United States v. Hallinan

290 F. Supp. 3d 355
CourtDistrict Court, E.D. Pennsylvania
DecidedDecember 4, 2017
DocketCRIMINAL ACTION NO. 16–130–01, –02
StatusPublished

This text of 290 F. Supp. 3d 355 (United States v. Hallinan) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Hallinan, 290 F. Supp. 3d 355 (E.D. Pa. 2017).

Opinion

EDUARDO C. ROBRENO, J.

In this criminal action, the Government sought to introduce at trial fifteen documents withheld by a law firm in response to a subpoena, the testimony of the law firm's partner, who represented one of the defendants, concerning the subject matter of the documents, and the testimony of two other attorneys, who represented a company which was alleged to be owned by one of the defendants. Defendant Charles M. Hallinan and an uncharged third party intervenor objected to the admission of the *359documents and testimony on the basis that they are protected by the attorney-client privilege, the attorney work product privilege, or the community-of-interest privilege. The Government disputed the assertions of privilege, and argued that, to the extent any privilege exists, it was unavailable here by application of the crime-fraud exception.

The Court reviewed the documents in camera, and held two hearings, portions of which were ex parte and in camera, at which it allowed Hallinan and the third-party intervenor to object to the testimony of the attorney witnesses on the basis of privilege.

Following each of the hearings, the Court determined that, in the first instance, all of the documents before it and portions of the testimony of the three attorneys are protected by the attorney-client, attorney work product, or community-of-interest privileges. Nevertheless, with respect to the fifteen documents and the testimony of one of the attorneys, the Court found that the protection is lost by application of the crime-fraud exception, and allowed the Government to introduce the documents and that attorney's testimony at trial.

The Court issued its ruling in orders dated October 11, 2017, October 23, 2017, and October 30, 2017. The case proceeded to trial, and the defendants were convicted. The Court now supplements the legal reasoning for the issuance of those orders.

I. THE SUPERSEDING INDICTMENT

Defendants Charles M. Hallinan, Wheeler K. Neff, and Randall P. Ginger ("Defendants") were indicted by a grand jury on charges of conspiracy to violate the Racketeer Influenced and Corrupt Organization ("RICO") Act, conspiracy to commit fraud, mail fraud, wire fraud, and money laundering.1 A second grand jury was later empaneled and returned a superseding indictment.

The superseding indictment charged that, from at least 1997 until 2013, Defendant Hallinan owned, operated, controlled, and financed numerous business entities based in Bala Cynwyd, Pennsylvania, which issued, serviced, funded, and collected debt from small, short-term, high-interest loans, commonly referred to as "payday loans" because they were meant to be repaid when the borrower received his or her next paycheck ("the Hallinan Companies"). See Superseding Indictment at 2, ECF No. 87. According to the superseding indictment, Hallinan directed some of his companies to charge fees of approximately thirty dollars for every one hundred dollars borrowed, which translated to annual percentage rates of interest of approximately 780 percent, given the short-term nature of the loans. Id. The grand jury charged that the payday loans issued by the Hallinan Companies violated the laws of Pennsylvania and more than a dozen other states restricting the amount of interest permissible on personal loans. See id. at 5-6.

According to the superseding indictment, Hallinan, aided and abetted by Defendant Neff, attempted to avoid the operation of state lending laws restricting the issuance of payday loans by entering into multiple partnerships with Native American tribes, who would then claim sovereign immunity from the state lending laws. See id. at 7-8. The superseding indictment charged that these partnerships were a sham, as the tribes had very little connection to the day-to-day operations of the payday lending operations, and did not *360provide the money advanced for the payday loans, service the loans, collect on the loans, or incur any losses if the borrowers defaulted. Id. at 8. The grand jury further charged that Hallinan paid the tribes at least $10,000 a month in return for the tribes' agreement to claim ownership of the various Hallinan Companies and assert sovereign immunity. Id.

Apex 1 Processing, Inc. ("Apex 1") is a payday lending corporation incorporated by Hallinan in Florida in July 2008. See id. at 13. According to the superseding indictment, in November 2008, Hallinan pretended to sell Apex 1 to an entity owned by Defendant Ginger, a purported chief of a Canadian-based Native American tribe. See id. at 13-14. As part of their agreement, Hallinan promised to pay approximately $10,000 per month to Ginger, and Ginger promised to claim that his tribe owned Apex 1 whenever necessary to evade state payday lending laws and regulations. See id.

On March 23, 2010, payday loan borrowers filed a class action lawsuit in Indiana state court against Apex 1 ("the Indiana Litigation"). Id. at 32. The borrowers alleged that Apex 1 issued payday loans to them that violated Indiana law. See id. On May 8, 2013, the Indiana state court certified a class of 1,393 plaintiffs in the Indiana Litigation ("the Indiana Plaintiffs"). See id. at 33. According to the superseding indictment, beginning around July 2013, Hallinan, Neff, and Ginger engaged in a scheme to defraud the Indiana Plaintiffs by deceiving them into believing that Apex 1 was effectively judgment proof so that they would accept a discounted settlement offer on their claims. See id. at 33-34.

The superseding indictment further charged that, in order to convince the Indiana Plaintiffs that Apex 1 was judgment proof, Defendants defrauded the plaintiffs into believing that (1) Ginger was the sole owner of Apex 1, (2) Ginger was a Canadian Indian chief who lived on tribal lands in Canada, (3) Apex 1 had few if any assets that could be recovered, and (4) Hallinan did not exercise managerial control over Apex 1. See id. at 34-35. According to the grand jury, Hallinan took part in this scheme after Neff warned him, in July 2013, that if the Indiana Plaintiffs established that Hallinan had not actually sold Apex 1 to Ginger in 2008, Hallinan could face personal exposure of up to $10 million. See id. at 33.

In April 2014, the Indiana Plaintiffs agreed to settle their claims for approximately $260,000, although their attorneys had valued their clients' cause of action at greater than $2.6 million. See id. at 36. According to the superseding indictment, Hallinan caused one of the Hallinan Companies to pay the entirety of the settlement. See id. at 36-37.

II. PROCEDURAL HISTORY

Defendants were first charged by indictment on March 31, 2016. ECF No. 1. A superseding indictment was issued on December 1, 2016. ECF No. 87. Defendants Hallinan and Neff filed a motion to dismiss the charges against them on February 8, 2017, ECF No. 149, which the Court denied on August 15, 2017, ECF No. 203. A jury trial commenced on September 26, 2017 against Hallinan and Neff,2 and the jury returned a guilty verdict against both Defendants on all counts of the superseding indictment on November 27, 2017.

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Bluebook (online)
290 F. Supp. 3d 355, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-hallinan-paed-2017.