On 5th April, 2023, the Bureau commenced a civil action against James R. Carnes (JRC) and Melissa C. Carnes (MCC) in their personal capacities. In addition, they were both sued in their capacities as trustees of the James R. Carnes Revocable Trust and the Melissa C. Carnes Revocable Trust.

In or about 2013, the Bureau began an investigation into an illegal payday lending business. JRC's response was to began to make transfers into the MCC Trust, via the JRC Trust.

The Bureau says that JRC had control over the trusts and was able to use them to continue to conduct his illegal business. Carnes had run a business called Integrity Advance LLC which, in January 2021 was declared to be in breach of the USA's Truth in Lending Act and the Consumer Protection Financial Protection Act. The administrative (not judicial) finding was that the company and JRC had engaged in deceptive and unfair practices.

Credit was conditional on repayment by funds transfers that were authorised in advance, including the use of remotely created cheques (a hangover from a system developed in the US in the early 2000s for electronic cheques that didn't catch on anywhere else).

The restitution was no small amount: USD38,453,341.62. Moreover, Integrity Advance was ordered to pay USD7.5 million and JRD USD5 million as assessed civil money penalties.

None of the sums were paid within the 30 days allowed for payment. In the absence of payment, the Bureau obtained what amounts to a default judgment for liquidated damages. That order was made in July 2021.

The Bureau's Final Order needed more steps and it was not until September 2022 that the Tenth Circuit Court of Appeals affirmed the order and on 1 March this year, Integrity Advance and JRC issued a petition for certiorari (a petition for judicial review; not an appeal as such).

The Bureau says that Integrity Advance and JRC moved more than USD12,000.

JRC was not the direct owner of Integrity Advance: that was "Hayfield Investment Partners." The majority owners of Hayfield was Willowbrook Marketing, LLC, of which JRC was the majority shareholder.

A series of transfers were made and, the Bureau says, "by purchasing and
retaining vehicles, artwork, jewelry, stock, alternative investments, and real property in the name of the MCC Trust, rather than his own name, Carnes has removed or concealed assets that would otherwise be publicly traceable to him."

The Bureau says that the purpose of the action is the "avoidance" of those transfers. This, presumably, means "voiding" because what is sought is the recovery of those moneys

The list of assets purchased is like a shopping list for show-offs. The assets are listed below. One glance at them and the similarity between this list and lists from operators of Ponzi schemes is remarkable.

This case is fascinating because it's not a criminal case and so counter-money laundering laws do not apply. It is all being dealt with, including asset tracing and recovery, in the civil courts, even though the terminology uses is that more usually found in criminal legislation.

Further Reading: the Complaint is here: https://files.consumerfinance.gov/f/documents/cfpb_james-r-carnes-melis…

Assets identified:
a. 2010 Ferrari, ZFF65LJA4A0172295 ($101,557)
b. 2009 Lexus LX 570, JTJHY00W694020496 ($28,782)
c. 2015 Land Rover Range Rover, SALGS2TF8FA213908 ($48,330)
d. 2018 Land Rover Range Rover, SALWR2RE2JA190589 ($101,171)
e. 2020 Audi Q5 2.0T Quattro, WA1BNAFY4L2015925 ($49,329)
48. Carnes retains approximately $800,000 in insured jewelry in the name of the
MCC Trust including the following jewelry pieces (and their insured value):
a. Diamond pendant ($34,287)
b. Ladies Rolex watch ($41,836)
c. Ladies platinum ring ($36,981)
d. Ladies 14KT white gold diamond tennis bracelet ($33,246)
e. Marked Tiffany & Co. platinum and diamond solitaire ring ($248,403)
f. One Tiffany & Co. stainless steel Gentleman’s Patek Philippe “Aquanaut” watch
($31,430)
g. One 18 KT white gold medium engraved hinged bangle bracelet ($9,909)
h. One hand made custom designed ladies diamond bracelet, 4.20 carats black
diamonds, 2.42 white diamonds ($14,496)
i. One pair diamond “studs earrings”, 4.08 carats ($47,240)
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j. One custom designed ladies diamond bracelet, total weight of 37.96 carats
($65,156)
k. One pair of 18K yellow gold large inside out hoop earrings ($10,312)
l. Patek Phillipe 175th Anniversary watch ($81,611)
m. One Tiffany & Co. platinum and diamond ring set ($161,663)
n. Jewelers Regulator American Made Case with elaborate fox carving (1880s)
($25,000)
49. Carnes retains approximately $1.38 million in insured artwork in the name of the
MCC trust including the following pieces (and their insured value):
a. Kenneth Noland, Untitled ($400,000)
b. Robert Indiana, Love ($495,000)
c. Milton Avery Painting, Mother and Child ($350,000)
d. Wayne Thiebaud, Large Sucker (From Seven Still Lifes and a Rabbit) ($36,000)
e. Sean Landers, Tartan Forest 2 ($100,000)
f. Chris McCaw, Sunburned GSP#791 (Artic Circle, Alaska) ($16,000)
50. Carnes also has made investments of approximately $1.9 million in an array of
companies and limited partnerships under the name of MCC Trust. The income from these
investments are regularly reported on the Carnes’ joint income tax return. These investments
(based on original amount invested) include:
a. Rock Island Capital Fund II, LP ($500,000);
b. Clearview Energy, LP ($200,000);
c. Bio Daf USA, Inc. ($100,000);
d. JEL Resources, LLC (at least $74,000);
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e. SCM Walla Walla Investors, LLC ($200,000);
f. KCH Emerge, LLC ($90,000);
g. Mer-Sea & Co, LLC ($500,000);
h. Deeyook II, LLC ($100,000);
i. Bird Dog Oil, LLC (at least $100,000).
51. In addition, on August 17, 2020, Carnes, as co-trustee of the MCC Trust,
completed a wire transfer of $2,706,478.64 from the MCC Trust account to First Security Bank
in Bozeman, MT to fund the purchase of 14 Double Eagle Way, Unit 7005, Big Sky, MT 59716.
Carnes, through the MCC Trust, continues to maintain possession of the property at 14 Double
Eagle Way, Unit 7005, Big Sky, MT 59716