Local companies tied to offshore payday lenders

But those businesses are as a matter of fact a front for an unlicensed Internet payday loan empire that consumer advocates say may not comply with a newly passed Tennessee law.

The Chattanooga entrepreneur who controls the businesses, Carey V. Brown, calls his payday business a "shell corporation" set up overseas for "lawsuit protection and tax reduction."

Tennessee regulators say that the payday entities operated out of Chattanooga -- PayDayMax.com, MyCashNow.com and DiscountAdvances.com -- are not licensed to do business in the state, even though a new Tennessee law says payday lenders aren't supposed to operate in the state without a license.

"The only way we can look at in other words to say they're operating illegally if they don't have their licensing and accreditation, and within time, somebody's gonna knock on their door and shut the place down," said Jim Winsett, president of the Chattanooga Better Business Bureau.

The payday conglomerate in substance operates as one company, employing as many as 400 local employees and generating between $1 million and $2 million in daily loan revenue from payday loans, former employees say.

Terenine, Area 203 and ACH Federal openly do business as server hosters, online marketers and direct-deposit processors, with a client list that includes the Chattanooga Area Chamber of Commerce, Precept Ministries and others.

Their ads use words like "virtualization" and "cloud computing," and the companies sponsor innovation-focused events and organizations.

From 2008 through 2010, the businesses made near 1.5 million loans to roughly 1.1 million in a class by itself clients, according to former operations manager Casey Lomber's written testimony to the FTC.

Brown, the man behind the payday lenders and related businesses, is a former Rossville used-car dealer who began making online payday loans in 2001 through MyCashNow and Credit Payment Services.

Online operator is unlicensed

"If an online operator is unlicensed, at that time he or she may not be following applicable regulatory laws," explained Jones, whose company is licensed to operate both Internet and retail store locations making payday loans. "Those who operate offshore are able to avoid regulations."

Though MyCashNow.com and related companies owned by Brown appear to be based offshore, Chattanooga is the actual physical location that houses most of the payday businesses' workers, split among two buildings on Amnicola Highway and one on Brainerd Road, former employees said.

Lot of stuff with payday loans

"We did a lot of stuff with payday loans," said former Area 203 intern Brittany Jackson. "That's the main thing I worked with, and the largest business unit during I was there."

The businesses invoice each other for services, just like any company does with its clients, although they're owned or controlled by the same man, Shelley said.

Brown said in his 2005 deposition that he owned more than 20 such businesses, which he personally operates through contracts to put it more exactly than a traditional ownership structure.

The strategy is a means to an end

The strategy is a means to an end: Payday earnings are used to support missionaries in their efforts to "save souls" overseas, said Christiansen, the former Terenine engineer who helped set up many of the company's operations.

Bulletin boards at the Amnicola Highway building that houses Terenine, ACH Federal and Area 203 are covered with pictures of smiling children whom Brown has helped, and overflowing with postcards from overseas missionaries whom he supports with earnings from his payday sites, former employees said.

In fact, the overall company's mission statement is "to maximize the growth of the Kingdom by helping the least of these, through strategic giving from profitable business," according to an email received from Brown while a prior investigation.

The goal is a reference to strengthening the biblical kingdom of God, said Terenine chief innovation officer David Glenn in a mid-2011 interview.

Typical business

Former employees say Brown creates individual companies where a typical business would simply employ a human resources or accounting department, for instance.

"We actually started as a department within a family of businesses a couple of years ago," Carney said. "Prior to 2010, [Terenine] was more of an IT department that was focused on providing services to affiliated businesses."

The push for business beyond Brown's Internet payday loans hasn't fared so then, according to employees who quit or were fired.

The two most visible of Brown's companies

The two most visible of Brown's companies, Terenine and Area 203, joined local business groups just as the Chattanooga Research Council and participated in events like the Devlink innovation conference. Area 203 sponsored the 48-hour launch, an event to spur startup businesses in Chattanooga, and did marketing work for customers like the Crash Pad, the Chattanooga Area Chamber of Commerce and LifeKraze.

But even with the Chamber and other customers, Brown's companies weren't pulling in enough outside business. Area 203 made up the difference on its online client list by posting the names of other Brown affiliate companies just as Terenine, ACH Federal and API Recruiting.

Though Brown spent millions of dollars and hired hundreds of workers, former employees say that about 90 percent of his revenue however comes from payday loans, and that a high rate of turnover has led to a loss of customers.

The problem

The problem was that feeding the beast -- the payday loan business -- remained the active priority, even trumping outside customers, they said.

Despite the limited number of nonpayday customers that Brown's companies service, a few of his businesses are ringing up staggering revenue growth.

J.Ed. Marston, director of marketing and communications for the Chattanooga Area Chamber of Commerce, said at that time the Chamber hired Area 203 he had no indication that a payday business was behind the marketing group.

"If the clients are seeking us out trying to do business with us, that's our right," Brown said. "Nevertheless if we're -- we can't exactly target a specific state that has lower allowable fees than what we charge."

The overseas entities

The overseas entities, insofar as they exist, are contractually run through CPS, which handles tasks that include "marketing, handling phone calls, taking applications, approving and denying loans, fraud verification, accounts receivable," Brown said in 2005.

"Many lenders argue that because it's over the Internet, the law doesn't apply, however the Internet doesn't bequeath magical status on the loan," King said.

Ira Rheingold, executive director for the National Association of Consumer Advocates, said most Bermuda Internet businesses are set up to dodge taxes or U.S. laws.

That department regulates 10,262 financial entities. Only in May was the agency handed the responsibility of regulating and licensing Internet payday lenders, MacDonald said.

"Since that time, we have started a process of determining what entities might be engaging in Internet payday lending without being licensed," he said. "We cannot comment on specific investigations."

Overseas interest

His move to portray his business as an overseas interest was itself a response to an ongoing class-action lawsuit against five cash advance stores that he owned in 2001, he said in the deposition.

"I already have a class-action suit going against my brick-and-mortar stores," Brown said then. "It was just a matter of time earlier they come afterwards the Internet business, too."

Though that was years ago, his employees for all that call his payday business "the chicken" in honor of the long-gone mascot, Shelley said, if only because they don't know what else to call CPS.

The hardship of running such a complicated business

The hardship of running such a complicated business and the expense of dodging regulators is worth it if it supports Brown's work building the kingdom, Christiansen said.