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It has been 10 months since federal authorities raided the offices of Mission Hills residents Tim Coppinger and Ted Rowland. following a civil complaint filed by the Federal Trade Commission.

The feds alleged that Coppinger and Rowland ran an online payday-lending scheme that not only deceived borrowers about the costs of their loans but also deposited money into the bank accounts of people who had never authorized payday loans, then charged them fees and interest when they didn't pay back the phantom loans. These allegations cast Coppinger and Rowland's enterprise — that went by many names, but which, for simplicity's sake, I'll refer to here as CWB Services — as even more odious than the industry's usual shady players, whose enormous profits depend on triple-digit interest rates and hidden fees. CWB Services wasn't just gouging customers. It was, according to the FTC, stealing from people.

Since last September, the case had been grinding its way through federal court in the Western District of Missouri. Last week, the FTC announced that a settlement had been reached — one that, at first glance, sounded like stern justice: consumer redress judgments of $32 million against Coppinger and $22 million against Rowland. (Prison time was not on the table, this being a civil case.)

But those big numbers don't tell the whole story. The settlement is a suspended sentence — what is sometimes referred to as an avalanche clause. That means the court isn't coming after Coppinger or Rowland for those amounts, as long as the two abide by certain terms of the settlement.

The snow falls if Coppinger or Rowland is ever again found to be participating in the consumer lending business, or if it is discovered that either made false sworn financial statements during the case (say, failing to have disclosed a bank account in the Caymans).

Coppinger and Rowland also have agreed to transfer and relinquish certain assets, mostly corporate and personal bank accounts that have been frozen since the feds' original bust. Barring the violation of the suspended sentence, the value of these assets represents the true financial punishment for Coppinger and Rowland.

Matt Wilshire, the FTC's lead counsel on the case, declined to comment on the dollar amount of those assets. But the bank account numbers that Coppinger and Rowland gave up are listed in the settlement filing, and the values of those bank accounts are listed in previous reports from the receiver assigned to the case.

From Rowland — who argued all along that he was not involved in the operations of CWB and that all he did was provide capital to the call center run by Coppinger — the feds are taking personal bank accounts, corporate bank accounts, cash surrender value on a life insurance policy, a defunct collections account, and another $275,000 for unspecified reasons. Add it up, and Rowland's financial penalty appears to be around $400,000, plus some presumably sizable legal fees.

In addition to paying his attorney, Coppinger is giving up several personal bank accounts worth a total of about $520,000. He also was ordered by the court last year to sell his house at Lake Lotawana, which netted $137,000. And Coppinger is forfeiting his financial stake in several unrelated business entities, the value of which is unclear.

Neither Coppinger nor Rowland is obliged to sell his Mission Hills home, due to homestead protection laws in the state of Kansas.

"Coppinger gets to keep his house and his 401(k), and that's about it," Larry Cook, the court-appointed

receiver assigned to the case, told The Pitch. "Rowland as far as we know has no equity left."

On the first day that Coppinger's and Rowland's attorneys appeared in federal court, back in September 2014, Judge Dean Whipple noted the FTC's allegation that CWB Services had issued $28 million in loans and extracted $46 million in return. "Where did that $18 million go?" Whipple asked. "I expect to learn where that money went."

Cook has some answers. It appears that $7.5 million went to eData Solutions, a lead-generation company that solicited borrowers and then sold their personal information and loan applications to CWB. (eData Solutions was founded by Joel Tucker, who later sold the operation to the Wyandotte Nation Indian tribe — a workaround that has historically shielded online payday lenders from state prosecution.) According to Wilshire, none of the eData money has yet been retrieved. But he noted that a provision in the settlement allows Cook to continue making attempts to demand and recoup assets related to this case for the next six months; additional clawbacks are, in theory, forthcoming.

Another $6.6 million was paid out to entities owned by an Arizona man named David Harbour, who court documents say is a friend of Rowland's brother-in-law. Depositions reveal that Harbour's role was to introduce Rowland to potential investors. Cook found that Harbour and his wife, Abby, used the payments to "buy luxury goods, including private chartered jets, extravagant birthday celebrations, golf club memberships, and vacation homes in Mexico and Idaho." He submitted a motion for the Harbours to turn over the $6.6 million, arguing that they and Rowland had "created a corporate structure to prevent consumers and regulators from collecting on claims against them. Specifically, they regularly transferred consumer payments away from the lenders, through shell corporations, and then on to DNA Investments [Harbour's company] and investors."

Earlier this month, the Harbours agreed to an undisclosed settlement.

Cook's most recent receiver report says $723,000 in third-party investor money has been recovered in addition to the Harbour settlement. Wilshire declined to identify the names of those investors, but some clues exist in court filings. An overhead breakdown, filed as an exhibit, shows interest payments from CWB's payday-lending operation to more than a dozen recipients. The list, which cites only the last names of investors, includes: Stradinger, Schumacher, Bode, Vossler, Redd, Stocklets, McCue, Rixon, Wentz, Krull, Runyan, Moritz, Martin, S. Coppinger, M. Stoetzer, McNitt, Holland and Ewers.

Wilshire said, "Generally speaking, people don't receive interest payments from an operation unless they made some kind of capital investment in it or have a promissory note."

Asked whether it was reasonable to assume that these were some of the individuals being pursued for clawback money, Cook said, "At this point we're looking at those [names] and others and have already reached some settlements. Some of those people have lost significant sums."

He added: "These are people who purchased, from the defendants, promissory notes that paid out fixed returns between 12 and 30 percent. I've yet to determine why some people got 12 percent and some got 30 percent."

Christopher Koegel, an assistant director of the FTC's Division of Financial Practices, told The Pitch that the FTC will soon be undertaking a consumer-redress program related to the CWB case. They'll work from documents and data obtained in the investigation to identify consumers who were harmed by CWB and start sending out checks. A final report from Cook, laying out the full amounts recovered, will be filed later this year.

Source: www.pitch.com

Category: Payday loans

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