a Better Bubble™
Hundreds of thousands of Texas families have been waiting months for the state to process their Medicaid applications. The median processing time is 79 days despite a federal requirement to do so in 45 days. We’ve heard from families who say they could not access critical care during that time, such as not being able to afford to reset their child’s broken nose. Health care providers have reported patients struggling to get lifesaving heart surgeries.
The delays worsened after the federal government lifted pandemic-era protections last year. Our reporting shows that Texas rushed through the process, removing more than 900,000 children not because they were ineligible, but for procedural reasons like their families failing to fill out a form.
The backlog for food benefits is not much better. The state most recently reported having nearly 97,000 applications to process for the Supplemental Nutrition Assistance Program, or SNAP — often referred to as food stamps — and said that the median time it took was 33 days.
We are committed to reporting on long-standing issues with Texas’ social safety net and their root causes. We need help from those who know the delays firsthand and the harm they may cause: the families who rely on and are currently waiting for benefits. We want to show any failures to the people who are responsible for overseeing these systems — lawmakers, advocates, even the federal government — and explain where the state may be falling short of its obligations.
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For three years during the coronavirus pandemic, the federal government gave Texas and other states billions of dollars in exchange for their promise not to exacerbate the public health crisis by kicking people off Medicaid.
When that agreement ended last year, Texas moved swiftly, kicking off more people faster than any other state.
Officials acknowledged some errors after they stripped Medicaid coverage from more than 2 million people, most of them children. Some people who believe they were wrongly removed are desperately trying to get back on the state and federally funded health care program, adding to a backlog of more than 200,000 applicants. A ProPublica and Texas Tribune review of dozens of public and private records, including memos, emails and legislative hearings, clearly shows that those and other mistakes were preventable and foreshadowed in persistent warnings from the federal government, whistleblowers and advocates.
Texas’ zealousness in removing people from Medicaid was a choice that contradicted federal guidelines from the start. That decision was devastating in Texas, which already insures a smaller percentage of its population through Medicaid than almost any other state and is one of 10 that never expanded eligibility after the passage of the Affordable Care Act.
“The difference in how Texas approached this compared to a lot of other states is and was very striking. It wanted everybody off, anybody extra off, even though we knew that meant that state systems would buckle under the pressure,” said Erin O’Malley, a senior policy analyst with Every Texan, a left-leaning statewide advocacy group.
Medicaid rolls swelled nationally during the pandemic, with tens of millions of people added to the program and no one removed. In Texas, the number of people receiving Medicaid benefits grew by more than 50%, to 6 million. When the federal government stopped requiring continuous coverage in April 2023, states had to determine who was no longer eligible.
The question wasn’t whether to remove people but instead how to do it in a way that caused the least disruption and ensured those who qualified stayed on.
To that end, the federal Centers for Medicare and Medicaid Services advised states to proceed slowly and rely heavily on existing government data to automatically renew eligible residents, steps the agency believed would prevent poor families from wrongly losing coverage. Congress gave states a year for the so-called “Medicaid unwinding.”
But Texas opted for speed, launching reviews of about 4.6 million cases in the first six months. It also decided against the more vigorous use of automatic renewals urged by the federal government, forcing nearly everyone to resubmit documents proving they qualified. Nearly 1.4 million of those who lost coverage were disenrolled for bureaucratic reasons like failing to return a form or completing one incorrectly, not because they weren’t eligible.
The decision to buck federal government guidelines was one of many that led to serious repercussions for Texas residents who rely on the program.
Among them were children forced to forgo or postpone lifesaving operations such as heart surgeries, said Dr. Kimberly Avila Edwards, an Austin pediatrician and Texas representative for the American Academy of Pediatrics. Children with severe diseases such as sickle cell anemia, as well as those with neurodevelopmental delays and autism, also unnecessarily lost critical care.
One of her colleagues treated a boy with a rare heart condition who lost Medicaid coverage in January after his parents failed to sign a form that even his caseworker was not aware the family needed to complete.
The boy’s parents couldn’t afford his $6,000 monthly pulmonary hypertension medication, nor could they pay for an ultrasound that would help determine whether he could survive without the drugs, said Avila Edwards, who declined to identify him because of medical privacy laws.
“If we have children who are less healthy, who are unable to get the preventative care they need for their chronic medical conditions, that fundamentally should raise concern for all of us,” she said.
The boy was eventually reenrolled in Medicaid after Texas pediatricians persuaded the state health agency to restore his coverage, Avila Edwards said. A Texas Health and Human Services Commission spokesperson said the agency would not restore coverage based on pediatricians’ intervention.
Thomas Vasquez, an HHSC spokesperson, acknowledged that the agency “learned many lessons” and is working to improve eligibility processes. HHSC representatives defended the rollout, saying that the agency conducted community outreach and hired more than 2,200 employees.
Texas’ approach to the Medicaid unwinding reflected the state’s long-standing conservative ideology regarding the government-subsidized program, said Simon Haeder, an associate professor at Texas A&M University’s School of Public Health.
As attorney general more than a decade ago, Gov. Greg Abbott helped lead a successful lawsuit against the federal government to ensure states didn’t have to cover more residents under Medicaid as part of the Affordable Care Act. Since then, Abbott and state lawmakers have continued to severely limit the program to mostly children, pregnant women and disabled adults. Poor adults aren’t typically eligible for Medicaid unless they have children. Parents of two kids must earn a combined income of less than $285 monthly to qualify for coverage.
A spokesperson for Abbott declined an interview on his behalf and did not respond to a request for comment on the state’s handling of the unwinding.
Texas’ stance during the unwinding, Haeder said, was, “We don’t do anything illegal, but we want to get our program as fast as we can down to what it was before the pandemic.”
Ignored WarningsIt was inevitable that the COVID-19 public health emergency would eventually end, as would the prohibition against pushing people off the rolls. Federal officials worried about the effects of the unwinding on vulnerable Americans almost from the start. In fact, the Biden administration repeatedly extended the emergency declaration, even after the peak of the crisis, to maintain safeguards that included keeping millions of low-income people on Medicaid.
Once the emergency officially ended in April 2023, states were free to cull their rolls. In preparation, federal officials advised states not to review more than 11% of their caseloads each month, cautioning that moving more quickly could overwhelm their systems and lead to the wrongful removal of eligible people.
But that was guidance, not a requirement, and Texas chose a far more aggressive plan.
In the first month of the unwinding, the state started the review process for about a million cases, or 17% of its caseload.
The federal government in May 2023 pressed Texas on why the state was moving so quickly. State officials downplayed the concerns, writing in an email obtained by the news organizations that they were frontloading people who most likely no longer qualified and were reviewing entire households at once.
Within the first four months of the unwinding, the state dropped more than 600,000 people from Medicaid. The vast majority were removed not because the state determined they were no longer eligible but for reasons such as failing to provide the proper documents in time.
That July, U.S. Health and Human Services Secretary Xavier Becerra called on Texas and other states to increase the number of eligible people they automatically renewed with existing government data. He warned in a letter that his agency would take action against states that were not complying.
In the same week, a group of employees anonymously emailed HHSC Executive Commissioner Cecile Young and media organizations, claiming senior management had alerted them that tens of thousands of people had improperly lost Medicaid due to the agency’s poor handling of the unwinding. Young’s chief of staff responded in an email that she couldn’t address the allegations of unidentified whistleblowers.
Texas alerted the federal government days later that it had erroneously dropped nearly 100,000 people, according to records obtained by the news organizations.
In August 2023, CMS once again implored the state to stop requiring eligible people to resubmit paperwork proving they still qualified. The federal agency said it appeared that many people didn’t know they needed to reenroll, didn’t understand the forms or faced obstacles in submitting the required information.
Other states that had taken a similar approach, such as Pennsylvania and Maine, made significant changes. Not Texas.
The state agency flagged to CMS last September that more than 30,000 kids lost their coverage, even though most of them should have been moved from Medicaid to the Children’s Health Insurance Program, according to emails the news organizations obtained through the state’s Public Information Act.
State officials later told the news organizations that 95,000 people had been wrongly removed, instead of close to 130,000, as originally reported to CMS. Asked why the figures had decreased, a spokesperson said the agency “provided approximate numbers as we worked to resolve the issue.” Agency representatives said the state quickly reinstated coverage and implemented changes to prevent further improper denials. They did not provide specifics.
Alarmed by the deluge of disenrollments, advocacy groups, health providers and newspaper editorial boards began calling on the state last summer to pause the unwinding and ensure people were not incorrectly losing coverage. It did not do so.
In October, after Texas had already disenrolled more than 1.2 million people, the state gave about 400,000 people who likely qualified for Medicaid an extra month to submit paperwork, according to an agency spokesperson.
Still, problems persisted.
In December, Becerra appealed directly to Abbott and eight other governors of states with the highest shares of children who had lost coverage. Texas accounted for nearly a quarter of all children in the U.S. who had lost Medicaid or CHIP during the unwinding, Becerra wrote. He again urged the state to employ a series of actions, including automatically renewing eligible people.
Without providing details, Becerra said the federal government would not hesitate to take action against states that did not comply with federal requirements.
“A One-Two Punch”Three months later, Micaela Hoops’ children lost the government-subsidized health insurance for which they had qualified their entire lives. After years of not having to renew their Medicaid coverage under the pandemic rules, the 37-year-old North Texas mother said she was confused about when she was required to reapply and missed the deadline to provide proof of the family’s income.
Hoops sifts through paperwork from the Texas Health and Human Services Commission at her home in Sherman, Texas. (Danielle Villasana for ProPublica and The Texas Tribune)In other states, the kids might have been automatically renewed using other government information, like quarterly payroll data reported by employers to the state or federal tax records. Instead, Hoops had to frantically reapply seven days after the coverage lapsed in March, submitting 24 pay statements for her husband’s weekly wages as a marketing director for a real estate company. This put the family at the back of a monthslong waiting list.
During that time, Hoops, a stay-at-home mom who homeschools the children, had to take her eldest son to the emergency room for a debilitating migraine. The visit came with a $3,000 bill that she and her husband could not pay. A few months later, the 14-year-old broke his nose while playing with his brother on a trampoline. She paid a few hundred dollars out of pocket for the doctor but couldn’t afford the CT scan required to reset his nose.
More than 100 days after Hoops reapplied, the state restored her children’s coverage retroactively. She hopes Medicaid will cover the hospital visit, but her son’s nose remains crooked.
“My children didn’t deserve to go without insurance,” Hoops said. “They’re kids. They have medical emergencies, things happen, and they deserve to be taken care of.”
Coverage for Hoops’ children wasn’t restored until more than 100 days after she reapplied. (Danielle Villasana for ProPublica and the Texas Tribune)While Hoops’ children got their Medicaid back, some families that believe they wrongly lost Medicaid are still waiting after being forced to reapply. Texas’ median processing time for Medicaid applications is almost three months, according to a recent agency briefing obtained by the news organizations. This exceeds the federal limit of 45 days for most cases.
The sudden suspension of health insurance for a population the size of New Mexico has had additional ramifications in Texas, including higher treatment costs for hospitals and clinics forced to take on more uninsured patients.
Texas Children’s Hospital in Houston, the largest pediatric hospital in the country, laid off employees this year after significant budget shortfalls. A hospital spokesperson declined to comment, but, in a recent financial filing, the hospital attributed some of the challenges to losing Medicaid patients during the state’s unwinding process.
Across the state, some safety net clinics reported a 30% decrease in Medicaid revenue due to the unwinding, said Jana Eubank, who heads the Texas Association of Community Health Centers. She said the extra costs added to challenges for the already financially strapped facilities.
“Some centers are having to lay off staff. Some centers are furloughing staff,” Eubank said. “I’ve got a couple of CEOs that aren’t taking a salary right now. I’ve had centers that are unfortunately having to cut back certain services or extended hours, like behavioral health services, dental services, just because they can’t afford to continue to offer that care.”
Separately, some families that were pushed off Medicaid are also waiting more than a month for food assistance because Texas uses the same eligibility system to process applications for both.
San Antonio Food Bank CEO Eric Cooper said the nonprofit was crushed by demand this summer when families faced sudden medical bills, kids were out of school and the state had a backlog of more than 277,000 food stamp applications. The situation worsened when Texas declined to participate in a federal nutrition program, turning down an estimated $450 million that could have helped feed nearly 3.8 million poor children during the summer. HHSC officials said they could not get the program running in time.
“It’s felt like a one-two punch, the double whammy,” Cooper said.
“We haven’t really felt any relief since the Medicaid unwinding and the official end of the public health emergency,” he added. “It’s still an emergency. It’s still a crisis.”
Federal InvestigationIn May, after Texas’ unwinding ended, the federal government launched an investigation into long waits faced by people who had applied for Medicaid coverage. Addressing these persistent delays was especially important because they affected eligible people who lost coverage in the past year, Sarah deLone, director of CMS’ Children and Adults Health Programs Group, wrote in a letter to the state.
Former federal officials and health policy experts called the probe a significant step by the agency, which typically works with states behind the scenes.
But CMS has few options to hold Texas accountable if it finds wrongdoing, said Joan Alker, executive director of the Center for Children and Families at Georgetown University in Washington, D.C. The Biden administration’s major enforcement tool is yanking federal funding, but that could cause low-income people to lose health insurance and invite a lawsuit from Texas, Alker said. And the investigation likely won’t go anywhere if Donald Trump wins in November, she said, since the former president previously encouraged states to restrict Medicaid access and promised to undo the Affordable Care Act entirely.
CMS spokesperson Stephanie Rossy declined to comment directly on its investigation or on Texas’ handling of the unwinding. But in a statement she wrote that “states’ choices have real consequences for eligible people’s ability to stay covered.”
Texas officials also declined to discuss the probe, but in a letter to the federal agency two weeks after the May investigation announcement, the state’s Medicaid director, Emily Zalkovsky, acknowledged that Texas experienced “severe operational and systems challenges” during the unwinding.
Although the federal probe was welcomed by advocacy groups, as well as some health care providers and Texas families, it’s unlikely to immediately help eligible people who lost Medicaid during the unwinding and are waiting to get back on.
While Hoops’ children have regained coverage, she believes that what her family endured reflects state leaders’ attitudes toward low-income people.
“Maybe they didn’t realize they were making cruel decisions,” she said. Still, she feels like the state’s mentality is basically, “Well, you just shouldn’t be dependent on us.”
Caught in Texas’ Medicaid and Food Stamp Application Backlog? Know Someone Who Is? Help Us Report.
Update, Sept. 27, 2024: This story was updated to include comment from the Texas Health and Human Services Commission about the case of a boy with a rare heart condition who lost Medicaid coverage.
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The sprawling business empire created by tribal leaders in northern Wisconsin was born of desperate times, as the Lac du Flambeau Band of Lake Superior Chippewa Indians faced financial ruin. Its subsequent success would be built on the desperate needs of others far from the reservation.
The tribe had made some poor choices as it sought to expand its fortunes beyond a modest casino in its home state of Wisconsin two decades ago. Grand plans for a floating casino off Cancun, Mexico, collapsed, and a riverboat gambling venture in Mississippi required more cash than the tribe had on hand.
The resulting loans — $50 million in bonds issued in 2008 at 12% — proved crushing. Struggling to make debt payments, tribal officials soon were forced to slash spending for essential programs on the reservation and lay off dozens of employees.
Protests erupted, with demonstrators barricading themselves inside a government building and demanding audits and investigations. When angry tribal members elected a new governing council, it refused to pay anymore. The tribe defaulted on a loan it had come to regret.
The LDF tribe turned to the one asset that could distinguish it in the marketplace: sovereign immunity.
This special status allowed it as a Native American tribe to enter the world of internet lending without interest rate caps, an option not open to other lenders in most states. The annual rates it charged for small-sum, installment loans frequently exceeded 600%.
Business partners, seeing the favorable math, were easy to find. So, too, were consumers who had run out of options to pay their bills. Their decisions to sign up for LDF loans often made things worse.
ProPublica traced the key decisions that put LDF on the path to becoming a prominent player in a sector of the payday lending industry that has long skirted regulation and drawn controversy.
LDF did not just dabble in this type of lending; it fully embraced it. Like other tribes that have taken this route, LDF built its success on a series of complex business arrangements, with roles and motives difficult to unravel.
Over time, ProPublica found, LDF signed off on deals involving outsiders with histories of predatory practices — associations that carried profound implications for the tribe. Not only did they put the tribe’s reputation at risk, they generated a barrage of costly lawsuits and questions of whether LDF was allowing partners to take advantage of tribal rights to skirt state usury laws.
In Boston, Brian Coughlin initially had no idea that a Native American tribe was involved in the small loan he took out with a high interest rate. He only learned about LDF after he filed for bankruptcy to seek protection from his creditors.
“I was definitely surprised,” he said. “I didn’t think they operated things like that.”
During the bankruptcy process, an LDF partner still hounded him to pay, which Coughlin said pushed him to a breaking point and a suicide attempt. Federal law prohibits chasing debtors who have filed for bankruptcy, and Coughlin sued the tribe in a dispute that went all the way to the U.S. Supreme Court. Last year, the court — in a decision with far-reaching implications for tribes — ruled that LDF could be held liable under the Bankruptcy Code.
Brian Coughlin initially had no idea that LDF was involved in the small loan he took out with a high interest rate. He filed for bankruptcy, but an LDF partner still hounded him to pay. (Bob Croslin for ProPublica)His and other consumer lawsuits paint LDF as a front for outsiders who take an oversized cut of the proceeds, leaving LDF with only dollars per loan. Interviews and ProPublica’s review of records also show how heavily LDF relies on its partners for most of the essential operations. These descriptions are disputed by LDF, which has told ProPublica that it merely is outsourcing for much-needed expertise while still maintaining control.
In a statement to ProPublica this year, John Johnson Sr., LDF’s president, described the tribe’s lending business as “a narrative of empowerment, ethical business practice, and commitment to community enrichment.” He has declined to be interviewed and did not respond to written questions for this story.
Over time, LDF has set up at least two dozen internet lending companies and websites, ProPublica determined. Its loans are so pervasive the LDF tribe showed up as a creditor in roughly 1 out of every 100 bankruptcy cases sampled nationwide, as ProPublica reported in August.
This year, LDF and some of its business affiliates agreed to a federal class-action settlement in Virginia that, if finalized, will erase $1.4 billion in consumer debt and provide $37 million in restitution. Tribal defendants are responsible for $2 million of that; the tribe in a statement has indicated that its business arm would pay.
Tribal officials have consistently denied wrongdoing. A newsletter to tribal members as LDF was starting up its venture said the tribe “is not practicing any type of predatory lending.” In his statements to ProPublica for the August story, Johnson stressed that the tribe complies with tribal and federal law, that its lending practices are transparent, that its collections are done ethically and that the loans help distressed borrowers who have little access to credit.
LDF leaders have not publicly stated any desire to alter their business practices, even as some community members express concern.
“Feeding greed with unscrupulous business practices is crushing us,” one LDF member recently wrote on a community Facebook page.
“The Money Is Dirty”After the bond debacle in the 2000s, LDF leaders felt stung by their outside financial advisers, believing they were deceived about the terms of the transaction and risks involved.
Moving forward, they wanted someone they could trust. They found that in Brent McFarland.
McFarland was not a tribal member, but he grew up near the reservation and had friends on the Tribal Council. McFarland, an investment adviser who’d run a restaurant and worked in real estate, offered some helpful advice to the tribe, and the council eventually hired him for a wider role. He helped it establish the Lac du Flambeau Business Development Corporation in 2012, governed by a board answerable to the Tribal Council. And he looked for ways LDF could make money, apart from gaming.
“I ended up meeting some people that were doing online lending,” he said in an interview.
Tribes could get into the industry — attracting willing partners with expertise in lending — without putting up any capital because sovereign immunity was its own bounty.
But as certain as LDF was that state laws wouldn’t apply to its operations, the tribe took a careful approach. LDF decided it would not lend to people in Wisconsin, including its own members. “It keeps our relationship with the state of Wisconsin healthy,” McFarland told the Milwaukee Journal Sentinel.
Peter Bildsten, who ran the state Department of Financial Institutions then, remembers visiting the reservation as it was embarking on the new venture. He recalled that he met some of LDF’s business partners, who recognized that the lending operation would be extremely lucrative but also potentially controversial.
“They talked about yeah, we are doing it, and we know there’s virtually nothing you can do about it and especially if we don’t lend to any people in Wisconsin. You can’t do anything,” Bildsten said. “It was almost kind of a dare.”
Many tribes, still suffering from a legacy of racism and inadequate federal resources, struggle to find economic solutions for their people. McFarland, who no longer works for LDF but does consulting for tribes, defended LDF’s decision to move into high-interest loans as a legitimate option.
“The business is offering a service where the interest rates and cost of borrowing are well disclosed to consumers,” he told ProPublica in an email. “It’s expensive, but if used responsibly can be more affordable than many other options. The costs and risks are not hidden from consumers.”
Johnson, LDF’s president, has said there was a rational reason for the tribe’s business partnerships: It needed outside expertise as it entered a new industry.
“But let me be more specific: Zero I.T. enterprise architects, data analysts, or marketing strategists lived on the Lac Du Flambeau reservation when the Tribal Council decided to enter this industry,” he wrote in an email to ProPublica in August.
LDF’s partners run their operations far from tribal land. ProPublica identified several Florida lawsuits that allege a straight-forward process: “The LDF Tribe mints a new ‘tribal’ limited liability company, supposedly organized under Tribal law, for each new investor. Each new investor then runs his or her own ‘tribally owned’ website, offering consumers loans at interest rates between 450% and 1100% annually.”
Those cases were settled or dismissed without LDF addressing the allegations.
LDF does not publicly disclose its partners. ProPublica identified one of them as RIVO Holdings, a fintech firm based in a high-rise in downtown San Diego that has serviced two LDF websites.
First image: The Lac du Flambeau Business Development Corporation in Wisconsin. Second image: The office building where RIVO Holdings operates in San Diego. (First image: Tim Gruber for ProPublica. Second image: Philip Salata for ProPublica.)RIVO is an acronym for respect, integrity, value and opportunity. The company’s founder and CEO is Daniel Koetting. His personal website touts his employment of “over 200 local employees at RIVO.” His brother Mark, of Kansas, managed a separate lending portfolio for the tribe.
The brothers entered the tribal lending industry after facing regulatory scrutiny for previous lending operations. In 2006, Califonia issued a cease-and-desist order to both men for unlicensed lending; Daniel Koetting received a similar demand from New Hampshire in 2011.
Initially, the Koettings partnered with the Big Lagoon Rancheria tribe in California to offer high-interest loans beginning in 2013. But that relationship began to fall apart several years later.
The tribe alleged that the Koettings surreptitiously pushed customers to new lending companies set up with LDF, and an arbitrator awarded Big Lagoon Rancheria $14 million in 2018. Years of litigation followed as the Koettings fought the decision. The case is still pending.
“I actually called Lac du Flambeau and warned them and informed them that they were getting into business with Big Lagoon’s client list,” Virgil Moorehead, Big Lagoon Rancheria’s chairperson, told ProPublica.
Joseph Schulte Jr., who once worked at RIVO, likened one area of the company’s San Diego office to a Wall Street trading floor, with exuberant staff celebrating short-term wins, such as meeting daily sales goals. To keep the staff pumped up, he said, management brought in pallets of free Celsius energy drinks.
“People were making a lot of money working there,” Schulte said of RIVO Holdings.
Although figures for LDF’s loan portfolios are private, Daniel Koetting’s previous venture with the Big Lagoon Rancheria amassed approximately $83 million in revenue over five years, according to a legal filing.
Court papers, including divorce filings, show Daniel Koetting enjoying a lavish lifestyle in recent years, living in a five-bedroom, five-bath house in La Jolla, an affluent seaside enclave of San Diego. He owned thoroughbred horses, drove a Porsche and dabbled in motion pictures. He and his wife had three children. In the divorce, he reported household expenses in 2021 that included an average of $7,000 a month on groceries and eating out, plus an additional $5,000 a month for “entertainment, gifts and vacation.”
Daniel and Mark Koetting did not reply to emails, calls or letters from ProPublica seeking comment.
Meanwhile, the two companies that RIVO and LDF run — Evergreen Services and Bridge Lending Solutions — are associated with more than 200 complaints from customers since 2019, frequently about onerous interest rates and payment terms. “I just don’t understand how people can do this,” a California resident protested to the Consumer Financial Protection Bureau. “This is a predatory lender and I am a victim.”
Early on in LDF’s leap into lending, the large building on the corner of this shopping center housed a call center above a smoke shop. (Tim Gruber for ProPublica)Bildsten, the former Wisconsin department head, believes that LDF tribal leaders are trying to help the reservation improve services, such as dental care, for its members and that the lending business is part of that laudable goal.
“They’re able to do some good stuff,” Bildsten said, “but the money is dirty.”
An Ill-Fated Loan With Profound RamificationsBrian Coughlin lit a cigar. Sitting in his Chevy Malibu with the sunroof open to let out the smoke and a bottle of pills next to him, he wondered: When will this end?
He’d faced many hurdles in life, from serious physical and mental health issues to the loss of his father. He’d also used bad judgment, overspending and loading up on multiple credit cards as he blew through a decent paycheck as head of trash collection for the city of Boston.
Like many other Americans with little to no savings and poor credit scores, he was enticed by online pitches for quick cash — offers that came with exorbitantly high interest rates.
Months earlier, in December 2019, he’d filed for bankruptcy, expecting relief. There would be payment plans and a court injunction halting contact from creditors — a key protection laid out in U.S. bankruptcy law. But one creditor would not give up.
Lendgreen, one of LDF’s initial companies, had loaned Coughlin $900 at an annual percentage rate of 741%. At the time of the bankruptcy, he owed $1,595. The company continued to call, email and text him, fueling his anxiety. A phone log shows Lendgreen called Coughlin 50 times during one four-month period.
Brian Coughlin’s Three-Month Loan Came With a 741% APR Source: Brian Coughlin’s loan agreement. (Lucas Waldron/ProPublica)“This is all for nothing,” Coughlin recalls thinking of the bankruptcy process.
That night in his Chevy, Coughlin took a fistful of pills and ended up in the hospital. Lendgreen still was calling him while he recovered. But now he was ready to fight.
Coughlin’s attorney filed a motion with the bankruptcy court in March 2020 asking a judge to order Lendgreen, the LDF tribe and LDF Business Development Corporation to stop harassing him.
The case was about more than just harassment, however. Coughlin wanted compensation for all that had happened. He asked the court to award him attorneys fees, medical costs, expenses for lost time from work while hospitalized and punitive damages.
Coughlin (Bob Croslin for ProPublica)To Coughlin’s surprise, LDF told the court that sovereign immunity protected it even in a federal bankruptcy case, and the bankruptcy judge in Massachusetts agreed. When Coughlin took the case to the 1st U.S. Circuit Court of Appeals and won, the tribe appealed to the U.S. Supreme Court.
As they dug into who actually violated the collections ban, Coughlin’s attorneys needed to unravel the business relationships surrounding Lendgreen, which no longer has an active website. That led them on an international paper chase from Wisconsin to Ontario, Latvia and Malta, an island in the Mediterranean, where an entity that provided capital for Lendgreen appeared to be based.
In gathering evidence, Coughlin’s lawyers obtained an agreement between Lendgreen and another company — Vivus Servicing Ltd. of Canada — showing Vivus was to handle most all operations of issuing and collecting the loans made in Lendgreen’s name. It also would retain most of the profits.
For each new or renewed loan, the contract called for Vivus to share $3.25 with LDF as well as $3.25 per loan payment, or not less than $10,000 a month.
Vivus Servicing had subcontracted certain administrative functions of the Lendgreen loans to 4finance Canada, an affiliate company of a European lending conglomerate based in Latvia, court records show. An attorney who represents Vivus and 4finance declined to comment.
“There’s money flowing to all sorts of places,” Coughlin’s attorney Richard Gottlieb said.
As he began to better understand the web of connections, Gottlieb concluded that LDF’s role in its lending operations was minimal. The partners, he said, performed all the key functions — “from the creation of the loans themselves to the maintenance of the computer software and internet sites to the collections personnel to the customer service reps to the management.”
Even though LDF fought in court to be able to pursue collections against people in bankruptcy, internal documents indicate that the head of LDF Holdings, which oversees the tribe’s lending enterprise, was not pleased with how a business partner treated Coughlin.
“I Shouldn’t Be Getting Phone Calls”Coughlin inquires with Lendgreen about why its phone calls have not ceased.
(Brian Coughlin)Jessi Lorenzo, president of LDF Holdings at the time, communicated in May 2020 with 4finance Canada about Coughlin’s loan. Why had they not stopped soliciting repayment once notified that Coughlin had filed for bankruptcy, she asked in an email.
“Everything should have ceased then,” wrote Lorenzo, who was based in Tampa.
In a brief interview on her porch, Lorenzo declined to comment on the Coughlin case and said she did not want to be part of a tribal lending story that might be negative. Later, in an email, she wrote that she was proud to have worked for LDF as it “built a business that benefited their community, providing modern careers with upward mobility and good benefits in a remote part of Wisconsin.”
A Future Clouded by Legal ChallengesLDF tribal leaders don’t talk much about their business with outsiders. But there is little doubt that the lending business has altered the shape of the tribe’s finances, allowing LDF to move past its costly mistake of issuing $50 million in bonds for the Mississippi casino boat.
The Tribal Council agreed in 2017 to pay $4 million and finance an additional $23 million to settle claims against it after defaulting.
But the tribe and its partners continue to face new threats from a range of legal actions.
The attorneys in the Virginia case have promised future litigation against more LDF partners. And as LDF keeps lending, it opens its companies up to additional consumer lawsuits. Dozens of such cases have been filed since 2019, most of which end quickly, with undisclosed settlements.
McFarland takes issue with these types of cases against tribes. “The law firms filing class action lawsuits seek to paint tribes as either victims or villains in online lending,” he said in an email. “This approach has been employed against tribes since Europeans came to the Americas, whether Tribes are entering gaming, cannabis, selling tobacco, and a host of business opportunities.”
When Coughlin’s suit reached the Supreme Court, some of the issues involving tribal-lending partnerships were touched on, if only briefly.
During a hearing in April 2023, Justice Samuel Alito interrupted LDF’s lawyer as he was talking about sovereign immunity and the Constitutional Convention. Alito inquired about the tribe’s relationship with Lendgreen.
“Who actually operates this?” he asked.
“The tribe does, Your Honor,” replied attorney Pratik Shah, representing LDF. “This is not a rent-a-tribe situation.”
Shah said the enterprise employed 50 to 60 people working out of a headquarters on the reservation, though “they use third-party vendors, servicers and all, like any other business.”
Shah added: “This is a fully tribal operation.”
But the central issue was whether the tribe could be held liable for violating bankruptcy rules.
“What the tribe is saying is you can’t sue them for hundreds of thousands of dollars of actual damages,” Shah told the court. “That’s at the core of sovereign immunity.”
In June of last year, the high court sided with Coughlin, ruling 8-1 that there’s no sovereign immunity for tribes when it comes to the Bankruptcy Code.
Justice Clarence Thomas concurred in the ruling, not because of his reading of the Bankruptcy Code, but because he held that sovereign immunity does not apply to lawsuits arising from a tribe’s commercial activity conducted off-reservation.
Coughlin, far left, in front of the Supreme Court with his attorneys Terrie Harman, Richard Gottlieb, Gregory Rapawy and Matthew Drecun (Courtesy of Richard Gottlieb)Back in Bankruptcy Court, Coughlin continued to pursue LDF and Lendgreen for damages and legal fees. In mid-August, in the midst of settlement talks, Coughlin asked the court to pause the process required to unmask the outside entities involved with LDF as all sides tried to resolve the dispute. In September, a judge approved a settlement in which the tribe and Lendgreen agreed to pay Coughlin $340,000. LDF denied liability as part of the agreement.
At the same time, pressure is mounting on the tribe’s business partners. As part of the deal, the tribe will give Coughlin documents “with respect to the culpability and responsibility” of the outside partners, according to the settlement. That will enable Coughlin’s lawyers to dig further. LDF also will make a corporate representative available to testify in legal actions against their former business allies, if necessary.
“I want to see all the actors that are actually part of this scheme brought to justice, in a way,” said Coughlin, who now lives in Florida.
“I don’t necessarily believe the tribe is the orchestrator of this whole mess. I think they’re a pawn, unfortunately.”
To do the best, most comprehensive reporting on this opaque industry, we want to hear from more of the people who know it best. Do you work for a tribal lending operation, either on a reservation or for an outside business partner? Do you belong to a tribe that participates in this lending or one that has rejected the industry? Are you a regulator or lawyer dealing with these issues? Have you borrowed from a tribal lender? All perspectives matter to us. Please get in touch with Megan O’Matz at megan.omatz@propublica.org or 954-873-7576, or Joel Jacobs at joel.jacobs@propublica.org or 917-512-0297. Visit propublica.org/tips for information on secure communication channels.
Mariam Elba contributed research.
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