The Federal Trade Commission should be able, under current law, to order a payday lender to hand over its so-called ill-gotten gains after its leader was convicted of usury, fraud, and racketeering, the Supreme Court heard Jan. 13.
The court heard 67 minutes of oral argument in the case known as AMG Capital Management Inc. v. Federal Trade Commission (FTC).
After a five-week jury trial, he was found guilty in October 2017 of racketeering, wire fraud, money laundering, and Truth in Lending Act offenses.
Tucker and his company, AMG Capital Management, are appealing a decision by the U.S. Circuit Court of Appeals for the 9th Circuit that found the FTC had the power to seek disgorgement of $1.27 billion in ill-gotten gains.
AMG provides high-interest, short-term payday loans online that renew automatically. The FTC sued the company in 2012, claiming it failed to provide adequate disclosure regarding loan terms. AMG ended the targeted practices but refused to hand over the money.
Tucker and his business partner, attorney Timothy Muir, lied to millions of customers regarding the true cost of their loans to defraud them out of hundreds, and in some cases, thousands of dollars, DOJ said.
“Further, as part of their multi-year effort to evade law enforcement, the defendants formed sham relationships with Native American tribes and laundered the billions of dollars they took from their customers through nominally tribal bank accounts to hide Tucker’s ownership and control of the business.”
The FTC Act authorizes the FTC to carry out an administrative adjudication if it “has reason to believe” someone has violated or is violating the prohibition on unfair or deceptive acts or practices. If, after a hearing, the Commission decides that “the act or practice in question is prohibited,” it must make a written report and issue a “cease and desist” order. The statute also gives the FTC the rulemaking authority to “define with specificity acts or practices which are unfair or deceptive.”
Congress later amended the law to give the FTC authority to enforce its orders in U.S. district courts.
During oral arguments, the justices seemed skeptical of the claims by the FTC.
Justice Brett Kavanaugh asked FTC attorney Joel R. Marcus if his client actually possesses the legal authority it claims.
“I worked in the Executive Branch for many years, so I understand how this happens,” the justice said.
“When you’re in the Executive Branch or an independent agency, you want to do good things and prevent or punish bad things, and sometimes your statutory authority is borderline. And it could be war policy or immigration or environmental or what have you, but with good intentions, the agency pushes the envelope and stretches the statutory language to do the good or prevent the bad.
“The problem is ... this results in a transfer of power from Congress to the Executive Branch to decide whether to exercise this new authority. That’s a particular concern, at least for me, with independent agencies. So and why isn’t the answer here for the agency to seek this new authority for Congress for us to maintain the principle that separation of powers, that the agency should stick to the authority ... in the text and not ... go beyond that?”
Marcus replied: “The real question is what was Congress’s intent when it gave the commission the authority to seek a permanent injunction in federal court. And if it intended to accord the agency ... the ability to go ask the court for all of the inherent equitable remedies, then I think that resolves your concerns about separation of powers issues.”
Justice Stephen Breyer suggested to AMG attorney Michael Pattillo that it may be unwise to back away from the FTC’s position when the courts have sided with the agency for the past half-century.
“The argument that’s against you is simply this to me: Law isn’t perfect. Courts make mistakes. We make mistakes too. And this, if it is a mistake, has been around for years. ... So too much time has passed, water under the bridge, good-bye.”