A former Main Line investment banker who made a career of flouting state laws and preying on cash-strapped people to build one of the nation's largest payday-lending empires was sentenced Friday to 14 years in federal prison and stripped of more than $64 million in assets.
But Charles M. Hallinan, 77, of Villanova, remained unrepentant in the face of a prison term that his lawyers said might as well be a "death sentence" given his age and rapidly declining health.
Hallinan said nothing when given the chance to address U.S. District Judge Eduardo Robreno before his punishment was imposed. In interviews with probation officers before Friday's hearing in Philadelphia, he said he was "exactly the opposite" of contrite.
Perhaps that was to be expected from a man whose colleagues dubbed him "the godfather of payday lending." But it only cemented the judge's decision to strip Hallinan of his vast financial holdings and freedom during the final years of his life.
"It would be a miscarriage of justice to impose a sentence that would not reflect the seriousness of this case," Robreno said. "The sentence here should send a message that criminal conduct like [this] will not pay."
Hallinan's sentence came seven months after a jury convicted him of 17 counts including racketeering, international money laundering, and fraud in a case that cast doubt on the legality of many of the business tactics that have turned the payday-lending industry into a multibillion-dollar-a-year financial juggernaut.
Hallinan pioneered many of those tactics in an effort to evade state regulatory efforts, and taught many of the industry's other top lenders how to make millions by illegally offering low-dollar, high-interest loans to financially desperate borrowers with limited access to more traditional lines of credit.
Interest rates on many of the loans he issued greatly exceeded rate caps instituted by the states in which borrowers lived, like Pennsylvania, which imposes a 6 percent annual limit.
In court Friday, Assistant U.S. Attorney Mark Dubnoff argued that there was little difference between the exorbitant fees charged by money-lending mobsters and the annual interest rates approaching 800 percent that were standard on many of Hallinan's loans.
"The only difference between Mr. Hallinan and other loan sharks is that he doesn't break the kneecaps of people who don't pay his debts," Dubnoff said. "He was charging more interest than the Mafia."
In all, government lawyers estimate, Hallinan's dozens of companies made $492 million off an estimated 1.4 million low-income borrowers between 2007 and 2013, the period covered by the indictment.
Robreno's forfeiture order will strip Hallinan of many of the fruits of that business, including his $1.8 million Villanova mansion, multiple bank accounts, and a small fleet of luxury cars, including a $142,000 2014 Bentley Flying Spur. In addition, the judge ordered Hallinan to pay a separate $2.5 million fine.
But his lawyer, Edwin Jacobs, was more concerned Friday with a more significant price his client might have to pay – his life.
Citing Hallinan's recent diagnoses of two forms of aggressive cancer, Jacobs pleaded with Robreno to take the unusual step of granting Hallinan house arrest so that he could receive necessary treatment.
"What is just, under the circumstances?" Jacobs asked. "If there is going to be a period of incarceration, one that makes it so that Mr. Hallinan doesn't survive is not just."
Although Robreno made some accommodations for Hallinan's health – including giving him 11 days to get his medical affairs in order before he must report to prison – he refused the defense lawyer's request. The judge cited the financier's efforts to obstruct the investigation up to and during his trial as well as the prison system's ability to care for ailing inmates.
It was far from the harshest sentence imposed on a titan of the payday lending industry in a series of similar cases brought by the Justice Department over the last two years. Still, it may be one of the most significant.
Hallinan helped to launch the careers of many of the other lenders now headed to prison alongside him – a list that includes professional race car driver Scott Tucker, who was sentenced to more than 16 years in prison in January and ordered to forfeit $3.5 billion in assets.
Hallinan's codefendant and longtime lawyer, Wheeler K. Neff, was sentenced in May to eight years behind bars.
Hallinan broke into the industry in the 1990s with $120 million after selling a landfill company, offering payday loans by phone and fax. He quickly built an empire of dozens of companies offering quick cash under names like Tele-Ca$h, Instant Cash USA, and Your First Payday, and originated many strategies to dodge regulations that were widely copied by other payday lenders.
As more than a dozen states, including Pennsylvania, effectively outlawed payday lending with laws attempting to cap the exorbitant fee rates that are standard across the industry, Hallinan continued to target low-income borrowers over the internet.
He tried to hide his involvement by instituting sham partnerships with licensed banks and American Indian tribes so he could take advantage of looser restrictions on their abilities to lend. But in practice he limited the involvement of those partners and continued to service all the loans from his offices in Bala Cynwyd.
"He bet his lifestyle on the fact that we would not catch him. He lost that bet," U.S. Attorney for the Eastern District of Pennsylvania William M. McSwain said in a statement after the sentencing. "Now, it's time for Hallinan to repay his debt with the only currency we will accept: his freedom and his fortune, amassed at his victims' expense."