Firm Linked To Reputed Mob Figure Got Loans
Portland's Capital Consultants lent pension money to an auto lender associated with a man accused of organized crime ties
By Jeff Manning and James Long of The Oregonian staff
June 24, 2000
Capital Consultants LLC of Portland has lent at least $6 million -- much of it from union pension funds -- to a Georgia-based auto lender linked to a businessman with reputed ties to organized crime.
Alvin Malnik, a Boca Raton, Fla., lawyer and investor, is the beneficiary of two trusts that hold 100 percent of the stock of Title Loans of America, the nation's largest title-lending chain, according to Don Tucker, a Title Loans lobbyist in Florida. The company is part of a burgeoning car-pawning business that has drawn fire nationally from consumer groups for charging interest rates as high as 300 percent.
The New Jersey Casino Control Commission denied Malnik a casino license in 1980, citing, among other things, his long association with mob financier Meyer Lansky. The commission ruled that Malnik was "a person of unsuitable character and unsuitable reputation." And in 1993 the commission disciplined two Atlantic City casinos for allowing Malnik to set foot in them.
Malnik has denied, in past interviews with reporters in Florida, that he's involved in organized crime, pointing out that he has never been convicted of a crime.
But the casino commission noted that law enforcement authorities had long regarded Malnik as an underworld figure and "believed that Malnik was . . . himself involved in organized crime."
Title Loans of America was one of several new borrowers that Capital Consultants supplied with money after the Portland firm extended its reach into the Southeast in 1998. Most of the borrowers were themselves lenders -- finance companies specializing in high-interest loans to consumers with checkered credit histories.
Capital Consultants' operations have been in the spotlight since the 1999 bankruptcy of the Portland-based Wilshire Financial Services Group. Documents show that Capital Consultants had lent $160 million, mostly union pension trust funds, to Wilshire Credit Corp., a company then controlled by Wilshire Financial founder Andrew Wiederhorn.
The fate of the $160 million has been uncertain since then.
A federal grand jury is looking into Capital Consultants' loans to Wilshire Credit and the relationship between Wiederhorn and Capital Consultants' chairman and CEO, Jeffrey L. Grayson.
Wilshire Financial and Wilshire Credit Corp. are now under new management and are not a focus of the investigation.
Capital Consultants reported to the Oregon Laborers-Employers Pension Trust Fund in December 1999 that it had granted a $15 million line of credit to Title Loans and that the Florida lender had drawn $6 million from that line. In the same quarterly financial statement, Capital Consultants said Title Loans' "financial performance remains very strong" and that it had decided to extend the loan through Oct. 31, 2000.
The money was drawn from at least two union retirement plans: the District Council of Laborers pension fund, which invests retirement money for union members from Oregon, Idaho and Wyoming; and from the Plumber, Steamfitter and Shipfitter Industry Local 290's 401(k) plan.
Lee Clinton, head of the Oregon Laborers Trust, said he knew nothing of Title Loans of America's operations or the company's connection with Malnik.
"I don't know them, I don't even know that name," Clinton said. "We don't really talk about each investment unless there is a specific issue with it."
The union also issued a statement that said "we have no knowledge of these allegations" about Malnik, adding that "in our continuing due diligence" the union intends to "investigate the facts."
Norm Sepenuk, a Portland criminal defense lawyer now representing Grayson, told The Oregonian that Capital Consultants' deal with Title Loans was totally legitimate and was a safe investment for Capital's clients. "It was a $50 million line of credit," Sepenuk said. "A bank did $35 million that was part of a $50 million package funded mostly by a bank. These people came well recommended by a brokerage firm."
"It's been a great loan," Sepenuk said. "They (Title Loans) paying like clockwork, principal and interest." "A perfect loan" Grayson, he said, had heard of Malnik "and checked him out and determined that he was fine. He was just a tax lawyer.
"The brokerage people had recommended these people highly," Sepenuk said. "The bank felt well enough to come in with $35 million, and it's been a perfect loan."
But consumer groups have excoriated the title lending business, which Florida Attorney General Bob Butterworth has compared to "legalized loan-sharking."
"If title loan companies had been around in the 1920s, Al Capone never would have become a bootlegger," Butterworth told a hearing earlier this year that led to legislation reducing Florida's maximum rate on title loans from 264 percent a year to 30 percent.
Boosters of the title loan business argue that the high interest rates are justified by the high default rates and bad credit histories of the borrowers. Title lenders typically make small loans -- often just a few hundred dollars -- and take the title to the borrower's car as collateral.
Critics say the industry preys on the poor, charging triple-digit interest and often seizing borrowers' cars as well. The U.S. military also criticized the industry, accusing it of setting up shop just outside military bases to lure young servicemen and women.
Phone calls to Malnik's South Florida residence were not returned. Robert Reich, Title Loans chief executive in Atlanta, didn't return repeated phone calls.
The New Jersey Casino Control Commission said "the evidence establishes that Mr. Malnik associated with persons in organized criminal activities, and that he himself participated in transactions that were clearly illegitimate and illegal."
The commission noted that a high-level La Cosa Nostra informant had told law enforcement officials that dealing with Malnik was the same as dealing with Lansky.
In a newspaper interview last year, Malnik downplayed his acquaintance with Lansky, saying he had met Lansky personally only once, and had represented him only in a few civil matters. Lansky died in 1983 at age 81.
Title Loans of America was one of several Southeast companies that began receiving loans from Capital Consultants in the summer of 1998.
Most of the money -- $70 million -- went to five related companies sharing the same small office building in northwest Miami. The first loans were to Creditmart Inc., followed by other loans to Brooks Financial LLC and other related used car and furniture lenders in the building.
Brooks and the other companies do not appear to be in the title loan business but provide financing for car and furniture dealers. Brooks has become ensnared in the mounting controversy over Capital Consultants' loans to the former Wilshire Credit Corp. Grayson told some of his clients last month that Brooks was making most of the interest payments on the Wilshire loans.
More than 20,000 union members and their beneficiaries are counting on that income to help finance their retirement.
You can reach Jeff Manning at 503-294-7606 or by e-mail at email@example.com.
James Long can be reached at 503-221-4351 or by e-mail at firstname.lastname@example.org.