Home North Pole Economy Prosecutors examine McDowell Rice Smith & Buchanan’s role in Scott Tucker case

Prosecutors examine McDowell Rice Smith & Buchanan’s role in Scott Tucker case

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Federal prosecutors want access to communications between Scott Tucker and his attorneys at Kansas City law firm McDowell, Rice, Smith & Buchanan in a 2010 lawsuit.

Federal prosecutors want access to communications between Scott Tucker and his attorneys at Kansas City law firm McDowell, Rice, Smith & Buchanan in a 2010 lawsuit.

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U.S. lawyers suing Leawood payday loan businessman Scott Tucker want access to communications between Tucker and a major Kansas City law firm, cases that would be banned without the government’s claim which the firm aided Tucker in committing fraud.

Federal prosecutors in New York, where Tucker awaits trial on criminal charges relating to running an illegal payday loan business and racketeering, have asked a judge to order McDowell, Rice, Smith & the company. Buchanan to disclose her records related to a 2010 case that she handled on behalf of Tucker.

Records and communications between attorneys and clients are in almost all aspects sacrosanct and strictly off-limits to outside parties. An exception to attorney-client privilege is if it is established that a lawyer assisted a client with criminal or fraudulent behavior.

Manhattan prosecutors filed a lawsuit in March against the law firm. The motion states that R. Pete Smith, chairman of McDowell, Rice, Smith & Buchanan, filed a 2010 lawsuit on behalf of Tucker that forced the Kansas Secretary of State to acknowledge a 2008 merger between two companies in the payday loan industry.

Prosecutors say it was a “sham merger” designed to hamper investigations into Tucker’s payday lending business.

Lawyers representing Tucker and his co-defendant, Tim Muir, said in a response filed in court Thursday that the government had failed “terribly short” in its attempt to overcome attorney-client privilege.

Thomas Buchanan, a member of the McDowell, Rice, Smith & Buchanan executive committee, told The Star in an email that the firm handled the 2010 case under Kansas law.

“Our law firm is not a party or joined to the criminal proceedings in New York and we have not received any subpoenas or documents,” Buchanan wrote. “Kansas statutory and judicial process was followed in the matter (sic) we dealt with.”

Buchanan declined to respond further to allegations by federal prosecutors. He cited ethical rules that prohibit lawyers from publicly discussing clients’ cases without permission.

Tucker, whose involvement in payday loans began with a storefront operation in the late 1990s, has become one of the most prominent figures in the online consumer loan industry. Federal and state investigators said he obtained his fortune by granting deceptive short-term loans at interest rates as high as 700%.

Last year, Tucker and his related businesses were hit by a $ 1.3 billion in civil judgment in a case brought by the Federal Trade Commission. It was the highest judgment obtained by the FTC in a contentious case.

A New York grand jury in February 2016 indicted Tucker, as well as Muir, an Overland Park lawyer not affiliated with McDowell, Rice, Smith & Buchanan but who handled Tucker’s business affairs. They are accused of giving deceptive loans, illegally collecting debts and racketeering.

The indictment says Tucker amassed a $ 2 billion business that exploited 4.5 million consumers. Tucker’s corporate profits allowed him to finance a professional racing car team; Tucker competed in races in North America, Europe and the Middle East.

Tucker and Muir pleaded not guilty and denied any wrongdoing. Their trial is scheduled to begin in September.

Smith, the chairman of McDowell Rice, is one of Kansas City’s best known and most successful attorneys whose practice includes corporate affairs, litigation, divorce and bankruptcy.

A key business practice of Tucker, which comes into play in the McDowell Rice case, was his use of businesses based on Native American lands. Indian tribes generally enjoy immunity from state regulations and investigations.

The lawsuit at the center of the government’s attempts to breach Tucker’s attorney-client privilege with McDowell Rice was filed by Smith in 2010 in Wyandotte County District Court. It was filed against a company called AMG Services Inc.

The lawsuit sought to force the Kansas Secretary of State to acknowledge a merger of Tucker’s payday loan services company, called CLK Management, with AMG Services.

AMG is a loan company, and Tucker described it as belonging to the Miami Tribe of Oklahoma.

Tucker’s lawsuit said the merger took place in 2008, but AMG Services had not filed documents with the Kansas Secretary of State’s office to make it official. When Tucker sued AMG two years later, he wanted the documentation to reflect that the merger took place in 2008.

The date of 2008 is important. By merging with AMG Services, CLK would become a tribal corporation and could withstand investigations into its business practices, prosecutors say.

And in 2008, prosecutors said the Colorado attorney general was trying to investigate CLK Management. Prosecutors accuse the AMG-CLK merger of thwarting this attempt.

Lawyers for Tucker and Muir argue that the merger was a straightforward and legitimate business transaction. They add that Colorado’s attempt to pressure CLK was “a way to shut down the tribe’s payday lending business.”

But prosecutors also said AMG was nominally created with a tribe, but was effectively owned and operated by Tucker in an office building in Overland Park where 600 employees worked. Tucker’s criminal attorney described Tucker as an AMG employee.

The government is calling Tucker’s case against AMG a “mock lawsuit” designed to address the failed merger registration of two of Tucker’s companies.

AMG never responded to the lawsuit. Exactly 21 days after Smith filed the lawsuit on Tucker’s behalf, which is the time frame within which Kansas civil defendants must respond to a lawsuit, Wyandotte County Judge David Boal ruled an order finding AMG in default and ordering state authorities to register the merger of CLK into AMG, effective in 2008.

To support its case, the government released a letter from a lawyer advising the Miami Tribe General Manager of Oklahoma. It was written in 2008 and describes the Colorado Attorney General’s subpoena as a way to pressure a company that does not have tribal protection from a state investigation.

The letter, written by lawyer Lance Morgan of Omaha, Neb., On June 3, 2008, came as the Colorado attorney general issued a subpoena to CLK.

“Colorado is trying to achieve its goal of indirectly hampering the Miami Tribe’s business model by trying to put pressure on CLK, an entity that does not enjoy sovereign immunity,” Morgan’s letter reads. to Don Brady, general manager of the tribe.

He went on to say that a merger would create an entity that “might be able to invoke tribal sovereign immunity.”

Another claim by prosecutors is that the tribe paid $ 120,000 for CLK, “a paltry sum considering the value of the business,” and that bank records indicate that the acquisition was only paid for in 2010. Tucker’s defense attorney retorts that there could be all kinds of them. for commercial reasons to defer a payment.

The government also claims the lawsuit includes false statements, including a claim by Tucker that he had no control over AMG following the 2008 merger. Prosecutors have copies of AMG checks bearing Tucker’s signature in 2009 and 2010 which were written to McDowell Rice to pay for legal services – all after the merger.

AMG Services never responded to Tucker’s lawsuit against the company in 2010. Defendants who do not respond to the litigation are considered in default, which means that a judge accepts a plaintiff’s claims as true and grants generally to the plaintiff what is requested in the lawsuit.

Lawyers for Tucker and Muir say AMG acted on legal advice by not responding. They say that as far as the Miami Tribe is concerned, AMG’s acquisition of CLK was legal and the tribe did not want to submit to Kansas law by responding to Tucker’s lawsuit in Wyandotte County.

A letter from a tribal lawyer in 2010 said that the registration of the CLK-AMG merger in Kansas was important to Tucker so that other states would recognize the transaction.

The files the government has recovered through grand jury proceedings hint at a coordinated effort by Tucker and other attorneys to derail investigations into their companies.

Prosecutors cited them in the motion asking McDowell Rice for additional documents.

Prosecutors say the emails between Tucker and Muir, where they congratulate each other on the Wyandotte County judge’s decision, demonstrate Muir’s role.

In a July 31, 2010 email to Tucker, Muir wrote: “There are only a dozen agents in the country who can really appreciate how (expletive) good it is. And we ALL want to be flies on the wall when the opposing attys figure that out. “

Muir’s email continued, “Finally, when Pete spoke to an agent in the KS Sec of State office, she said,” I don’t know how you did this… you shouldn’t have been able to. to do.

Federal prosecutors say the referenced Pete is R. Pete Smith.

Another email written to Tucker by Conly Schulte, an Omaha lawyer who works for a firm that represents tribes, also gives Muir credit for leading the merger lawsuit.

“I think this was one of the brightest legal jobs I’ve seen in a while – Tim deserves a huge pat on the back for pulling this one off!” Schulte’s August 5, 2010 email to Tucker reads.

“Getting a court order directing the Secretary of State to file Articles of Amalgamation – with an effective date of June 2008 – in such a short time – was simply miraculous! This will prove invaluable in the ongoing litigation in California (and elsewhere) – and should go a long way in protecting the business model. “

Lawyers for Tucker and Muir say the emails reflect “appreciation for the excellent legal work involved” in the merger registration while preserving AMG’s tribal immunity.