Del Kimball, Sam Furseth and other online payday lenders are still doing big business — in court

In June, a three-judge panel of the Missouri Court of Appeals issued an unusual opinion in the case of Erica Hollins v. Capital Solutions Investments Inc.

In 2006, Hollins took out a $100 loan from CSI, a consumer installment lender. She made only one payment on the loan, then stopped responding to CSI’s requests for further payment. The balance quickly grew. CSI eventually was granted a default judgment against Hollins for $912 — $729.90 of which was interest.

Hollins then filed a class-action suit seeking to have her judgment — and the judgments of several other individuals who had borrowed from CSI — vacated, on the grounds that CSI did not disclose how interest was calculated on their loans. CSI filed a motion for summary judgment, and the judge agreed that the case had no merit. Hollins’ case was dismissed.

The Missouri Court of Appeals upheld the U.S. Circuit Court’s ruling but also wrote an opinion blasting Missouri’s usury laws, which permit interest rates as high as 1,950 percent. One member of Hollins’ class-action suit had taken out a $100 loan and then been hounded for $4,105. Another plaintiff paid $5,300 on an $80 loan and still had a remaining balance of $19,643.

Presiding Judge Kurt Odenwald called CSI’s loan practice “obscene and usurious.” He went on: “The amount the lenders are attempting to collect on these types of loans shocks the conscience.” In a concurring opinion, Judge Robert G. Dowd Jr. wrote: “Such drastic imbalances in what is borrowed, what is paid back, and what is still owed demonstrate the inherent injustice in these lending arrangements.”

“I’ve been practicing in this area of law for 33 years, and I’ve never seen a Missouri appeals court publish an opinion like this,” says Bernard Brown, a local consumer-protection lawyer. “They’re outraged that they have to enforce this terrible law, and this opinion is them crying out for people in the state to sit up and take notice.”

When rich people can’t pay their debts, the process is a bit less predatory, a bit more polite. Eventually, though, judgments and garnishments and bankruptcies come down the pike. That’s what’s beginning to happen in the case of LTS Management.

As The Pitch has reported, LTS Management was an online payday-lending operation that at one point employed more than 100 people in downtown Kansas City, Missouri. Two years ago, the federal government implemented a coordinated effort — commonly referred to as Operation Choke Point — that pressured banks to discontinue processing payments to and from lenders such as LTS Management. These companies routinely used the Internet to lend money in states that had outlawed such transactions due to their high interest rates and fees.

LTS — whose business model, according to documents obtained by The Pitch, relied on the average borrower paying back double what he or she initially borrowed — crumbled. Its owners, Del Kimball and Sam Furseth, were subsequently revealed to be over-leveraged. They owe a lot of people a lot of money. Some clarity as to just how much money they owe arrived last week in the U.S. Bankruptcy Court of the Western District of Missouri.

Most of the time, bankruptcy is entered into voluntarily — you’re in debt and out of money, so you file for bankruptcy in order to begin the process of straightening out your finances. Far less common is involuntary bankruptcy, which occurs when an individual or an entity refuses to organize and pay what’s owed. (Kimball, for example, recently refused to show up for a court-ordered debtor’s exam in Johnson County; a judge there subsequently issued a bench warrant for him.) In that event, creditors file an involuntary Chapter 7 petition, stating their claims. Three such petitions were filed against LTS, Kimball and Furseth on Wednesday, August 5.

The sums are staggering.

Earlier this year, an entity called NorthRock LLC obtained a $35 million judgment against LTS and other related entities in Jackson County, Missouri. In addition, Northrock obtained a $7 million judgment against Kimball and Furseth. (In settling a dispute over the priority of claims with two other LTS creditors — KB-2011 LLP and Netfinance LLC — NorthRock assigned half of its interest in those judgments to KB-2011 LLP and Netfinance.) Jensen Marketing has a judgment of $1,753,069 against Freemont Ventures LLC, an affiliated entity whose sole members are believed to be Kimball and Furseth, in Jackson County. Benjamin Burford has a judgment of $214,890 against LTS in Jackson County. In Johnson County, Kansas, eData Solutions has a $13.6 million judgment against Kimball and Furseth. CoreFirst Bank & Trust has a $500,000 judgment against Kimball and Furseth, also in Johnson County.

Those are all court-ordered judgments, none of which have been satisfied or appealed by Kimball or Furseth. Additional sums are at stake in asserted claims working their way through various courts. For example, American Express Bank has filed suit in Jackson County, claiming that Kimball and LTS have outstanding unpaid balances totaling more than $200,000. In federal court in Colorado, a lobbying firm called Chesapeake Enterprises has alleged that Kimball owes it $575,000 for unpaid services.

Last week’s bankruptcy petitions against Kimball and Furseth are these creditors’ best shots at recovering what they claim the men owe them. But because Kimball and Furseth have so far stonewalled creditors, questions remain about where this $55 million in judgments is, and whether any of it is left.

Filings in the Chesapeake case suggest that Kimball has been scrambling since the fall of 2013 to broker some kind of international payday-lending deal — what Cole Kimball, Del’s cousin, describes in e-mails to Chesapeake as “an $8 billion euro deal” [sic] involving operations in the U.K., Mexico, Russia, Hong Kong and Kiev.

Kimball and Furseth’s attorney, John Mullen, did not respond to The Pitch‘s requests for comment. Court records show that Mullen recently withdrew as counsel for Kimball and Furseth in the eData Solutions case in Johnson County. Mullen may not even be able to represent them in their bankrupty case. As court records show, he’s also a creditor: Kimball and Furseth owe him $138,000 in unpaid attorney’s fees.