The nerve center of payday lending pioneer Charles Hallinan's multimillion-dollar business empire was – at least on paper – housed for years in a dilapidated shipping container parked on a dusty patch of tribal land in rural Northern California.
Inside, a lone computer server purportedly fielded hundreds of requests each day from desperate borrowers across the country – applying online for low-dollar, high-interest loans to carry them until their next paycheck.
Hallinan's business partners – the Guidiville Band of Pomo Indians of the Guidiville Rancheria — believed that their willingness to maintain that server, humming away on their reservation, kept the venture both legal and profitable.
But as government witnesses have testified over the last month, the server contained no information, did nothing, and ultimately was as empty as the business relationship Hallinan had forged with his American Indian partners.
While Hallinan continued to rake in up to $3 million a month on loans issued from his Bala Cynwyd headquarters, prosecutors have said, he had the Guidiville tribesmen guarding a worthless box.
"It showed a disrespect of the tribe and our circumstances," testified Michael Derry, the business agent for the Guidiville tribe. "We really wanted to learn this business, this industry, learn everything about it. Mr. Hallinan … was pitched to us as the godfather of this industry … and here he was saying he's not going to teach us. He's not really going to help."
Federal prosecutors have spotlighted the relationship between payday lenders and tribes like the Guidiville Band as they have wound down their racketeering conspiracy case against Hallinan.
They concluded the case Thursday after 21 days of testimony that painted him as a predator who capitalized on the financial distress of low-income borrowers to whom he lent money at annual interest rates approaching 800 percent.
A 76-year-old Villanova resident and Wharton School graduate, Hallinan is credited with innovating many of the business practices that have helped the industry thrive despite an ever-tightening noose of government regulations. In a defense scheduled to begin Friday, his lawyers are expected to argue that he broke no laws and merely exploited legal loopholes – like those granting sovereign immunity to Indian tribes – to keep offering a legitimate financial service to borrowers most banks wouldn't touch.
In fact, it was government efforts in the 2000s to crack down on ties that payday lenders had established with regional banks that drove Hallinan to forge his first relationship with Indians – a now-widely adopted practice within the industry known as "rent-a-tribe."
The theory, which Hallinan has claimed credit for developing along with his longtime lawyer and co-defendant, Wheeler Neff, works under a similar legal framework to the rationale that tribes across the country have used to erect casinos on their reservations.
As Pennsylvania and dozens of other states have imposed interest rate caps on small loans, Hallinan and other payday lenders could effectively export whatever interest rates they wanted by setting up operations on self-governing tribal lands.
For Hallinan's companies, the arrangement proved particularly lucrative. While working with the Guidiville Band between 2011 and 2013, the businesses were pulling in millions in fees charged to borrowers – and doling out a monthly cut of $20,000 or more to the tribe, said Derry.
Hallinan maintains that Derry — who now describes the business relationship as a sham — was all too willing to take a cut of the profits until federal agents started asking questions.
But that money was particularly coveted by the 152-member Guidiville Band, which only secured its current 44-acre plot of land northwest of Sacramento after suing the federal government for terminating its tribal status in 1958. Heirs to a centuries-long history of poverty, landlessness and decimation by disease, the tribe has in recent years cemented relationships with six other payday lenders.
As Derry described it, the partnership between his tribe and Hallinan existed in name only. Tribe members had no access to the computer server that Hallinan stored on the Guidiville reservation – the server that Derry said he believed housed information on all the loans Hallinan's companies were giving out in the tribe's name.
When Derry pushed Hallinan for a chance to review the data, Hallinan publicly offered to fly several tribe members out to his Bala Cynwyd headquarters to learn more about the business but privately groused to lawyer Neff about the tribe's request.
"If these guys are really serious about their responsibilities, then we're dealing with the wrong tribe," he wrote to Neff in a 2012 email. "These guys are getting carried away with their 'ownership.' We have to put an end to it now if we can't get this straightened out."
Federal agents later seized the server and found that it contained no data and was not even capable of connecting to computers outside the reservation.
That came as no surprise to Adrian Rubin, a Jenkintown-based payday lender and ex-Hallinan business partner, who testified last month about a separate relationship his companies formed with the Guidiville Band in 2012.
Rubin entered the payday lending industry in 1998, after serving a stint in federal prison for tax evasion. He described Hallinan as a mentor who taught him everything from how to make money in the business to how to find potential borrowers.
"The majority of the time we would advertise on an urban-type radio station," he said. Hallinan thought that "those type of customers" that listened to "those types of stations" would be most interested in a payday loan.
But years after splitting from Hallinan, Rubin set up his own company and separate partnership with the Guidiville Band – an arrangement he told jurors he knew was illegal from the start.
Hallinan's top managers, he said, told him that the servers he would be sending to the reservation in California were for nothing more than show.
"The purpose was to create the illusion that we were going to send information – the customers we were approving or denying – to the server and somebody on tribal lands was going to look at it and say, 'Yes, that's approved,' or 'No, that's not approved,'" Rubin said.
In reality, he added, "it was my decision as to who was being approved and wasn't. It was my decision when they would get funded. It was my decision as to what charges were being assessed to each customer. … It was all my money and all my employees."
But Rubin's 17 hours of testimony over four days may pose problems for the government's case.
In addition to his 1995 tax fraud conviction – which should have barred him from the lending industry — he pleaded guilty in 2015 to racketeering charges tied to his own payday lending and to crimes stemming from a separate scheme in which he scammed 70,000 low-income customers into buying useless credit cards.
On the witness stand, Rubin also admitted to forging signatures of his father-in-law and a family friend on company documents, and to a life of crime that started with stealing candy bars at Philadelphia theaters as a teenager.
Hallinan's lawyer, Edwin Jacobs, scoffed at any comparison between Rubin and his own client.
"So, you're a two-time federal felon, you're a lifetime fraud, you're a lifetime liar," he challenged Rubin during his cross-examination. "What do Mr. Hallinan and Mr. Neff have to do with your nine years of illegal payday lending?"