drunk nature of the online lending business. So do a few other local investment offerings continued from page 9 that The Pitch has obtained. Ward Parkway Capital is an LLC formed belonged to Spectrum Business Ventures, a private investment firm headquartered on the in February 2012 by Kansas Citians Michael Sinatra and Jim Gamble. Sinatra is a principal Country Club Plaza. (Spectrum Business Venat local consulting firm Chadwick Partners; tures also owned 100 percent of eDat Holdhe previously owned a limousine company in opp, a Missouri limited liability corporation town and served as a VP at UMB Bank. Earlier used in eData Solutions’ puzzlingly complex this year, Sinatra was named one of Ingram’s business structure.) magazine’s “40 under 40.” Gamble is a realAmit Raizada is listed as president and secretary of Spectrum Business Ventures on all estate agent with Reece & Nichols. In Ward Parkway Capital’s offering, it the company’s filings since 2005. Raizada also signs as both manager of eData Solutions and sought $5 million from investors, with a minimum buy-in of $50,000. The document president of Spectrum Business Ventures in a promises investors a 25 percent annual return joint lawsuit filed by the two entities in 2011. Raizada formed Spectrum Business Ven- on their money. That is a pretty rich claim. What’s the tures in 2002 after “developing wireless retail secret? stores for AT&T and T-Mobile,” according to a “The Company intends to use the proceeds 2010 Kansas City Business Journal article. Like of the sale of the Notes to fund one or more new a lot of private investment firms, Spectrum loans to one or more Payday Lending OperaBusiness Ventures doesn’t disclose much about its practices. The Business Journal report tors,” the offering states. Sinatra and Gamble’s venture resembles a noted that the company bought a distressed Prairie Village lemonade stand compared with ethanol plant in Nebraska in December 2010. Vianney Fund, whose offering The Pitch has According to its website, Spectrum Business Ventures has lately been acquiring apartment acquired. Led by Vincent Hodes, Vianney in 2010 sought $20 million from investors, with buildings in the Carolinas. And Raizada apa $100,000 minimum buy-in. (Hodes is a memparently shares Scott Tucker’s enthusiasm for race cars: In 2012, he bought a McLaren ber of St. Ann. He also is listed as the owner and president of Midland Metal Manufacturing, a sports car for $269,255 in cash from a dealer in Beverly Hills. He later sued the dealer for plumbing-supply company.) Vianney Fund projected its annual rate of misrepresenting various attributes and accesreturn to be between 18 percent and 35 persories of the vehicle. cent. “We intend to focus the majority of the In 2011, eData Solutions and Spectrum Company’s efforts and investments on fundBusiness Ventures filed suit against a Scarsing loans to payday-lending dale, New York, finance companies in both the retail compa ny ca lled New “That’s why this and Internet markets,” the World Merchant Partners. offering states. “However, The entities had previously payday stuff has the Company may also exentered into an agreement spread around the tend credit to other Subwhereby N WMP would prime Borrowers, including “act as a non-exclusive ficity like it has, check-cashing, rent-to-own, nancial and strategic advidespite how ugly it is subprime mortgage, and sor to eData in connection pawn shops.” with assisting eData in the at its core.” In other words, Vianney research of, and the idenis an equal-opportunity extification and selection of, one or more sources of capital.” The suit al- ploiter of poor people. The Vianney offering also notes that Hodes leges that NWMP later violated nondisclosure “has made loans totaling in excess of $15 miland confidentiality agreements that had the lion over the past four years to a number of effect of harming eData’s business. Subprime Borrowers that the Company may Pretty boring stuff — until you scan for the target for loans in the future.” Hodes or his dollar signs in NWMP’s counterclaim. Among affiliates, it reads, have made loans totaling the highlights: NWMP claimed that it brokered $15.5 million in financing for eData from an approximately $10 million to the Bahamas Marketing Group and KSQ Management. unnamed company. NWMP also claimed that Both of these companies are controlled by eData was able to obtain $60 million from an Joel Tucker. A related document obtained by outfit called the Riverside Co. through NWMP’s The Pitch shows that Joel Tucker entered into a contacts. Finally, NWMP alleged that eData guaranty agreement in favor of Vianney Fund. was in the process of entering into a con“What Vince Hodes does is draw up an tract, aided by NWMP’s introduction, with investment fund and then take it to his rich Deutsche Bank “in an amount believed to be friends at the country club and get them to $180,000,000.00.” drop in a hundred thousand, a couple hundred One of the largest banks in the world lendthousand apiece,” says a source familiar with ing $180 million to a virtually unknown Kanthe setup. “Then he hands the money over to sas City company? Such a deal — Smith, who somebody like Joel Tucker to use as capital for also represents Spectrum Business Ventures, disputes the figure — gives a sense of the cash- his payday companies. And it’s such a great
KC H O M E
The Usury Suspects
Joel Tucker’s lavish KC home return that if you have that kind of money, it’s just a very easy bet to make. Because in a year, you’ve done nothing, and now you’ve got an extra $20k or $30k. Or if you’re superrich and you have a million sitting around, in theory you’re making $200,000 without lifting a finger. “That’s why this payday stuff has spread around the city like it has, despite how ugly it is at its core,” this source continues. “Because it’s just another investment to a lot of these people. They’re just writing a check. They’re so far removed from where that money is actually coming from that they barely even have to think about it.”
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hristopher Hodes, Vincent Hodes’ brother, is not quite so removed. From a Brookside building at 601 East 63rd Street, he presides over a variety of hard-to-pin-down companies. Based on lawsuits filed in recent years, he is likely very much immersed in the online lending industry. In 2010, the Arkansas Attorney General sued Arrowhead Investments and Galaxy Marketing, as well as Christopher Hodes (whom it alleged to be the controller of these two companies), for lending over the Internet to Arkansans at interest rates of 782 percent. Arkansas law caps consumer lending rates at 17 percent. The companies settled and promised not to lend in the state again. But another lawsuit from that year, brought by Axentia Solutions (a “business with expertise in sales and marketing of debit card programs,” according to the petition), reveals how difficult it can be for a state to ensure that a Christopher Hodes company is not lending at usurious rates to its citizens. The suit names Christopher Hodes as a principal owner of a company called Star Financial and alleges that “Hodes is an individual who has a financial interest in Star, as well as other entities that engage in, fund, support, or profit from the payday-loan industry.” It then names 36 such LLCs, in addition to Arrowhead Invest-
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ments and Galaxy Marketing. It notes that among Star’s financial backers are Vincent Hodes and Vianney Fund. Not a shock. Also not shocking: It states that “because sovereign Indian tribes enjoy immunity from many state and federal regulatory regimes, Hodes had become interested in … using various Indian tribes as lenders in order to circumvent the increasingly restrictive regulatory environment in which the payday-lending industry operated.” Axentia had relationships with the Ponca tribe, and in the course of Axentia and Star’s dealings, Hodes was introduced to some of the tribe’s representatives. The suit goes on to allege that Christopher Hodes went around Axentia and persuaded the Ponca Indians to sever their relationship with Axentia and enter into a nondisclosure agreement with “Star, Hodes or Hodes-related entities.” Christopher Hodes and another brother, Billy Hodes, were primary investors in the south Plaza restaurant and bar the Beacon. It opened in 2012, and reports of unscrupulous business dealings had begun wafting from the place by the time it closed this past summer. The Beacon served much of the community around Visitation Parish, located a couple of blocks away. Christopher and Billy Hodes are members of the parish; Christopher was on the school ministry team in 2011 and the administrative ministry team in 2012. The latter “advises the pastor and parish council in matters pertaining to the financial affairs of the parish,” according to the Visitation website. The Hodeses bought out the Beacon’s principal partners in late 2012. When the brothers closed the place, former employees attest to being left high and dry. Carlos Williams, the former head chef at the Beacon, describes an environment in complete disarray. “By the end, the liquor license had expired. We were on a do-not-deliver list with distributors,” he says. “And they were withholding the money that’s supposed to be sent to the courts for employees with child support. People’s checks were being garnished because the money wasn’t being sent where it was supposed to be sent.” Williams also notes that the Beacon’s accounting was done through one of Christopher Hodes’ businesses. Whitten Pell, who created the concept for the Beacon, has a similar take: “Myself and many of the other investors found dealing with the Hodes brothers to be extremely unpleasant.” There are recent indications that the world of short-term online lending might soon undergo an implosion not unlike that of the Beacon. The federal government is flexing some muscle in both regulating the industry and prosecuting its especially bad apples. And some local payday outfits, once aligned, have begun to turn against one another. Part 2 of this story runs next week.
E-mail david.hudnall@pitch.com december 5 -11, 2013
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