Payday Loan Mogul Trades Ferrari-Racing Life for Prison Term

Scott Tucker says he’s a pioneering self-made man who, without a college degree, founded successful businesses in a variety of fields and contributed billions of dollars to the U.S. economy. A judge says he’s an unrepentant fraud and sentenced him to almost 17 years in prison.

The disgraced payday loan mogul, better known as a race-car driver on U.S. and European circuits, enjoyed a luxurious lifestyle, with a private jet, a vacation home in Aspen, Colorado, and a fleet of Ferraris. The 55-year-old resident of Overland Park, Kansas, was never short of cash.

The same can’t be said of his former customers. Millions of Americans who couldn’t get loans from regular banks flocked to Tucker’s businesses, where they were sometimes charged interest rates exceeding 700 percent for small loans they needed to make ends meet, the U.S. said.

“What I see here is a scheme to extract money from people in desperate circumstances,” U.S. District Judge Kevin Castel said Friday in Manhattan before sentencing Tucker to 16 years and 9 months in prison.

Tucker, wearing a gray suit, was handcuffed in court after Castel ordered him jailed immediately. The judge denied Tucker’s request to remain free until the end of the month so he could surrender to authorities in Kansas. Castel cited concerns about his mental health and possible self-harm.

Tucker and Timothy Muir, a lawyer who worked for him, were convicted in October. Muir, who was sentenced to seven years on Friday, argued he was hired with no experience and said that Tucker’s business practices were already established when he came aboard. Castel allowed Muir to turn himself in next month.

Jurors found the men guilty of collecting unlawful debts, using misleading contracts and falsely stating that the businesses were owned and operated by Native American tribes. That bogus claim helped them get around state laws that prohibited the business practices, the U.S. said. The scam ran from 1997 to 2013, Castel said.

From 2008 to 2012 alone, Tucker victimized 4.65 million people, according to prosecutors, collecting $1.3 billion in illegal interest payments as some people paid a total of almost $1,000 to settle a $300 loan.

Castel on Friday repeatedly criticized a Dec. 20 letter he’d received from Tucker. The judge in particular mocked Tucker’s attempt to portray himself and Muir as being generous because they never sued customers to collect debts.

"Why would they? That would expose their fraud," Castel said. "They weren’t generous. They were shrewd."

Race Car Driver Scott Tucker Convicted Over Payday Loans

In his letter — a bid for leniency — Tucker largely blamed his past lawyers and said he’d merely failed to properly communicate loan terms to his customers. He said his prosecution had led to his brother’s suicide and that the government had wrongfully demonized his legitimate operations, including AMG Services Inc., as a racketeering scheme.

But Tucker’s past convictions contradict that claim, Castel said. At the hearing, the judge reminded Tucker that he’d pleaded guilty years ago to using a copy of a title to a Porsche he’d sold as collateral on a $55,000 loan. Tucker never paid a cent back and "characteristically blamed others," the judge said.

"The notion that Mr. Tucker is a good an honest business person doesn’t fly with me," Castel said.

Kansas City

Born in Kansas City, Missouri, Tucker helped raise his brothers after their World War II vet father died, according to his letter. His mother, whom Tucker describes as his hero and his inspiration, started her own janitorial business that eventually employed about 300 people and counted AT&T Inc. among its customers, he said.

"Since childhood, I aspired to become an entrepreneurial American success story," Tucker wrote in his letter to the judge. "I wanted to build businesses, create jobs, pay taxes, live in accordance with principles that make our country the best in the world."

But Castel said Tucker chose another route, using loopholes to take advantage of native American tribes’ unique legal status to get around the law. Prosecutors said Tucker and his team formed sham relationships with the tribes and laundered billions of dollars through their bank accounts to hide his ownership and control of the business. The tribes got 1 percent of the revenue, the government said.

"From my vantage point, I saw us as doing a good deed for society," Tucker said, by following a 2000 law intended to help Native Americans create jobs and improve infrastructure.

"I am very sorry that our leaders castigate me as a villain, or some type of predator," Tucker said in the letter to the judge. "I truly regret that I failed to communicate the business model and industry appropriately."

The case is U.S. v. Tucker, 16-cr-091, U.S. District Court, Southern District of New York (Manhattan).

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    Tax Plan Has Lobbyists Swarming, Lawmakers Asking Whats in It?

    Republicans are barreling into a lobbying frenzy next week, when House Ways and Means Chairman Kevin Brady plans to unveil a sweeping tax bill to remake the U.S. economy that’s being crafted with rigorous secrecy.

    The stage was set with the House’s adoption Thursday of a budget resolution designed to speed the course of tax legislation and kick off a three-week sprint toward a House bill. Now, lobbyists representing every corner of the economy are poised to first devour, then attack what may be hundreds of pages of legislation that Brady says he’ll release Nov. 1.

    Special interests from realtors to dairy farmers will be trying to save their industry-specific tax breaks, said Tim Phillips, president of Americans for Prosperity. His group, which is backed by billionaire industrialists Charles and David Koch, supports ending such breaks.

    “It’s pretty fierce,” Phillips said. “We met with Brady on Tuesday and he was saying their offices are swamped with all the special interest groups swarming in asking to be protected.”

    President Donald Trump has promised that middle-class Americans will be the biggest beneficiaries of the tax overhaul. But it remains to be seen which groups will lose their advantages — a necessary step to help pay for cutting tax rates. Even Republican members of Brady’s committee say they don’t know whether any decisions have been made.

    “The problem is that Ways and Means has somewhat been kept out of the loop with details,” Representative Jim Renacci of Ohio, a member of the House tax-writing panel, said in an interview. “There are still a lot of hurdles to get it done.”

    The bill is supposed to be released in just five days.

    “Chairman Brady and Ways and Means members are meeting regularly to discuss specific pro-growth tax reform policies that will deliver more jobs, fairer taxes and bigger paychecks,” said Emily Schillinger, a Ways and Means spokeswoman. “They will meet again on Monday and Tuesday in the lead up to the bill introduction. Committee members have also met extensively and regularly with members throughout the House Republican Conference about how tax reform will directly improve the lives of their constituents.”

    ‘80 Percent Plus’

    Leaving such details under wraps has become “almost a double-edged sword,” said lobbyist Will Hollier, whose clients include Microsoft Corp. and Visa Inc. The secrecy has allowed for some efficiency, but it’s also prevented GOP leaders from winning broad support for the legislation in their own conference so far, he said.

    A key test will be how House leaders deal with the state and local tax deduction, the first flash point in the debate. Trump and congressional leaders have proposed abolishing that break, which benefits high-tax states that tend to vote Democratic. But several Republican House members from such states want to preserve the break in some form.

    “Can you get people to put their party loyalty above home-grown constituents’ concerns?” said Hollier, a former chief of staff and legislative director for Senator Mike Crapo, an Idaho Republican. “How they deal with that will show that people can be broken.”

    Some conservatives wonder if the secrecy does more harm than good. “I think it’s important that members feel like they have ownership of big, majority-defining packages like this,” said Ryan Ellis, a tax lobbyist who formerly worked with anti-tax activist Grover Norquist. “They really didn’t on health care.”

    The tax framework that the White House and GOP leaders released on Sept. 27 calls for tax rate cuts for individuals and corporations, and is estimated to raise the deficit by $2.4 trillion. Republicans need to get that number down to $1.5 trillion under their budget parameters — a difficult balancing act as they’ve promised a more generous Child Tax Credit and bigger tax breaks for middle-income families.

    “I don’t think that people realize that 80 percent plus of this effort is eliminating things in the code,” said Senator Bob Corker of Tennessee, who has called for a tax bill that won’t add to the federal deficit after taking into account reasonable economic growth expectations.

    “I mean, over the next two weeks, especially when the Senate tax-writing committee puts their stuff out, they’re going to realize that this the biggest tax code rewrite since 1986 and it’s going to affect everyone,” he said.

    ‘Totally Undecided’

    One of the ways to make up the revenue gap is by limiting the deductions corporations take on the interest they pay on their loans — a major consideration for industries such as private equity and real estate. A prior House Republican proposal called for completely eliminating the corporate break, which could have raised more than $1 trillion over a decade.

    “They’re totally undecided,” about how to restrict corporate interest deductions, said Marc Gerson, the chair of law firm Miller & Chevalier. Gerson said proposals include setting limits based on a company’s earnings before interest, tax, depreciation and amortization, or Ebitda, a key measure of profitability. Existing debt might be grandfathered in, he said.

    Another piece of the framework is aimed at preventing U.S. companies from shifting their earnings to offshore tax havens — by imposing a minimum foreign tax. The idea — described briefly and obliquely in the framework language — was called “appalling” several weeks ago by Ken Kies, a lobbyist whose clients include Microsoft and General Electric Co. The rate and formula for such a tax haven’t been specified, but the proposal carries multibillion-dollar implications for multinationals.

    On the individual side, the treatment of state and local deductions remains in question. At least 12 Republicans from high-tax states, whose constituents stand to lose if the tax break is repealed, voted no on the House budget Thursday. The most vocal among them have demanded a compromise on the issue.

    Brady said Thursday he hadn’t made a decision on what to do about SALT after meeting with Republicans who are worried that ending the tax break would slam middle-class families in their states — although he said he’s confident he can accommodate their concerns.

    ‘Minority Express Lane’

    “The bottom line is the ball is in their court, and they know it,” said Representative John Katko, a New York Republican who’s a top target of Democrats in the 2018 election. “They didn’t get specific in this” meeting, he said, but gave “a lot of assurances.”

    Democrats, meanwhile, are also waiting to pounce. Brady has so far resisted pressure to embrace Trump’s call for making no changes to the tax-protected status of 401(k) retirement plans. Five Democratic senators — Debbie Stabenow of Michigan; Sherrod Brown of Ohio; Ron Wyden of Oregon; Ben Cardin of Maryland; and Bob Casey of Pennsylvania — on Thursday signed a letter warning Republicans against “reducing the opportunities that millions of Americans have to save for their retirement.”

    The tax battles will take place amid a mad dash to complete a tax overhaul by the end of the year. House and Senate leaders hope to pass bills through their chambers by Thanksgiving, said Speaker Paul Ryan and Senate Majority Whip John Cornyn. The different bills would then have to be reconciled.

    It took about 10 months from when a tax bill was introduced until it was signed by President Ronald Reagan in 1986 — the last time the U.S. tax code was revamped.

    There are, of course, other issues on the congressional agenda. Congress must fund the government to avoid a shutdown by Dec. 8. That could turn ugly as the White House has signaled it’ll demand funding for a border wall, and Democrats say they want a solution to protect young undocumented immigrants. Congress also faces impending business to shore up health-care markets, extend flood insurance and revisit the Iran nuclear deal — all of which could soak up valuable time.

    Nonetheless, there may be some common ground among members of Congress — a shared interest that could surpass the special interests.

    The Republican determination to complete a tax overhaul by the end of the year is driven in part by “the very real and justified fear that the majorities hang in the balance and that failure on tax puts you in the express lane to the minority,” said Rohit Kumar, a former deputy chief of staff to Senate Majority Leader Mitch McConnell who now oversees tax policy for PricewaterhouseCoopers.

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      U.S. Growth at Above-Forecast 3% on Consumers and Businesses

      The U.S. economy expanded at a faster pace than forecast in the third quarter, indicating resilient demand from consumers and businesses even with the hit from hurricanes Harvey and Irma, Commerce Department data showed Friday.

      Key Takeaways

      While GDP grew more than anticipated, analysts look to another key measure to assess the true health of the economy. Final sales to domestic purchasers, which strip out trade and inventories — the two most volatile components of the GDP calculation — climbed 1.8 percent, the slowest since early 2016, after rising 2.7 percent in prior quarter.

      The fallout from the hurricanes was mixed, probably depressing some figures while lifting others. The storms inflicted extensive damage on parts of Texas and Florida, though the effect is likely to be transitory as economic activity is expected to rebound amid rebuilding efforts.

      Consumer spending, which accounts for about 70 percent of the economy, added 1.6 percentage point to growth last quarter. That was driven by motor vehicles, as Americans replaced cars damaged by the storms, while services spending slowed to the weakest pace since 2013. Even so, a steady job market, contained inflation and low borrowing costs are expected to provide the wherewithal for households to sustain their spending.

      The first reading of GDP, the value of all goods and services produced, also showed continued strength in business investment, indicating growth is broadening out to more sources beyond household consumption. Companies are upbeat about the outlook and overseas markets are improving, which may help boost exports and contain the trade deficit.

      At the same time, the details of business investment showed a mixed picture. The decline in investment in structures probably reflects the hit from Hurricane Harvey, especially on oil and gas drilling.

      Residential investment remained a weak spot. Builders are up against a shortage of qualified labor and ready-to-build lots at the same time sales are being held back by a shortage of available properties that’s driving up prices.

      Price data in the GDP report showed inflation picked up while still lagging behind the Federal Reserve’s 2 percent goal. Excluding food and energy, the Fed’s preferred price index — which is tied to personal spending — rose at a 1.3 percent annualized rate last quarter, following a 0.9 percent gain.

      Fed policy makers can point to evidence that growth is steady enough to allow them to keep raising interest rates, with investors expecting a quarter-point increase in December.

      While the economy is probably on solid footing in the ninth year of this expansion, the central bank and many economists expect GDP growth to slow beyond 2018, moving closer to 2 percent rather than the sustained 3 percent pace that the Trump administration says will happen if its tax plan is enacted.

      Economist Views

      “It’s hard to confidently discern the hurricane effects in this report, but the economy seems to be on pretty solid ground,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “The details are reasonably solid. Consumers stepped down a little from the second quarter but their spending still expanded at a decent pace.”

      The gain in equipment investment shows “businesses may be getting a little more confident about the expansion, both here in the U.S. and abroad,” he said. Overall, the report “probably gives a little more confidence to the Fed to hike rates before year-end, but I don’t think it’s a game-changer.”

      Other Details

      • Nonresidential investment — which includes spending on equipment, structures and intellectual property — increased 3.9 percent and added 0.49 percentage point to growth
      • Equipment investment jumped 8.6 percent for a fourth quarter of growth, longest streak since 2014
      • Residential investment fell at a 6 percent rate after 7.3 percent drop, worst two-quarter performance since 2010
      • Net exports added 0.41 percentage point to growth as exports rose, imports fell; inventories added 0.73 point, most since 2016
      • Government spending fell at a 0.1 percent rate; the figures reflected 1.1 percent in federal spending, driven by defense, while state and local outlays dropped 0.9 percent
      • After-tax incomes adjusted for inflation increased at a 0.6 percent annual pace, down from the previous quarter’s 3.3 percent; saving rate fell to 3.4 percent from 3.8 percent
      • GDP report is the first of three estimates for the quarter; the other two are due in November and December as more data become available

        Highlights of Third-Quarter GDP (First Estimate)

        • Gross domestic product grew at a 3% annualized rate (est. 2.6%) following a 3.1% gain in 2Q, best back-to-back quarters since 2014
        • Consumer spending, biggest part of the economy, grew 2.4% (est. 2.1%) after 3.3% in 2Q
        • Business fixed investment rose 1.5%, adding 0.25 ppt to growth; spending on nonresidential structures fell, equipment and intellectual property gained, residential dropped
        • Trade, inventories added a combined 1.14 ppt to growth
        • Commerce Dept. said it can’t estimate hurricanes’ impact on GDP; disaster losses on fixed assets, private and public, totaled about $131.4b

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