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This is a mug of 1516 Riverside Drive. It is Chattanooga Headquarters for payday transactions involving several named financial entities.

A company involved in an unlicensed payday lending operation recently lost an early legal bid to silence some of its former employees.

Terenine, which provides the IT backbone for a payday consortium controlled by former Rossville used-car dealer Carey Vaughn Brown, alleged in court that three ex-workers had revealed secret details of the group's operations to the Chattanooga Times Free Press.

The company is suing the former employees for what it claims are violations of nondisclosure contracts signed by the ex-workers who were quoted in a news story published in December. Terenine President David Carney said criticisms of Brown's business operations in the article cost the company current and prospective clients.

However, Hamilton County Chancellor Jeffrey Atherton turned down a request for a temporary injunction. The suit now is on hold until the payday consortium can prove it is legally operating in Tennessee, attorneys said.

Business licenses

According to the secretary of state, Terenine, ACH Federal, Area 203, Firma 8, Kingdom Site, Scenic City Legal Group and Support Seven have licenses to operate a business in Tennessee.

But none of the payday entities from which the licensed companies emerged -- including Credit Protection Depot, Credit Payment Services and Communications Processing Services -- has received certificates of authority, state documents showed.

And none of Brown's companies currently is licensed to make payday loans in Tennessee. However, Neil MacDonald, a spokesman for the Tennessee Department of Financial Institutions, said "at least one of the entities is in a licensing process with the department."

MacDonald added that "the department is involved in various stages of investigation" into some of Brown's companies, though he didn't respond to requests for elaboration.

Public knowledge

During a hearing in late January, Atherton ordered a reporter and the wife of a defendant from the courtroom after Terenine attorneys indicated they could call the two as witnesses.

Attorneys for the defendants sought to prove that the details revealed to the Times Free Press already were in the public domain.

The lawyers argued that many details were available from a 2005 deposition in which Brown outlined his business practices. Details about Brown's businesses and their links with payday lenders also were disclosed in legal actions and investigations initiated by the Federal Trade Commission, as well as the states of New Hampshire, California and Oregon.

In the 2005 deposition, Brown described his use of foreign shell companies to protect himself from regulations and taxes.

"The servers are in Bermuda," Brown said in the deposition. "That's where the servers are -- and where a lot of other corporations have their servers there, too."

Return fire

The payday lending consortium has sustained return fire from ex-employees as well.

Former risk manager Joseph Chastain alleged in a lawsuit against Brown's group that he lost his job after Brown's umbrella company for the payday group -- Credit Payment Services -- threatened his employer with legal action if it continued to employ Chastain.

According to the complaint, CPS wrote a letter to Chastain's then-employer, Check into Cash, claiming that Chastain was violating the terms of a noncompete agreement he'd previously entered into with CPS.

Chastain, however, says no agreement was signed, and any such agreement would be invalid because CPS "does not presently exist even if it may have existed at one point in time."

No company officials at CPS or its affiliates were available for comment last week.

Chastain further alleged that insofar as it exists, "CPS is subject to Tennessee laws governing payday lending but nevertheless consistently and regularly operates in violation of those laws."

He accused the company of violating the laws of Tennessee and "many other states," even partnering with Indian reservations and offshore entities to hide its involvement in charging payday customers higher rates than allowed by law.

Tennessee allows licensed payday lenders to charge up to $15 on a $100 loan, but Brown's websites, such as PayDayMax, DiscountAdvances and MyCashNow, charge more.

Employee disclosures

In his court testimony, Terenine President David Carney said his company had lost at least one client and other prospective clients after the Times Free Press article was published. The company claims it suffered damage to its reputation as a result of the recent employee leaks.

"These individuals have gone out, talked to the newspaper and discussed entities they say are customers," said attorney Hillary Klein, representing Terenine.

Evidence showed that some initial nondisclosure agreements were signed between workers and Credit Payment Services, or CPS. To make things more complicated, CPS also is an acronym for Communications Processing Services, or Compro -- an earlier name for the payday loan group.

Despite his role as president of Terenine, Carney maintained he had little direct knowledge of Terenine's ties to CPS, didn't know the role of one of its employees, and was unaware of Terenine's origins as the IT department for the payday group.

"I don't know definitively about what company it spun off of," Carney said when questioned about Terenine's ties to CPS.


Carney's testimony contrasted with a 2010 interview he gave to the Times Free Press, in which he told a reporter that "We really started as a department within a family of businesses a couple of years ago."

"Prior to 2010, [Terenine] was more of an IT department that was focused on providing services to affiliated businesses," Carney said at the time.

Defense lawyers jumped on the apparent inconsistency.

"What right does [Terenine] have to file suit on behalf of a company you don't know about or what they do?" asked Steve Dobson, an attorney for a former employee.