Case 1:16-cr-00091-PKC Document 175 Filed 06/06/17 Page 1 of 9
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`UNITED STATES OF AMERICA,
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`-against-
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`SCOTT TUCKER and TIMOTHY MUIR,
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`Defendants.
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`CASTEL, U.S.D.J.
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` 16-cr-91 (PKC)
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` MEMORANDUM
` AND ORDER
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`The S1 Indictment (the “Indictment”) charges defendants Scott Tucker and
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`Timothy Muir with counts of conspiracy to collect unlawful debts, collection of unlawful debts,
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`wire fraud, money laundering and violation of the Truth in Lending Act related to the collection
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`of usurious interest on so-called “payday loans.” (See Docket # 114.) Among other things, the
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`Indictment alleges that Tucker managed and controlled several “payday lending” businesses that
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`were nominally owned by American Indian tribes, including the Miami Tribe of Oklahoma.
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`According to the government, Tucker entered into sham relationships with the Indian tribes in
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`order to invoke tribal immunity and continue lending practices that would otherwise be unlawful.
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`The government moves for an Order finding that the crime-fraud exception
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`applies to documents and communications possessed by Tucker’s attorneys relating to the state-
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`court action of Tucker v. AMG Services, Inc., 10 Civ. 1084 (Wyandotte County, Kansas)
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`(“Tucker v. AMG”). According to the government, Tucker v. AMG was a “sham” lawsuit
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`masterminded by Muir for the purpose of retroactively filing a merger certificate and invoking
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`tribal immunity. The government argues that documents and communications withheld by
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`Case 1:16-cr-00091-PKC Document 175 Filed 06/06/17 Page 2 of 9
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`Tucker’s attorneys at McDowell, Rice, Smith & Buchanan, P.C. (“McDowell Rice”), solely as
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`they pertain to Tucker v. AMG, fall within the crime-fraud exception.
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`For reasons that will be explained, the Court concludes that the government has
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`shown probable cause that such documents and communications possessed by McDowell Rice
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`were made in furtherance of a crime or fraud. The motion is therefore granted, and McDowell
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`Rice is directed to produce such documents and communications.
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`DISCUSSION.
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`The attorney-client privilege applies to confidential legal advice, and “is designed
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`to promote unfettered communication between attorneys and their clients so that the attorney
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`may give fully informed legal advice.” See generally In re Richard Roe, Inc., 68 F.3d 38, 39-40
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`(2d Cir. 1995) (“Roe I”). However, there is a “‘well-established’” exception to the privilege
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`when communications are made “‘in furtherance of contemplated or ongoing criminal or
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`fraudulent conduct.’” Id. at 40 (quoting In re Grand Jury Subpoena Duces Tecum Dated
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`September 15, 1983, 731 F.2d 1032, 1038 (2d Cir. 1984)). This exception exists because, unlike
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`in the normal attorney-client relationship, there is no societal interest in communications that
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`“are intended to further the commission of a crime or fraud.” Id.
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`For the crime-fraud exception to apply, the party invoking it “must at least
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`demonstrate that there is probable cause to believe that a crime or fraud has been attempted or
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`committed . . . .” Id. Second, the party invoking the crime-fraud exception must demonstrate
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`“that the communications were in furtherance thereof.” Id. “With strong emphasis on intent, the
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`crime-fraud exception applies ‘only when there is probable cause to believe that the
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`communications with counsel were intended in some way to facilitate or to conceal the criminal
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`activity.’ It is therefore relevant to show that the wrong-doer had set upon a criminal course
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`Case 1:16-cr-00091-PKC Document 175 Filed 06/06/17 Page 3 of 9
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`before consulting counsel.” United States v. Jacobs, 117 F.3d 82, 88 (2d Cir. 1997) (quoting In
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`re Grand Jury Subpoenas Duces Tecum, 798 F.2d 32, 34 (2d Cir. 1986)), abrogated on other
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`grounds by Loughrin v. United States, 134 S. Ct. 2384 (2014). “[T]he proposed factual basis
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`must strike ‘a prudent person’ as constituting ‘a reasonable basis to suspect the perpetration or
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`attempted perpetration of a crime or fraud, and that the communications were in furtherance
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`thereof.’” Jacobs, 117 F.3d at 87 (quoting In re John Doe Inc., 13 F.3d 633, 637 (2d Cir. 1994)).
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`If “‘the very act of litigating is alleged to be in furtherance of a fraud,’” courts
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`apply “a more stringent probable cause standard,” and the party seeking disclosure “‘must show
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`probable cause that the litigation or an aspect thereof had little or no legal or factual basis and
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`was carried on substantially for the purpose of furthering the crime or fraud.’” In re Grand Jury
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`Subpoenas Dated Mar. 2, 2015, 628 F. App’x 13, 14-15 (2d Cir. 2015) (summary order) (quoting
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`In re Richard Roe, Inc., 168 F.3d 69, 71 (2d Cir. 1999)); cf. Madanes v. Madanes, 199 F.R.D.
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`135, 149 (S.D.N.Y. 2001) (the crime-fraud exception may encompass “a ‘crime, fraud, or other
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`type of misconduct fundamentally inconsistent with the basic premises of the adversary
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`system . . . .’”) (Francis, U.S.M.J.) (quoting Coleman v. American Broadcasting Cos., 106
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`F.R.D. 201, 208 (D.D.C. 1985)).
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`According to the Indictment, Tucker has participated in the payday lending
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`industry since the late 1990s, and his businesses issued loans with interest rates that far exceeded
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`state usury limits. (Indictment ¶¶ 4.) The government alleges that beginning in 2003, Tucker
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`entered into sham business relationships with Indian tribes in order to invoke the protections of
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`tribal immunity and evade state usury laws. (Indictment ¶ 20-29.) The Indictment specifically
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`alleges that “to bolster the false appearance of tribal ownership and control” of Tucker’s lending
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`Case 1:16-cr-00091-PKC Document 175 Filed 06/06/17 Page 4 of 9
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`businesses, Muir “caused a sham lawsuit to be filed by SCOTT TUCKER, the defendant, against
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`AMG, despite the fact that AMG was MUIR’s client.” (Indictment ¶ 28.)
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`The government’s motion annexes documents showing probable cause that
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`Tucker v. AMG was a “sham” lawsuit orchestrated for the purpose of invoking tribal immunity
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`as to defendants’ allegedly usurious lending practices. Allegedly, one of Tucker’s “payday
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`lending” businesses was CLK Management (“CLK”), a corporation headquartered and
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`incorporated in Kansas. (Indictment ¶ 2.) A June 3, 2008 memorandum from the law firm
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`Fredericks Peebles & Morgan (“Fredericks Peebles”) to the CEO of Miami Nation Enterprises
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`discussed the possible acquisition of CLK by “a newly formed Miami Tribal Corporation,”
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`which became AMG Services, Inc. (“AMG”). (Gov. Mem. Ex. A.) Like CLK, AMG is alleged
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`to have been controlled by Tucker. (Indictment ¶ 2.) The June 3 memo notes:
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`The Miami Tribe has been involved in a protracted litigation with
`the State of Colorado. Colorado is having difficulty getting past the
`Tribe’s sovereign immunity defense. The State of Colorado has
`issued a subpoena for information related to CLK’s operations
`related to the cash advance business.
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`(Id. at 1.) The memo opines that the state of Colorado may be trying to disrupt the Tribe’s
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`business by attempting “to apply pressure on CLK, an entity that doesn’t have sovereign
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`immunity. It is likely their goal is to apply enough pressure on the CLK so that it no longer
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`makes economic sense to continue in business.” (Id. at 2.) It notes that the tribe’s new
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`corporation (i.e., AMG) could acquire CLK for $120,000, “creating an entity that may be able to
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`invoke tribal sovereign immunity.” (Id.) It notes that “the protection of the current business
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`model by purchasing CLK probably makes economic and legal sense.” (Id.)
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`It appears that, around that same time, AMG acquired CLK in some fashion,
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`although the formalities that would normally attend such a transaction seemingly were not
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`observed. The government notes that the Miami Tribe did not pay for CLK until June 29, 2010,
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`when it issued a check to Tucker personally for $135,259.17, a sum that included interest. (Gov.
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`Mem. at 3 & Ex. B.) The government also notes that no certificate of merger was
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`contemporaneously filed with the Kansas Secretary of State in 2008, as required by Kansas law.
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`(Gov. Mem. at 3.) And Tucker continued to sign checks under CLK’s bank account until at least
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`December 2008. (Gov. Reply Ex. I.)
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`Two years later, on July 8, 2010, Tucker filed his petition in Kansas state court in
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`Tucker v. AMG. (Gov. Mem. Ex. C.) The petition was signed by a McDowell Rice attorney.
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`(Id. at 6.) It sought an order directing AMG to execute a certificate of merger for its acquisition
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`of CLK, or, in the event that AMG failed to appear in the action, a judicial order directing the
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`Kansas Secretary of State to record a certificate reflecting the acquisition of CLK by AMG,
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`effective June 24, 2008. (Id. at 5.)
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`Although McDowell Rice represented Tucker in Tucker v. AMG, as recently as
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`May 2010, the bank account of defendant AMG had issued checks to McDowell Rice that were
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`signed by Tucker. (Gov. Mem. Ex. D.) On July 29, 2010, a judge of the Wyandotte County
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`Civil Court issued an order in Tucker v. AMG that found AMG in default, and, among other
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`things, directed the Kansas Secretary of State to record a Certificate of Merger retroactively
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`reflecting a June 24, 2008 merger of AMG and CLK. (Gov. Mem. Ex. E.)
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`Subsequent e-mails between Tucker and Muir are some evidence that Tucker v.
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`AMG was a sham proceeding orchestrated by Muir. In a series of e-mails dated July 31, 2010,
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`Muir, who was legal counsel to AMG, wrote to Tucker stating, among other things, “They’re
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`[sic] only about 10 attys in the country who can really appreciate just how fucking good this is
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`And ALL of us want to be flies on the wall when the opposing attys get this. Lastly, when Pete
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`Case 1:16-cr-00091-PKC Document 175 Filed 06/06/17 Page 6 of 9
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`talked to an atty at the KS Sec of State’s office, she said ‘I don’t know how you did this….you
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`shouldn’t have been able to get this done.’” (Gov. Mem. Ex. F; ellipsis in original.) In a
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`different e-mail that day, Muir wrote to Tucker stating, “This should be the ‘Sexual Chocolate’
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`of my legal career……..I should just drop the mic and walk off the stage…..” (Gov. Mem. Ex.
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`F; ellipsis in original.) On August 5, 2010, attorney Conly Schulte at Frederick Peebles, who
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`was outside counsel to AMG, e-mailed Tucker stating:
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`I wanted to follow up with you to let you know that I think this was
`one of the more brilliant pieces of legal work I’ve seen in awhile –
`Tim [Muir] deserves a huge pat on the back for pulling this one off!
`Getting a court order directing the Secretary of State to file the
`articles of merger – with an effective date of June 2008 – within
`such a short period of time – was just short of miraculous! It will
`prove to be invaluable in the pending litigation in California (and
`elsewhere) – and should go a long way to protecting the business
`model.
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`(Gov. Mem. Ex. G.)
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`In a letter of July 26, 2010, Schulte wrote to Tucker’s counsel at McDowell Rice
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`concerning Tucker v. AMG in his capacity as attorney for AMG. (Opp. Mem. Ex. A.) That
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`letter stated that AMG would not respond or appear in the Tucker v. AMG matter because it was
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`an instrumentality of the Miami Tribe and therefore “enjoy[ed] . . . sovereign immunity from
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`unconsented suit.” (Opp. Mem. Ex. A.) In an August 18, 2010 letter to AMG, Schulte stated
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`that the filing of the certificate of merger in Kansas “is important to Tucker and CLK” because it
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`would establish recognition of AMG’s purchase of CLK, “which is vital to protecting the
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`business model of the lending operation.” (Opp. Mem. Ex. B.)
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`In light of the foregoing, the Court concludes that the government has
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`demonstrated that there is probable cause to believe that a crime or a fraud was attempted, and
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`that the communications and documents possessed by McDowell Rice concerning Tucker v.
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`AMG were in furtherance thereof. The continuation of an unlawfully usurious lending business
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`was the crime or fraud attempted, and the communications and documents concerning Tucker v.
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`AMG were in furtherance thereof because they were part of an effort to baselessly invoke the
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`protections of tribal immunity. As the Second Circuit once observed, “a tribe has no legitimate
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`interest in selling an opportunity to evade state law.” Otoe-Missouria Tribe of Indians v. N.Y.
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`State Dep't of Fin. Servs., 769 F.3d 105, 114 (2d Cir. 2014).
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`First, the fact that a grand jury issued the Indictment, including allegations
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`concerning Tucker’s purportedly “sham lawsuit” against AMG (Indictment ¶ 28), supports a
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`finding of probable cause that a crime was committed. See United States v. Levin, 2015 WL
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`5838579, at *4 (S.D.N.Y. Oct. 5, 2015) (Forrest, J.) (“The Grand Jury has returned an
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`Indictment, finding probable cause to charge the defendants with mail and wire fraud. The
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`Government has thus satisfied the first prong of the crime-fraud exception.”) (citing Kaley v.
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`United States, 134 S. Ct. 1090, 1097 (2014)); see also Gerstein v. Pugh, 420 U.S. 103, 117 n.19
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`(1975) (a grand jury’s return of an indictment “conclusively determines the existence of probable
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`cause . . . .”).
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`Second, the record submitted by the government demonstrates probable cause to
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`believe that documents and the communications possessed by McDowell Rice relating Tucker v.
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`AMG were made in furtherance of a crime or fraud. See generally Jacobs, 117 F.3d at 88. As
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`noted, counsel to the Miami Tribe noted that acquisition of CLK may permit CLK “to invoke
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`tribal sovereign immunity” against the state of Colorado. (Govt. Mem. Ex. A.) When the
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`acquisition was purportedly consummated, AMG made no payment for CLK and did not submit
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`the necessary paperwork with Kansas officials. Then, in June 2010, AMG wrote a check to
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`Tucker personally for the CLK acquisition; nine days later, Tucker commenced Tucker v. AMG,
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`which sought an order directing the Kansas Secretary of State to accept a merger-related filing,
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`effective as of June 2008. (Govt. Mem. Ex. B-C.) Weeks earlier, Tucker had signed checks on
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`behalf of AMG for the payment of legal fees to McDowell Rice – the law firm that now
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`represented Tucker in his claims against AMG. (Gov. Mem. Ex. D.) After default judgment was
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`entered against AMG, Muir, who was AMG’s counsel, apparently celebrated the result in his e-
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`mails to Tucker. (Gov. Mem. Ex. F.) AMG’s outside counsel at Fredericks Peebles separately
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`e-mailed Tucker to praise Muir’s strategy as “invaluable in the pending litigation in California”
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`and helpful to “protecting the business model.” (Gov. Mem. Ex. G.)
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`A “prudent person” would have a “reasonable basis to suspect” that Muir and
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`Tucker orchestrated Tucker v. AMG in order to facilitate a retroactive filing that would permit
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`the invocation of tribal immunity. See generally Jacobs, 117 F.3d at 87. The government’s
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`showing comfortably satisfies the “more stringent probable cause” standard applied to “the very
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`act of litigating,” because a prudent person would have a reasonable basis to suspect that there
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`was little or no basis to pursue Tucker v. AMG except in furtherance of invoking immunity as to
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`the allegedly usurious lending scheme. See generally In re Grand Jury Subpoenas Dated Mar. 2,
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`2015, 628 F. App’x at 14-15.
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`“Once there is a showing of a factual basis, the decision whether to engage in an
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`in camera review of the evidence lies in the discretion of the district court.” Jacobs, 117 F.3d at
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`87. Often, in camera review is favored when there has been only a “minimum showing” about
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`whether the communications were in furtherance of a crime or fraud. See generally id. at 87-88;
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`see also Levin, 2015 WL 5838579 at *5 (opting to conduct an in camera review when “the Court
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`does not believe that the result is so obvious such that it would be appropriate to order
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`defendants to immediately produce the documents at issue to the Government.”).
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`In this instance, the government has comfortably made a showing of probable
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`cause that McDowell Rice’s communications related to Tucker v. AMG were in furtherance of a
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`crime or fraud. This evidence includes communications between the defendants and the
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`attorneys of AMG, Tucker’s purported adversary. The Court therefore concludes that in camera
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`review is unnecessary, and that documents and communications related to Tucker v. AMG
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`withheld by McDowell Rice pursuant to the attorney-client privilege shall be produced to the
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`government. The Court expresses no view as to whether McDowell Rice or any of its attorneys
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`were complicit in any crime or fraud committed by their client.
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`CONCLUSION.
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`The government’s motion is GRANTED. (Docket # 153.) McDowell Rice is
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`directed to produce the documents and communications relating to Tucker v. AMG within 14
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`days of this Order. The Clerk is directed to terminate the motion.
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`SO ORDERED.
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`Dated: New York, New York
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`June 6, 2017
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