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Justice News

Department of Justice
U.S. Attorney’s Office
Eastern District of Pennsylvania

Friday, May 25, 2018

Statement by United States Attorney William M. McSwain Regarding the Sentencing of Wheeler Neff to 8 Years’ Imprisonment in “Payday Lending” Case

“We see few cases in which a defendant has victimized so many that the number of those impacted is too high to count. This is one such case.

Wheeler K. Neff used his law license to help clients prey on the financial desperation of people all across the country. He helped so-called payday lenders evade the law and, in the process, collected hundreds of millions of dollars in debt on loans with interest rates that would make Tony Soprano blush – typically exceeding 780 percent.

The defendant drafted sham contracts for payday lenders like Charles M. Hallinan and Adrian Rubin – each of whom were convicted and are awaiting sentencing. These contracts were designed to give the false impression that Hallinan and Rubin’s companies were owned by Indian tribes that could claim ‘sovereign immunity’ from laws the defendants wanted to evade.

As an attorney, Mr. Neff should realize that a civilized society requires obedience to the law, including those laws he didn’t happen to like.   

Neff drafted these contracts to help clients collect unlawful debt for as long as possible without getting caught.  In return, Neff received hundreds of thousands of dollars a year in legal fees.

The defendant’s schemes pushed the limits of creative deception.

For example, he helped Hallinan defraud some 1,400 people who had brought a class action lawsuit in Indiana against one of Hallinan’s companies, Apex 1 Processing, Inc.  Fearing that Hallinan could face personal exposure of $8 to $10 million if the plaintiffs could prove that Hallinan owned Apex 1, Neff conspired with Hallinan to make it appear that Apex 1 had no assets, employees, or officers, and was owned by an Indian chief living in Canada in order to entice the plaintiffs to accept a discounted settlement on their claims.  To further this scheme, Neff told Hallinan to change his tax returns and retroactively transfer business activity from Apex 1 to another of Hallinan’s companies.  Neff also directed people to transfer all documents relating to Apex 1 to tribal lands in Canada, where they would never be found by the plaintiffs.

The defendant preyed on the vulnerable -- those who were desperate and struggling. Consider, for example, the story of one of Neff’s victims,  Dawn Schmitt, the Nebraska school teacher who testified that she turned in desperation to payday loans after her abusive partner left her broke and without credit.  Schmitt testified that she wound up taking out about five payday loans, including one from a Hallinan company, and fully intended to pay them all back.  But she could not do so, despite her best efforts, because she was trapped in a cycle of debt caused by Neff and his co-conspirators.  As a result, she was forced to declare bankruptcy and move home to North Dakota. 

But rather than an apologize to Schmitt and his other victims, the defendant doubled down on the kind of treachery that helped collect more than $490 million in debt, between 2008 and 2013, from hundreds of thousands of customers, including residents of Pennsylvania, a state which prohibits payday loans.

Over four days of trial testimony, Neff lied over and over again under oath. But to its great credit, the jury saw through Neff’s perjury. We hope that the verdict and today’s sentencing of 8 years in a federal prison provide some measure of justice to the victims.

And it was only through the hard work and dedication of our partners with the FBI, United States Postal Inspection Service, and Internal Revenue Service Criminal Investigations that we were able to unravel this complicated scheme and bring this defendant, and others charged in connection with this case, to justice. All involved in this exhaustive investigation should be congratulated.

And I would especially like to thank our trial team of Assistant United States Attorneys Mark B. Dubnoff and James Petkun who not only expertly and successfully prosecuted a very complex case, but who also saw and brought to light, in human terms, the damage the defendant has done to the lives of those who reached out in desperation, and found only more heartache.”

Financial Fraud
Updated May 25, 2018