Villanova Man Stole Millions Through Payday Loan Scheme: Feds

VILLANOVA, PA – A Villanova man was found guilty on several charges related to a "payday loan" scheme where he and a co-conspirator levied unlawfully-high interest rates to borrowers, resulting in the pair accruing millions illegally.

Charles M. Hallinan, 76, of Villanova, and Wheeler K. Neff, 69, of Wilmington, Delaware, were found guilty of various fraud and racketeering crimes, according to United States Attorney Louis D. Lappen.

Both Hallinan and Neff face a possible decade in prison, forfeiture of assets obtained through their crimes, three years of supervised release, a possible fine, and a special assessment, federal officials said.

In all the charges Hallinan and Neff were convicted of are:

• two counts of conspiracy to violate the Racketeering Influenced and Corrupt Organizations Act (“RICO”) relating to "payday lending" businesses;
• one count of conspiracy to commit mail fraud, wire fraud, and money laundering;
• and two counts of mail fraud and three counts of wire fraud.

Hallinan was also convicted of nine counts of international money laundering.

According to Lappen's office, Hallinan and Neff participated in a conspiracy that violated anti-usury laws in Pennsylvania and other states.

The pair generated more than $688 million in revenue between 2008 and 2013 from hundreds of thousands of customers, including Pennsylvania residents, according to Lappen's office. Additionally, Hallinan and Neff conspired to defraud nearly 1,400 people who had sued one of Hallinan’s payday loan companies into abandoning a lawsuit with damages valued as highly as $10 million, Lappen's office said.

Hallinan owned, operated, financed, and/or worked for more than a dozen businesses between 1997 and 2013 that issued and collected debt from small, short-term loans, commonly known as "payday loans," Lappen's office said. "Payday loans" are typically paid back upon the recipients next paycheck.

Hallinan and Neff conspired to avoid Pennsylvania and other states' money lending laws by paying thousands of dollars each month to three Indian tribes, according to Lappen's office. The pair would pretend that they were the actual payday lenders and claim that "tribal sovereign immunity" protected them froml aws and regulations, federal officials said.

Hallinan and Neff are also helped another payday lender evade state laws limiting high-interest loans by making fraudulent contracts with an Indian tribe that were crafted to show the tribe was the true lender.

"Pay day lending exploits those who can least afford it, the most financially vulnerable people in our society," Lappen said. "Hallinan’s companies charged customers exorbitant interest rates – exceeding 700 percent annually. Today’s conviction shows that we will prosecute predatory payday lenders and pursue significant prison sentences for those who financially exploit the economically disadvantaged."

The case was investigated by the Federal Bureau of Investigation, the United States Postal Inspection Service, and Internal Revenue Service Criminal Investigations.

"These defendants went to astonishing lengths to skirt state usury laws enacted to protect the public," said Michael Harpster, Special Agent in Charge of the FBI’s Philadelphia Division. "Their single-minded purpose: to continue draining dry the financially strapped folks who, out of desperation, resort to payday loans. Their greed is galling, their actions are illegal, and their convictions are richly deserved."

"The role of IRS Criminal Investigation becomes even more important in fraud cases duet o the complex financial transactions that can take time to unravel," said Edward Wirth, Acting Special Agent in Charge, Philadelphia Field Office. "Today’s verdict should serve as a reminder that individuals who engage in this type of financial fraud will be held accountable."

It is being prosecuted by Assistant United States Attorneys Mark B. Dubnoff and James Petkun.

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