As payday-lending kingpin Scott Tucker prepares for a criminal trial, the question remains: Where did the money go?
On April 12, Bloomberg published a report that described how Philadelphia payday-lending pioneer Charles Hallinan had become an investor in financial-technology companies.
The report surfaced weeks after Hallinan was brought up on federal racketeering charges in connection to his predatory-lending empire. Hallinan, Bloomberg reported, was an investor in Everest Business Funding, a new generation of lender that extends credit to consumers who can’t get loans from banks.
Hallinan in many ways is considered the godfather of modern, electronic payday lending. In part because of him, a business once dominated by storefront locations in low-income urban areas saw itself transformed by the internet. He was one of the first people to understand that the internet could be used to make short-term, high-interest loans available to a whole new pool of potential customers. Bloomberg’s report recounts how Hallinan’s sale of a landfill company for $120 million allowed him to turn his attention to payday loans. He was also an early adopter of the “rent a tribe” concept popular among online payday-loan companies, which shield themselves from regulations on how much interest a lender can apply to a customer’s line of credit.
If Hallinan’s business model sounds familiar to Kansas Citians, it’s because local payday-loan magnate Scott Tucker replicated many of Hallinan’s innovations. In fact, the two once did business together, shortly after Tucker, a Leawood resident, sunk his teeth into the payday-loan industry.
The two had a falling-out when Hallinan discovered that Tucker was secretly starting businesses that would compete against Hallinan’s. Tucker paid Hallinan $30 million to settle a subsequent lawsuit.
Like Hallinan, Tucker made immense wealth from payday lending before federal authorities investigated and put him under indictment in February.
Also like Hallinan, Tucker may be connected to similar financial-technology companies.
One of Tucker’s businesses is a private equity firm called Westfund LLC, which was incorporated in Nevada. It’s never been clear what Westfund’s business actually entails, though its name has been emblazoned on high-end auto-racing vehicles. (Tucker used some of his wealth to fund a motorsports team that raced Ferraris all over the globe.) Westfund’s listed business address is a tiny mail drop in a Las Vegas suburb.
In corporate filings with the Nevada Secretary of State’s office, Westfund’s only listed officer is an Overland Park man named Glenn Fisher. A self-described corporate CEO coach, Fisher keeps an office in a shared office suite at 7500 College Boulevard in Overland Park. He appears to have more than a business relationship with Tucker and his family. Fisher wrote a remembrance about Blaine Tucker, one of Scott Tucker’s brothers, after Blaine committed suicide in 2014. Blaine Tucker was involved with some of Scott Tucker’s payday-loan enterprises and was a named defendant in a civil lawsuit brought by the Federal Trade Commission in 2012.
Fisher is also the founder of a company called 5G Capital, which Fisher describes in an online profile as an alternative lending outfit for small businesses. Many alternative lending businesses have a strong internet presence in order to reach potential customers and extend loans quickly. But 5G Capital has almost no web presence.
5G Capital was incorporated with the Kansas Secretary of State’s office on March 27, 2015. The address listed for 5G Capital on that paperwork is the same office building in Overland Park where Tucker ran his payday-lending businesses; the attorney handling 5G Capital’s incorporation is Jonathan Gilmore, a law partner of Tucker’s attorney, Tim Muir. Muir has been charged as a co-conspirator with Tucker in New York. Both men are free on bond and await trial, which is set for later this year.
5G Capital’s business address is listed as 5400 Johnson Drive, which is a UPS Store that leases post office boxes. It is directly adjacent to a storefront payday-loan business.
What does 5G Capital do? Where does it get its money? Those questions were sent to Fisher’s office by The Pitch. Fisher never responded. Reached by phone, Fisher said he doesn’t discuss his businesses with the media. (In 2001, he was quoted in a Kansas City Business Journal article about a document-shredding business he ran at the time.)
Why does the existence of 5G Capital matter?
On May 19, 2015, less than two months after 5G Capital was incorporated, a New York company called eProdigy announced it had raised $100 million in capital from a single, unnamed private equity firm. A search of Uniform Commercial Code filings with the New York Secretary of State’s office reveals that 5G Capital holds a lien against eProdigy; 5G Capital filed a UCC financing statement on eProdigy on April 24, 2015. UCC financing statements are used when an investor wants to memorialize the collateral it has with a debtor. In 5G Capital’s case, it held as collateral almost anything associated with eProdigy’s business: its accounts, inventory, equipment, money, assets and shares in eProdigy and its subsidiaries. No other entity has a lien against eProdigy.
EProdigy was incorporated in New York on December 31, 2014, just months before it received the $100 million investment.
It’s run by a man named David Rubin. He wasn’t always known as David Rubin; he once went by David Rubinov. According to lawsuits against eProdigy and some of its subsidiaries, filed in New York and in Philadelphia, he’s the same Rubinov who has been charged by federal regulators with securities fraud. The SEC once called Rubinov a “securities recidivist,” a reference to several investigations in which the businessman has figured. In 2002, the SEC ordered that Rubinov no longer associate with securities broker-dealers, due to his involvement with an investment firm that was accused of fraudulent sales practices and making unauthorized trades. A year later, the SEC charged Rubinov with selling unregistered shares of a publicly traded company to unsophisticated investors through high-pressure sales tactics.
Rubinov acknowledged in court filings in New York that he changed his name to Rubin; those suing Rubinov’s companies believe he did it to cover his tracks and that investors wouldn’t have done business with him had they known his birth name.
Rubinov did not respond to requests for comment for this story. Efforts to reach him through a publicist were not successful. Rubinov in 2014 wrote an opinion piece for American Banker, an online financial publication. The headline of the story was “Why the merchant cash advance industry should self-regulate.” American Banker later appended an editor’s note to the story, acknowledging Rubinov’s history with financial regulators and saying the publication was unaware of that history when it published his article.
Tucker also could not be reached for this story. A letter left at his Leawood residence and an e-mail sent to him went unanswered.
Questions about Tucker’s finances and what he did with the money he made from his payday-loan businesses have become hotly contested in both his criminal trial and his case with the Federal Trade Commission.
Last month, a judge in Nevada overseeing the FTC case ruled in favor of the federal regulator. In doing so, it ordered a vast freeze of Tucker’s assets, including bank accounts attributable to him and his businesses. In a document that Tucker signed on April 26, he acknowledged that he had sent a copy of the judge’s asset freeze order to a list of people who were in a position to dispose of or manage Tucker’s assets. That list included Glenn Fisher.
Meanwhile, federal prosecutors in New York are seeking a forfeiture of an array of Tucker’s assets, ranging from his collection of luxury vehicles to other bank accounts under his control. Among those assets: bank accounts for Westfund.
Tucker’s attorneys say the government’s actions have stalled his ability to mount a defense for his criminal trial. Paul Shectman, a well-known New York trial lawyer representing Tucker, wrote a letter to the New York judge handling Tucker’s criminal trial to explain that the FTC’s asset freeze was so broad that Tucker’s legal team couldn’t pay vendors to help sort through the volumes of evidence that the government has collected on Tucker.
Jeff Morris, a Kansas City lawyer representing Tucker, has fired back against the FTC in the Nevada case. Morris has objected to the FTC’s request, and a subsequent judge’s order, that Tucker use $75,000 a month for living expenses and attorney fees when the FTC isn’t aware of the nature of Tucker’s finances.
A judge has ordered that Tucker turn over records of his financial and business holdings. Tucker’s legal team is trying to counter that obligation, claiming that turning over such records while a criminal case is pending violates Tucker’s right to avoid self-incrimination.
Filings in the FTC case reveal that Tucker faces other legal issues that haven’t previously been publicly disclosed. FTC attorneys wrote in a recent filing that Tucker faces potential criminal tax prosecution in Kansas.