April 7, 2010 in Business

Federal agents search offices of Spokane business

Team Spirit affiliated with payday loan firm
By The Spokesman-Review
 

Agents of the FBI and IRS Tuesday searched the offices of Team Spirit America, the operating affiliate of a payday loan business that investors allege was a Ponzi scheme.

An agent posted inside the door of the offices at 1801 W. Broadway Ave. declined to comment on the activity, or whether a search warrant had been issued.

Spokesmen for the IRS, FBI and U.S. Attorney’s Office also would not respond to questions. Washington State Patrol officers were present during the search.

Team Spirit is managed by Doris Nelson, founder of Little Loan Shoppe, which made short-term installment loans. Little Loan Shoppe, as LLS America LLC, filed bankruptcy in August.

A Mercedes similar to that driven by Nelson, who lives in Colbert, was pulled onto an unmarked trailer Tuesday at the Team Spirit offices, and taken away.

Although the Washington Department of Financial Institutions has filed civil charges against Little Loan Shoppe, Nelson and others, Tuesday’s activity was the first sign federal authorities might be investigating the operation.

The state alleges Nelson misled or improperly sold securities to investors who committed more than $29 million in U.S. dollars, and another $26 million in money from Canada, where the company was founded in 1997.

The state is seeking a $150,000 fine from Nelson, $30,000 from Paul Cooper, who helped find investors, and $60,000 in costs.

The investors were promised returns on promissory notes of as much as 60 percent, made possible by high-interest, short-term loans. But payments stopped in March 2009.

In a Ponzi scheme, early investors are paid with money from new investors, not with profits from the business venture.

Ralph Gamble, who was LLS America’s chief executive officer for five months before he was fired last fall, said he wrote off $27 million in losses on loans made from 2007 to 2009.

A February operating statement, the most recent filed in the U.S. Bankruptcy Court by LLS America, shows an operating profit, but assets of $7 million and liabilities of $35 million.

Gamble said Tuesday the U.S. Attorney’s Office subpoenaed his records in February. He would not say what records he turned over.

Gamble said he had no further contact with federal authorities, and was unaware Team Spirit offices were being searched until he saw news reports.

“The operation of the business was basically not conducted properly,” he said, adding he felt bad for the employees whose jobs might be at risk.


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