Now that New York prosecutors have pieced together and indicted a payday lending syndicate that operated under the noses of Tennessee’s top law enforcement officials for years, the Chattanooga Times-Free Press says Volunteer state officials admit they were held back by a subjective process with unclear lines of responsibility and insufficient resources to pursue such an investigation.
Legal experts have acknowledged that if the usury charges against payday lender Carey Vaughn Brown are true, he could have been subject to prosecution for criminal usury in Tennessee. Yet the onetime used-car dealer was able to continue making allegedly illegal loans from Tennessee until he was shut down by New York regulators in 2013 and then indicted in August.
“I do think there’s a problem in Tennessee with prosecuting white-collar crimes,” said Mark Pickrell, an attorney and adjunct professor at Vanderbilt Law School. “When it comes to white-collar crime, it takes a lot of resources. It is detail-oriented, takes a lot of documents, takes a lot of witness work. It’s a lot harder than ‘Joe punched Bob in the nose.'”
The payday case echoes the implosion of an alleged family Ponzi scheme in Soddy-Daisy, in which bankruptcy trustee Jerry Farinash alleged the perpetrators used the family tax business to identify and fleece dozens of retirees and widows. But the admitted ringleader, Jack Edwin Brown, died with no charges to his name.
Tennessee’s passive stance in prosecuting homegrown financial scandals sets the Volunteer State apart from aggressive crackdowns on illegal lending, mortgage and debt collection practices at the federal level and in a handful of other states.
The U.S. Consumer Financial Protection Bureau, which now keeps watch over the 12 million consumers who use payday loans, in July charged one of the nation’s largest payday lenders, ACE Cash Express, with illegal debt collection practices. The lender agreed to a $10 million settlement in July.
…Under Tennessee law, much of the responsibility for white-collar prosecutions rests with the local district attorney, who has wide latitude over whether to bring charges.
Tennessee is the only state whose attorney general is appointed by the state Supreme Court rather than elected. Tennessee Attorney General Bob Cooper has not pursued headline-grabbing white-collar criminal indictments like AGs in other states, where such investigations help win elections.
A survey of news releases issued by Cooper’s office from 2011 to 2014 shows that many of Tennessee’s biggest legal victories were spearheaded by other states in concert with federal officials against big companies like GE Capital, Toyota and Google.
In each year, only a handful of Tennessee white-collar cases that merited news releases — such as a number of deceptive advertising claims, several attorneys practicing without a license and an $800,000 Medicare fraud settlement with the Chattanooga-based AIM Center — were led by the state itself.
In fact, Medicare fraud investigations receive special federal task-force funding to clamp down on the practice. Payday lending and other white-collar criminal investigations in Tennessee receive no such stipend, state prosecutors said, which leaves local district attorneys to choose whether to pursue those high-cost investigations on their own dime.
On the other hand, payday lenders have no problem spending money in political and law enforcement circles. Nationally, payday lenders spent $4.7 million lobbying lawmakers in 2012, according to OpenSecrets.org.
Locally, Carey Brown contributed more than $1,000 to Hamilton County Sheriff Jim Hammond in 2012, earning a spot on the sheriff’s 71-member “posse,” for which Brown received a special identification card.
Brown, a former Georgia resident who now lives in a gated mansion in Ooltewah, also contributed over the years to U.S. Sen. Bob Corker, R-Tenn.; U.S. Rep. Tom Graves, R-Ga., and U.S. Rep. Phil Gingrey, R-Ga.; as well as to national presidential candidates Mitt Romney, Mike Huckabee and Fred Thompson and congressional candidate Weston Wamp, according to OpenSecrets.org.
He has been generous with local civic and charitable organizations, too.