SD-21: Chad Niell Makes A Statement, Says Nothing

September 12, 2013
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After my previous post about Chad Niell, Tiger Commissary President and current Republican primary candidate for Senate District 21, Niell’s campaign manager, Keith Emis, claimed on Twitter that the post contained errors.    When challenged on his statement, Emis reiterated that the post contained “several errors,” which Niell addressed in a statement to the Jonesboro Sun.

I requested a copy of the statement, and I offered to correct my post if there were errors, but Emis never responded.  Having now seen the statement, I know why: the statement is terrible, both in grammar and punctuation, and it doesn’t actually show any errors in my post.

Their entire statement is at the bottom, in all its unedited glory, but let’s dive right into what little substance the statement contains.

We started providing a kiosk to accept credit cards to fund inmate’s [sic] accounts in 2010.

I suppose this is the main “error” that Emis was referring to. After all, I said that Tiger was required to apply for a license beginning in 2008, but failed to do so until June 2013. Ignoring the absurdity behind that excuse — essentially, “we didn’t follow the law for THREE years, not FIVE!” — there’s still a problem with Niell’s argument. Namely, that his business required a license prior to when it began using kiosks.

You see, Tiger Commissary, prior to the kiosks they introduced in 2010, provided (and continues to provide) customers with web-based software to facilitate transfer of money to inmate accounts and management of those accounts. The law, which the Securities Department can and will confirm, requires a license regardless of how the money is transmitted.

So, no, it was not erroneous for me to say that Niell was required to apply for a license in 2008. In fact, Niell’s kiosk-related argument on this point is interesting, because it means one of two things. Either he still has no idea what is actually required in terms of licensing money transmitters in Arkansas, despite someone like me being able to figure it out online in short order and despite having more than enough money to hire someone who could answer any compliance question, or he thinks the voters of Senate District 21 are too dumb to see through a completely meritless argument. Neither answer smells all that great.

As always[,] before starting any new differentiation of our business[,] we contacted the state for clarification of what we would be doing and if [sic] any new license were [sic] required. We were assured there were [sic] not.

Interestingly, he does not specific who at “the state” he actually contacted, which is kind of important.  You know who they did not contact? The Arkansas Securities Department. How do I know? I asked, and Securities replied:

[T]here is no record of a conversation with Mr. Niell, and the policy of the Department is not to give informal advice over the phone. I’ve talked with the attorney and the examiner handling this matter, and no mention of a prior communication with the Department was brought up during the application process.

This is all to say that someone could have fielded a very generic question and given information to Mr. Niell in 2010, but since the business model of Tiger Commissary is a clear cut example of money transmission, I do not believe that would be the case.

Claiming you contacted “the state” and were told you didn’t need a license, when you didn’t actually contact the one agency responsible for licensing your business, is a lot like failing to register your car on time and then claiming ignorance because you called someone at the Department of Health to ask what the deadline was. Sure, you technically called “the state” in that situation, but not in a meaningful way.

The kicker here is, had Niell actually contacted the Securities Department in 2010, they certainly would have told him that a license was needed. In fact, an out-of-state competitor of Tiger Commissary, who provide substantially similar services (including kiosks), contacted the Securities Department in 2010 and were told unequivocally that they needed a license to conduct that business in Arkansas.

Over 7 months ago[,] we read an article where one of our large competitors was fined in Pennsylvania for not having the proper license for their kiosk. We immediately contacted the state to make sure we were in compliance. Still they could not tell us.

The competitor who got fined? Keefe Commissary, aka “The Company I Just Mentioned Above Who Knew To Call The Arkansas Securities Department In 2010 To Ask About Licensing.”

Also worth noting about that Keefe case, Keefe began operating in Pennsylvania in 2008, believing they were exempt from licensing, but continued contacting the appropriate state agencies to determine if they were actually exempt. In 2009, they applied for a license, but, despite trying to be diligent about the license, they were nonetheless fined for the 2008-to-2009 unlicensed business transactions.

Eventually[,] we found a regulation that applies to the banking industry.

Actually, no.  Ark. Code Ann. § 23-55-103(4) specifically excludes banks from the Money Services Act.  Literally, it spells out that the licensure requirement that applies to Niell does not apply to the banking industry.

The state allowed us to continue using the kiosk business because we made them aware of the problem[,] and the agency realized that disrupting this element of our business would impact lives of inmates, [and] their families, and [would] place a greater burden and liability on the county sheriffs that [sic] we do business with.

Again, no.  “The state allowed” Tiger to continue doing business because he filed a money-services application with the proper documentation.  I think that’s pretty obvious.  Ask yourself whether, as an agency tasked with ensuring that licensing procedures are followed, the Securities Department could have said, “you know what–don’t even worry about the application; we see how much of a burden it would be on your customers to make you comply with the law.”  Of course not.

Besides which, it’s not as if the Securities Department could have directly prevented Tiger from doing business.  The Money Services Act provides a very narrow situation in which the Commissioner may send a cease-and-desist order to someone who is in violation of the Act; otherwise, it only allows for a civil fine (up to $1,000 per day!) for failure to comply.  That’s pretty much it . . . at least on the civil side of things.

Where it gets more interesting is on the criminal side.  Under Ark. Code Ann. § 23-55-806(b), “A person that knowingly engages in an activity for which a license is required under this chapter without being licensed under this chapter and who receives more than $500 in compensation within a 30-day period from this activity is guilty of a Class B felony.” If Niell is talking about learning of a license requirement “over 7 months ago,” that could be problematic, at least in theory.

Niell’s statement ends with a claim that Tiger has conducted many transactions for lots of cash without any complaints from customers. While that is all well and good, I never suggested that he didn’t, so we can’t count that as an error in the original post.

Which means, in the end, Chad Neill’s statement to the Jonesboro Sun failed to identify a single error in my original report. What it did manage to do was make him look like someone who lacks even the most basic understanding of a law that governs the very way in which he’s made his money.

Yet SD-21 voters are apparently supposed to trust him to understand the laws that govern the rest of us?

Statement from Chad Niell to the Jonesboro Sun

We have been in business for 14 years. We started providing a kiosk to accept credit cards to fund inmate’s accounts in 2010.

We have a very unique business, the only one like it in the state. As always before starting any new differentiation of our business we contacted the state for clarification of what we would be doing and if any new license were required. We were assured there were not.

Over 7 months ago we read an article where one of our large competitors was fined in Pennsylvania for not having the proper license for their kiosk. We immediately contacted the state to make sure we were in compliance. Still they could not tell us. Eventually we found a regulation that applies to the banking industry. The state allowed us to continue using the kiosk business because we made them aware of the problem and the agency realized that disrupting this element of our business would impact lives of inmates, their families, and place a greater burden and liability on the county sheriffs that we do business with.

Additionally we have processed over 2.4 million dollars through 72,000 transactions without a single customer complaint. We operate our business with the highest of ethical standards and we have track record to prove it.

He even used ironic quotes around “report,” to make it sound like (a) he was smart enough to understand irony and (b) that the errors were so glaring that I shouldn’t have even bothered with posting it.  Neither (a) nor (b) is correct.
The Securities Department also noted that Niell’s June 2013 application made no mention of contact with the state as a reason for failing to properly license the business. Maybe it slipped Niell’s mind, right up until he needed to publicly explain his failure to license.

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8 Responses to SD-21: Chad Niell Makes A Statement, Says Nothing

  1. dave on September 12, 2013 at 7:13 pm

    Neill gets his conservative bona fides; will win nomination. Regulations and liberal bloggers are a cancer on faith, family, and freedom.

    “Still they could not tell us.”

    Excellent line. State regulations keeping honest, good hard-working Arkansans in a pickle with their persnickety forms and whatnots.

    And I’ll be honest with you here. It’s entirely “plausible” that Niell contacted some dumbass at the state and got misdirected. Nobody would disbelieve him if he said so. It all goes down a documentation wormhole and nothing whatsoever will happen. Unless we decide to do something very, very different in a very, very short amount of time.

    • Matt Campbell on September 12, 2013 at 7:36 pm

      I’d believe his “they could not tell us” much more if he had specified which state agency he contacted AND if he hadn’t based his inquiry on reading about another company failing to license under a very, very similar act.

      You may be right that no one cares about most of this. At the same time, if someone in this campaign can’t make hay out of Niell breaking the law, we’re in a quickly sinking ship.

      • ConcernedCitizen on September 15, 2013 at 1:59 pm

        Matt,

        This is really just the tip of the iceberg. In fact, Niell has probably violated the money transmitter license in most of the U.S. states and doesn’t even realize it yet. Since Tiger’s website can be accessed from any state, the depositor may in fact be located in a state for which he does not have a license (and hasn’t applied for one). For example, California is not listed as one of the states that he is doing business in, however, if a person from CA uses his website to deposit funds, he is required to have a CA money transmitter license. So, the only way a company that is doing business in this arena can satisfy the law is to acquire licensing in all states that require it. My insiders tell me that Mr. Niell may be in some serious hot water very soon. Talk of a class action in which the plaintiffs would be everyone who has ever used his money transmitter service. Since he was not legal to provide this service, they are due back the fee portion of the deposit amount. Even if Mr. Niell wins this primary and the election, he may not have much time to devote to Senate sessions in Little Rock. He will probably regret the day he decided to announce his candidacy. This could be the most expensive state senate run on record.

        • Matt Campbell on September 16, 2013 at 8:56 am

          Sadly, that’s probably incorrect. The license requirement is for contracting with entities to do business in a certain state. So each state says, if you’re going to provide money-transfer services TO an in-state business, you have to have a license. There’s no requirement that you be licensed in the state from which a person sent money to the business you’ve contracted with.

  2. dave on September 12, 2013 at 8:55 pm

    Au contraire, I never said no one cars about this. In fact, I think a lot of conservatives will truly view this as a “stand your ground” type of issue. This is red meat to them. Niell would be wise to make himself the victim and show the sympathetic small business owners and the media et. al. how “persecuted” he is. I think he can energize some tea-party types with this narrative and get some turnout. As far as the reference to the competitor, that’s a great pull on the SWOT-minded B.S. Business Admin grads who need a sound bite. The High Speed Cowboy Hat and the Batman Masked Bandit are becoming the norm. It’s like this…you’re gonna start being the guy who’s reporting on the planes landing safely.

    (You have him legally. I’m wanting to get some feedback from people who think more politically…what happens, how do we communicate a message, does anyone out there want to volunteer or help do something?)

  3. Dabb on September 13, 2013 at 9:44 am

    Yes, make himself the victim. Sounds just like Republicans in AR. Look at Jason Rapert. He makes himself the victim all the time. He must feel he’s a perfect person who never, ever does anything wrong.

  4. Free Willy Open Line - United Americans on September 14, 2013 at 9:21 am

    […] *OPPOSITION TO HOG FARM CONTINUES: We’ve mentioned the fundraiser at the house of former U.S. Rep. Vic Snyder to raise money for the effort to oppose the hog farm on a major tributary of the Buffalo River. It took place last night. More than 200 people attended and they raised more than $17,000. In addition to Snyder, former U.S. Rep. Ed Bethune spoke at the event.  *BLUE HOGGING: We mentioned earlier this week that Blue Hog Report had an item on issues with Chad Niell‘s licencing requirements regarding services his business had contracted to the state Correction Department. Keith Emis, Niell’s campaign manager for his run for Paul Bookout’s Senate seat, claimed on social media and elsewhere that Blue Hog blogger Matt Campbell was making a mountain out of a molehill and that the post had multiple factual errors. Now, Blue Hog strikes back. […]

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