Tags: Payday | Lenders | Political | Agenda

Payday Lenders Hide Political Agenda Behind Corporate Structures

Thursday, 22 March 2012 02:00 PM

Of all the names disclosed as donors to Restore Our Future, a political action committee supporting Mitt Romney, some stand out for how little they reveal.

RTTTA LLC of Provo, Utah, is one of four corporations created by auto-title and payday lenders who are subject to financial regulations in the Dodd-Frank financial overhaul law that Romney has vowed to repeal.

The other companies -- REBS Inc. of Las Vegas, Select Management Resources LLC of Alpharetta, Georgia, and Katsam LLC of Seattle -- were listed in Restore Our Future’s Feb. 20 and March 20 campaign disclosure reports without revealing their founders’ business interests.

The four firms contributed $235,000 during the two months after President Barack Obama made the recess appointment of the Consumer Financial Protection Bureau director, which oversees the payday lenders, Federal Election Commission reports show. Select Management, which offers car title loans, spent $600,000 in 2010 to lobby on the Dodd-Frank legislation and consumer issues, Senate reports show.

“If that source of funding is hidden, voters are unable to judge who is giving to a candidate and what the candidate is agreeing to in return,” said former FEC Chairman Trevor Potter, who is an advocate for limits on and disclosure of campaign donations.

Latest Secrecy Tactic

Creation of a limited liability company to avoid disclosure is the latest tool big donors and corporations are employing to shield their political involvement.

Four years ago, such contributions weren’t possible because the federal courts were yet to issue two rulings, including the U.S. Supreme Court Citizens United case, that allowed unlimited donations by wealthy individuals, corporations and labor unions to political action committees, later nicknamed super-PACs.

In the 2010 midterms, big contributors seeking to remain anonymous deposited their cash in a new group of “social welfare” organizations, which under tax law can keep givers’ names secret provided the groups don’t spend most of their resources on politics.

This election cycle is slated to feature an increased number of so-called social welfare groups. Democrats, including a group backing Obama, Priorities USA, and one supporting congressional candidates, founded “social welfare” arms in an effort to compete with Republican groups formed two years ago.

Expanding Secret Donations

The use of LLCs will further expand the amount of secret money in this year’s campaign. Thus far in the Republican primary, 19 limited liability firms or similar corporations have been listed as donating a combined $3.8 million to the pro- Romney super-PAC.

Bloomberg identified the payday lenders through state corporate and other federal campaign finance records.

The identities of several other LLCs to the pro-Romney super-PAC have emerged in other ways. After campaign disclosure advocates called for a federal investigation of W Spann LLC, which gave $1 million to Restore Our Future, a longtime Romney donor, Edward Conard, announced he was behind the company. Conard, a former Bain Capital LLC colleague of Romney’s, asked the super-PAC to amend its FEC records and identify him as the donor.

California Firm

JTC Holdings LLC of California made two donations in January totaling $20,000. JTC shares the same address as Justin Chang of Colony Capital LLC, a Santa Monica, California-based investment firm, according to filings at the California Secretary of State’s Office and FEC records. Chang, whose connection to JTC was first reported by the New York Times, also had given $10,000 to the super-PAC under his own name.

Brittany Gross, a spokeswoman for Restore Our Future, declined to comment on the donations. None of the LLCs or their founders returned telephone calls or agreed to comment.

Legislation introduced yesterday by 34 Senate Democrats would prevent political contributors from using limited liability companies and other tactics to disguise their donations. The measure would require all groups that spend at least $10,000 on elections to disclose their expenditures within 24 hours and identify donors that gave them at least $10,000.

“If you have one or two or three phony shell organizations that you’re laundering your influence money through to obscure who you are, we can chase that back under this law,” said Senator Sheldon Whitehouse, a Rhode Island Democrat and the bill’s chief sponsor.

Pro-Santorum PAC Disclosures

A super-PAC supporting former U.S. Senator Rick Santorum, Romney’s chief rival in the Republican presidential primary, does identify the individuals behind the LLCs that have donated to it.

The Dodd-Frank legislation enacted in 2010 in response to the worst economic downturn since the Great Depression placed payday lenders under the jurisdiction of the new consumer bureau.

“Both payday and auto title pawn lenders make high-cost, unsustainable loans to consumers,” said Ed Mierzwinski, consumer program director with the U.S. Public Interest Research Group, a Boston-based organization that supports stronger regulations. “Both have been the source of widespread consumer complaints, including from active-duty military commanders and veterans’ organizations.”

Cordray Appointment

The law gave the consumer bureau the authority to begin regulating these lenders as soon as a director was installed. Obama responded to a Senate Republican filibuster by using a recess appointment to install Richard Cordray as the agency’s director Jan. 4; Cordray announced the following day that his agency would begin looking at payday lenders and others.

Romney has called for repealing the legislation, and has described Obama’s decision to appoint Cordray as “Chicago-style politics at its worst.”

Jamie Fulmer, a vice president of Spartanburg, South Carolina-based Advance America, a payday lender, said the industry is cooperating with the bureau.

“We’ve been focused on what the bureau has focused on, providing consumers with simple, transparent, fully disclosed, easy-to-understand, cost-competitive products in the marketplace,” said Fulmer, whose company donated $25,000 under its own name to Restore Our Future last month. “We believe our products and services compete very favorably.”

Payday Lenders’ Donations

Payday lenders in total contributed $427,500 to Restore Our Future since Cordray’s appointment, most of it under their own names, FEC reports show.

Katsam LLC, of Seattle, has the same registered agent as Moneytree Inc., a payday lender, according to corporation records filed with the Washington secretary of state. Its members, David and Dennis Bassford, are also corporate officers at Moneytree. Bassford is also a director of the trade association.

REBS shares an address and a president, James Marchesi, with a Las Vegas branch of Check City, which offers both payday loans and loans to consumers using their automobile titles as collateral, according to records kept by the Nevada secretary of state and FEC reports.

The registered agent of RTTTA LLC, J. Todd Rawle, is an executive with Check City, based in Orem, Utah, the state’s Department of Commerce and federal election records show. Richard Rawle, another Check City executive and an officer of RTTTA, is a director of the Community Financial Services Association of America, an Alexandria, Virginia-based trade group for payday lenders. The group spent $2.3 million to lobby last year, according to reports filed with the U.S. Senate.

District of Columbia Lawsuit

Select Management is one of several companies owned by Rod Aycox. Another Aycox-owned title lender, Loan Max, was sued in 2009 by District of Columbia Attorney General Peter Nickles for charging interest rates of more than 300 percent a year, according to a press release from the attorney general’s office.

Loan Max settled out of court by agreeing to provide refunds to customers who lived in the nation’s capital and return cars that the company had repossessed, according to a D.C. government release.

Aycox, who also contributed $100,000 to Restore Our Future last month in his own name, contributed to five presidential candidates during the 2008 elections, including Romney and Obama, according to the Center for Responsive Politics, a Washington-based research group that tracks political giving. His foundation, the Georgia-based Rod and Leslie Aycox Foundation Inc., made a separate $100,000 donation to Restore Our Future in July, FEC filings show.

Personal Donations

Todd Rawle gave Romney the maximum $2,500 contribution last May. Dennis Bassford, chief executive officer of Tukwila, Washington-based Moneytree, and David, executive vice president, each contributed $2,100 to Romney’s 2008 presidential campaign, according to the center records.

Potter, a Republican who is president of the Campaign Legal Center, a Washington-based group that supports stronger disclosure requirements, said the FEC should require more information.

“If the money being given belongs to a particular person or a small group of people, it ought to be disclosed,” Potter said. “If the money really is John Smith’s and is given through a corporation John Smith discloses, it should be disclosed as coming from John Smith.”

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Thursday, 22 March 2012 02:00 PM
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