On a cool December afternoon in 2013, a dark-brown gelding named Shared Belief sprinted to an easy win over a field of elite thoroughbreds at Hollywood Park race track.
Bond Holder and Electric Eddie, two horses from the stables of John Paul Reddam, didn't win, place or show. But Reddam still strolled into the winner's circle -- after all, the race was sponsored by CashCall Inc., the Orange County, California, lending company he founded.
As Reddam posed for pictures, the track announcer hailed him as "a statesman" and "one of the great gentlemen to ever join us."
Two days later, a different side of Reddam was on display.
The Consumer Financial Protection Bureau sued Reddam and CashCall, alleging they used a flimsy connection to a firm based on a Native American reservation to offer loans nationwide -- at interest rates that approached 350 percent and were illegal in many states.
For Reddam, who has a history of successful wagers on his horses and his companies, it was one big gamble that didn't pay off.
The actions by the CFPB and state regulators, Reddam estimated, cost him and CashCall $500 million or more in lost business, fines and penalties.
Despite the setbacks, though, the 63-year-old Reddam has found a way to remain a player in the high-interest lending business.
In 2014, he sold an upstart lender that would soon be known as LoanMe but has quietly retained financial and operational connections to the company. That lender grew rapidly as CashCall shrank. In interviews with The Times, former employees said they were told LoanMe was set up because of concerns that CashCall might collapse under regulatory scrutiny.
LoanMe offers the same type of personal loans that CashCall specialized in -- debts that consumer advocates have sharply criticized because of their triple-digit interest rates and repayment plans that stretch out for years.
While neither Reddam nor LoanMe has been accused of breaking any laws, Cornell law professor Robert Hockett said the connections between the two look like a "classic shell-game strategy."
"You have a firm that takes a reputational hit and so you simply transfer its assets to an allegedly new entity -- one that's the same as the old but that doesn't have the reputational baggage," Hockett said.
Reddam, through his attorney Thomas Nolan of law firm Latham & Watkins, declined to comment because of litigation. The CFPB case is ongoing pending an appeal.
Nolan said in an email that a list of detailed questions from The Times about Reddam and his connections to LoanMe contained false assertions and presented "an incorrect, distorted and prejudicial view of Mr. Reddam's alleged involvement with the business you identify." He declined to say what was incorrect or misleading.
Now, CashCall has stopped making consumer loans altogether, according to customer service representatives who recently referred Times reporters asking about a loan to LoanMe. What's more, there are signs that LoanMe's business may be at risk.
The California Supreme Court recently ruled that the kind of consumer loans made by CashCall and LoanMe can be illegal if their rates are so high they "shock the conscience." The decision, which came after a decade of litigation against CashCall, could upend the high-cost lending industry Reddam helped build.
Consumer advocates were surprised when told of LoanMe's connections to Reddam. They said the links should be scrutinized by regulators, especially in Wisconsin, where LoanMe was able to get a lending license while CashCall wasn't.
"If there is a company that is hiding behind another it raises the question as to why," said Kevin Stein of the California Reinvestment Coalition. "There is a good chance that the answer is because he, or companies like that, don't want the public to know."
Reddam is well known in racing circles -- his horses have twice won the Kentucky Derby, and one was just a race away from winning the Triple Crown -- but the Sunset Beach resident is not otherwise a household name. Still, millions have probably heard of his companies.
Reddam founded DiTech, an Orange County mortgage firm, in 1995. A pioneer in the online mortgage industry, it blanketed Southern California with TV ads and billboards that quoted interest rates available that day, at the time a novel practice.
"He just poured every dollar back into advertising," said Glenn Stearns, whose Santa Ana, California, mortgage firm Stearns Lending competed against DiTech. "And a lot of the ads were about competitors. I hated that, but I always thought, 'That guy's pretty smart.'"
CashCall, founded in 2003, also advertised heavily, this time with TV spots featuring down-on-his-luck actor Gary Coleman. Reddam told a racing industry publication that he offered the gig to the now-deceased "Diff'rent Strokes" star after discovering he had inquired about a loan.
In one commercial, which Reddam said was particularly effective, Coleman walked along a wooded road and explained that, despite earning "millions and millions" as a child actor, he needed cash because "the people who took care of the money spent it." The ad worked, Reddam said, because it appealed to human nature.
"Everyone would like to think if they're in debt it's not their fault," he told the Thoroughbred Owners of California. "The market that CashCall has pitched to are people who are employed, making decent money, who spend it just as fast as they make it. It is what it is."
Seizing on the popularity of toll-free calling and, later, the ease of online lending, CashCall helped build what's now a multibillion-dollar industry: offering fast loans at eye-popping interest rates to borrowers with bad credit.
In 2004, CashCall's first full year in business, the company made more than 9,000 loans of $2,500 to $10,000, charging interest rates higher than 40 percent -- the most expensive category of loans tracked by California regulators at that time. That's more than twice the number of such loans made by all other state-licensed lenders combined that year.
As many as half the company's borrowers pay early and avoid paying so much interest, CashCall Chief Financial Officer Delbert Meeks said in 2013 court filings, but about 40 percent of borrowers default.
In 2013, the year the CFPB sued, CashCall issued about $116 million in loans with triple-digit interest rates in California alone.
The company's growth reflected the high tolerance for risk that has been one of Reddam's hallmarks.
'Everyone Was Victimized'
Reddam got a head start in finance, working for his father's mortgage company before starting his first firm, Costa Mesa, California, mortgage lender SC Funding, in 1988. But for a while it looked like he might take a different path.
A Canadian citizen, he studied psychology at the University of Windsor and later earned a doctorate in philosophy.
Ann Garry, a former philosophy professor at Cal State Los Angeles, supervised Reddam while he was teaching at the state school amid his doctoral studies at the University of Southern California. She described him as a "good teacher and a very nice guy" who came off as a "philosopher type," rather than a risk-taker. "Obviously, I didn't know him very well," Garry said.
Reddam wasn't your typical academic. He had a passion for horse racing, a sport he was introduced to in high school. While pursuing his doctorate, Reddam started buying into Standardbred horses, which competed in harness races. He told The Times in 2007 that he would regularly badger friends and colleagues into investing in horses.
"Pretty much anyone I knew, I was talking them into putting up $5,000 or something," Reddam said. "My landlord. The chairman of the philosophy department. Girlfriends. Everyone was victimized."
But he didn't go all out until 1999, when he sold DiTech to General Motors in a deal valued at as much as $275 million. He now owns more than 60 thoroughbreds that have won more than $3 million this year alone, according to racing information site Equibase.
He also likes to bet big on himself. He told The Times in 2012 that he collected at least $1 million when he bet on his winning horse, I'll Have Another, in that year's Kentucky Derby. The colt also won the Preakness Stakes but missed a shot at the Triple Crown after being scratched from the Belmont Stakes with a leg injury.
"The guy takes chances, and I'm sure they're calculated chances, but he isn't afraid to take a bet," said Stearns, the rival mortgage lender. "Why do you think he's probably the only mortgage banker to have two horses win the Kentucky Derby?"
Looking Beyond California
Reddam took just such a chance in expanding CashCall.
Until 2005, the company made "virtually all" its loans in California, according to financial statements made public as part of a lawsuit.
The company had lending licenses in more than a dozen other states, but its high interest rates would have been illegal in many, the lender's general counsel, Daniel Baren, said in a 2016 deposition. So CashCall employed the first of two strategies to get around state lending laws.
It signed a deal with a bank in South Dakota, and later with one in Delaware. CashCall advertised the loans, accepted applications and talked to customers, but the banks would provide the cash and originate each loan. CashCall would then buy the loans a few days later.
That type of arrangement, not unique to CashCall, takes advantage of a federal law that allows banks to lend nationwide at interest rates legal in their home states without regard to rate caps in a customer's state.
The deal fell apart in 2008 amid the financial crisis, so Reddam turned to Martin "Butch" Webb, a lending executive and member of the Cheyenne River Sioux Tribe who shared his interest in horse racing.
Webb formed Western Sky Financial to originate loans and sell them to CashCall. This arrangement relied on the argument that a tribal business did not have to obey state lending laws.
For a time, business was good. Through Western Sky, CashCall from 2011 to 2013 made at least $269 million in high-cost loans in 16 states outside California -- and collected at least $418 million in principal, interest and fees, according to court documents.
But regulators argued that the tribal arrangement was a sham, and that CashCall was breaking interest rate laws and lending without state licenses. New York, Georgia and Minnesota hit the lender with a wave of lawsuits in 2013, with the CFPB and several more states following.
In 2016, U.S. District Judge John Walter ruled in the CFPB's case that CashCall was the true lender. Webb had admitted in a deposition that CashCall fronted the money to Western Sky to make the same loans it would later buy.
The CFPB sought $287 million in customer refunds and penalties, but the judge earlier this year ordered CashCall and Reddam to pay just $10.3 million, finding that they did not know their actions were illegal. The regulator is appealing the decision.
Reddam and CashCall have sued their former lawyer, Claudia Callaway, saying that following her advice about the tribal lending program damaged their reputations and future business opportunities.
Callaway said Reddam knew exactly what he was doing.
"Reddam routinely and willingly involves himself in high risk/high reward gambles," Callaway's attorneys said in a court filing.
'We Were Going to be LoanMe'
As the gamble on CashCall was falling apart, LoanMe emerged.
The company began making loans in the summer of 2014, and by the end of the following year was one of the largest installment lenders in California, having made nearly $340 million in loans -- most of them carrying interest rates of at least 100 percent, state records show.
Reddam founded LoanMe under the name Cash4Rent in 2012. In April 2014, a few months after the CFPB sued CashCall, Reddam sold Cash4Rent for a mere $25,000 to a company controlled by former CashCall executives and the wife of CashCall's longtime chief financial officer, according to documents filed with the California Department of Business Oversight. A month later, Cash4Rent changed its name to LoanMe.
The connections between LoanMe and CashCall extend to the companies' business practices as well. Until recently, the companies advertised exactly the same loan sizes, interest rates, terms and payments in the states where they both did business. In California, for instance, both companies offered a $3,100 loan at 138.45 percent APR with 47 monthly payments of $351.09.
Five former CashCall employees, some who later went on to LoanMe, told The Times that managers stated LoanMe was created specifically because of CashCall's legal and reputational woes.
"In 2014, they started telling us they were no longer going to be called CashCall, we were going to be LoanMe," said Vanessa Ojeda, a former collections specialist at CashCall. "They said that because Paul Reddam got sued, that CashCall got sued ... they owed so much money and the company was going to go down."
Ojeda said she was unfairly fired before she could go to LoanMe, but had pushed for a transfer because she felt there was more job security. She said she was told by a manager to be patient because they had to "do a few (transfers) at a time."
Former CashCall loan officer Tuan Vo said his transfer to LoanMe was swift. Vo said he and other workers were told to report for work the next day at LoanMe.
"The very next day, the same building -- now we work at LoanMe," said Vo, who sued LoanMe last year, alleging wage theft and other workplace violations.
Vo also alleged LoanMe was created to "cleanse" CashCall's reputation. He said a manager told him if anyone called asking questions to say "we are not CashCall, we are LoanMe."
"That was the one thing that, right off the bat, they made it really clear," Vo said.
In court filings, LoanMe disputed Vo's contention that CashCall was transferring its business to the company.
Workers said the connections continued after LoanMe was up and running. One worker shared documents that showed she had responsibilities for both CashCall and LoanMe, while two others said they were in upper management meetings where decisions for both lenders were made.
Reddam testified last year that he lent money to both LoanMe and CashCall through GreenWall, a company he controls.
Corporate filings show another financial connection: Less than a year after Reddam sold LoanMe, a state filing showed its new owners received a loan from an Alaska limited liability company managed by Reddam's sister and owned by a trust Reddam established in 2014. The collateral for that loan included an ownership interest in LoanMe.
Lending to LoanMe could be lucrative for Reddam. Financial records for CashCall, made public in a lawsuit, show several large loans -- some for tens of millions of dollars -- paid Reddam annual interest of as much as 20 percent.
Web of Connections
Reddam retains connections to LoanMe in other ways as well. He owns Ralis Services Corp., a human resources and marketing firm founded in December 2014 and based in CashCall's building in Orange.
Ralis, according to court records, former employees and company web pages, handles services such as recruiting, hiring and web design for CashCall, LoanMe and other companies connected to Reddam. That includes Settle It, a debt-settlement firm that Reddam bought this year, state filings show.
Despite the connections to Reddam, LoanMe has avoided some of the regulatory scrutiny that has dogged CashCall.
In 2013, CashCall applied for a lending license in Wisconsin and acknowledged Reddam and the company were parties to regulatory actions and lawsuits. The application sat unapproved for nearly two years before CashCall withdrew it.
LoanMe applied for a license in 2014 -- just weeks after Reddam sold Cash4Rent. Its application noted that neither the company nor its owners and executives had been the subject of regulatory actions or lawsuits. The application was approved in 10 weeks.
Heather MacKinnon, chief legal counsel for the state's Department of Financial Institutions, said regulators knew LoanMe's executives were associated with CashCall and Reddam.
But she said having similar officers was not grounds to deny LoanMe's application under Wisconsin law.
"To date, LoanMe has not given reason for the department to issue an order against the company," MacKinnon said.
Peter Skopec, director of the Wisconsin Public Interest Research Group, said regulators should scrutinize the connections and hold the company accountable "if it turns out Reddam is pulling the strings."
If one spends time at the track, some of those connections are easier to spot.
The Alaska limited liability company that lent money to LoanMe's owners is called IHA, shorthand Reddam has used for I'll Have Another, his 2012 Kentucky Derby-winning colt.
As for Ralis and Settle It? Those are the names of two more Reddam horses.