Teagan Presley is not your everyday community bank customer. The former porn actress with 175 adult film credits on her resume and current strip club dancer was a faithful customer with JPMorgan Chase with no history of bounced checks or negative balances.
A faithful customer, that is, until the bank closed her account in April. When she went to the bank to ask why her account was closed, she was told it was because she was considered to be “high risk.”
“And then they told me that they canceled my husband’s account too, because our social security numbers are linked,” Presley told VICE News. “They told him that it was because I’m a notorious adult star. Which is funny, because I’m kind of a goody-goody in the business, and I’m not even doing porn anymore.”
Presley is not alone. In May 2013, CNBC reported that adult film actress Chanel Preston had a business account closed for “compliance issues.” Marc Greenberg, the founder of MRG Entertainment, a soft core porn production and distribution company, has filed a suit against Chase on allegations of violations to the fair lending laws and the bank’s own written policy of not using “moral reasons” as a basis for a loan denial.
In news reports from The Guardian, the Daily Beast and other news outlets, stories of current and former adult film workers being cut off from their accounts by Chase and other banks without explanation have been rampant. The response from the banks to the porn stars has been similar: “We recently reviewed your account and determined that we will be closing it on May 11, 2014,” read a letter Chase sent to porn director David Lord in April. “You may close your account before the date we’ve provided. Your account agreement says that either of us may close your account at any time, without notice and without a reason.”
While all of this may be a case of moral superiority, porn actress Layton Benton’s experience with Chase suggests something else. “We call customer service,” Benton told the Daily Beast. “They told me the reason they closed my account was that it was a risk for them to have the account and they want to prevent any fraudulent activity that could occur in the future.”
Around roughly the same time, Rep. Darrell Issa of California, the chair of the House Committee on Oversight and Government Reform, made his argument that the Department of Justice is exercising “prior restraint” — or, the assumption of guilt when no violation of the law has yet been proven — in the way the department is enforcing a little-known initiative.
Many who have studied both situations have come to the same conclusion: the jobs and the account closures were linked.
Operation Choke Point
When President Obama came into office in 2009, one of his primary objectives was to ensure that the banking collapse in 2008 — which directly led to the Great Recession, one of the longest economic lulls in the nation’s history — would not be repeated. One of the results of this was the Dodd-Frank Wall Street Reform and Consumer Protection Act, which constituted the largest set of changes to financial regulations since the Great Depression.
However, there was concern that if the banks were not willing to stop questionable transactions as they happen, then the government’s ultimately reactive approach to stop financial fraud would not work. As many millions of transactions cross the nation’s payment systems at any given moment, effective, widespread monitoring from a single point would be impossible — many of the larger crimes would go unnoticed and the fraudulent transactions that were detected would only be prosecuted after the damage had already been done. What was needed is what is now commonly referred to as “pre-crime” — a scheme to target and stop potentially destructive criminal patterns before significant damage is done.
The Financial Fraud Enforcement Task Force — which includes the Department of Justice, the Federal Trade Commission and the Federal Deposit Insurance Commission — came up with Operation Choke Point, a scheme that seeks to directly punish banks for their association with “high-risk” customers, such as credit card schemes, Ponzi schemes, gambling, escort services and payday loan providers. Through this, the federal government believed that it would reduce fraud by cutting off the “bad guys’” access to needed financial services.
The Justice Department has launched a number of criminal and civil investigations, as well as 50 subpoenas to banks and payment processors. One such case is Four Oaks Bank in North Carolina. Earlier this year, federal prosecutors suggested that the bank received more than $850,000 in payment-processing fees and customer refund requests while ignoring warning signs suggesting that online lenders were processing $2.4 billion in illegal loans through the bank. The bank ultimately settled with the federal government for $1.2 million.
A controversial tool
Fear of being hit with heavy fines or being branded as a fraud facilitator may ultimately have a chilling effect on the businesses the banks choose to work with. In conjunction with a 3 percent rate of returns on transactions, many — including Rep. Issa — feel that this initiative may squeeze out many companies that are in good faith, but have a high rate of returns, such as companies that offer financial services to the poor.
One such potentially targeted industry is the payday loan industry. While the industry is known for predatory rates and fees, it does offer many low-income Americans the only banking options available to them. Issa argues that — via the Justice Department’s interference — not only are innocent businesses being targeted, but so are the financial affairs of millions of unbanked and underbanked individuals.
In a letter to the Justice Department in January, Issa argued that the department’s use of prior restraint is distracting it from pursuing known cases of fraud.
In regards to low-income Americans, Issa also argued against the Justice Department’s attempt to limit unauthorized withdrawals. “While the Justice Department is correct that ‘without bank access there are no unauthorized withdrawals,’ without bank access there are also no authorized withdrawals,” he noted.
Not everyone in Congress shares Issa’s opinion, though. In February, Sens. Elizabeth Warren of Massachusetts, Dick Durbin of Illinois and Jeff Merkley of Oregon joined 10 other Democratic lawmakers in sending a letter to the Justice Department, encouraging the continued use of the initiative.
“Banks and third-party payment processors play a central role in the operation of the payment system, and all Americans depend on the vigilance of banks and payment processors to ensure they do not become unwitting victims of fraudulent schemes,” wrote the legislators. “The Department plays a critical role in ensuring system-wide compliance with anti-fraud, anti-money-laundering, and related laws, especially as they apply to the unique risks associated with our payments system, and we urge the Department to continue its vigorous oversight.”
A different theory…
There are those, however, who feel that the porn stars’ bank account closures and Operation Choke Point are unrelated, despite media coverage suggesting a link. David Mech is the executive producer of the documentary “Risky Business: A Look Inside America’s Adult Industry.” In conversation with MintPress News, Mech suggested that the porn stars’ treatment has more to do with the concept of “off-duty legal conduct” — or, the notion that someone can be actively discriminated against for legal, but potentially objectionable, actions done on his or her own free time — than any official banking policy.
Mech argues that the banking decisions amount to a moral decision on the part of Chase and the other banks involved. Chase is arguing that having accounts for adult film industry workers and those engaged in other “questionable” occupations implicitly associates the bank with a de facto acceptance of how the money was obtained, thereby lowering the bank’s corporate image.
The media, in recent years, has reported similar, non-porn-related situations of “off-duty legal conduct” being punished. In 2011, Georgia teacher Ashley Paine lost her job for posting a photo of herself on Facebook in which she was holding a glass of wine and a pint of beer. In 2013, Florida high school teacher Olivia Sprauer was fired when it was discovered that she was a beachwear model. In 2009, the city manager of Fort Myers Beach, Scott Janke, was fired when it was discovered that his wife was a former porn star. The mayor of Fort Myers Beach insists that Janke was not fired because of his wife’s former profession, but to keep the public peace.
“This is not so much about bank accounts,” said Mech. “If you are doing something lawful on your own time without using company resources, there must be something more than morality to justify discriminatory action taken against you. Why is it that my personal morality is less than someone else’s? Why does someone else’s complaint carry more weight than my liberty?”