Delaware lawyer heads to prison for part in payday loan scheme
Inside Subprime: June 5, 2018
By Jacob Rogers
A well-known Wilmington lawyer was sentenced to eight years in prison on Friday for participating in large-scale payday loan fraud that gave customers interest rates topping 780 percent, while evading state regulations and using Native American tribes and a bank as a front, according to Delaware Online.
The lawyer, Wheeler K. Neff, 69, used his license and expertise in corporate and banking law to help payday lenders draft bogus contracts which said the companies were owned by Native American tribes and could therefore claim immunity from state and federal laws regarding payday lending.
For an example of the scale of the fraud, Neff represented Charles M. Hallinan, 77, who owns a company called Apex 1 Processing Inc., which operates Paycheck Today, an online payday lender in Indiana. According to William McSwain, U.S. Attorney for the Eastern District of Pennsylvania, Neff helped Hallinan defraud roughly 1,400 people in Indiana who filed a class action suit against his company in 2012. Neff was himself indicted in April 2016.
If the plaintiffs won and proved that Hallinan owned the business, he would face personal losses of up to $10 million. So, Neff helped him by drawing up documents which made it seem that Apex 1 had no assets, no employees and was owned by a tribal chief living in Canada so the plaintiffs would have to accept a discounted settlement. Additionally, Neff had Hallinan transfer his business activity to another company, along with his tax returns, and told his client to move any documents relating to Apex 1 to tribal lands in Canada, conveniently outside the jurisdiction of federal prosecutors.
“As an attorney, Mr. Neff should realize that a civilized society requires obedience to the law, including those laws he didn’t happen to like,” McSwain said. “Neff drafted these contracts to help clients collect unlawful debt for as long as possible without getting caught.
“In return, Neff received hundreds of thousands of dollars a year in legal fees.”
Federal authorities have already reclaimed some of those fees, which totaled more than $356,000. Last year, prosecutors attempted to seize Neff’s home, where he conducted the business, but were only allowed to take a portion of the home in which he worked, about 12 percent of the property. According to Delaware Online, Neff has already paid off around half of what he owes the government by selling property he owns in Kansas.
Neff does not have to surrender to federal authorities until July 9, at which time he will be promptly escorted to prison.
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