After losing its top executive and more than five dozen employees, a lender with its headquarters in North Carolina has filed a lawsuit against a mortgage subsidiary of Fortress Investment Group.
RoundPoint Mortgage Co. says it originates home loans in 49 states through online marketing with an emphasis on refinances.
The Charlotte, N.C.-based company has reportedly grown from just one employee when it was established in July 2009 to 292 employees as of April 2013.
“In creating its electronic mortgage loan business, RoundPoint Mortgage Co. has developed and implemented loan pricing models, technology based workflows and processes that are proprietary to RoundPoint Mortgage Co.,” a lawsuit filed by RoundPoint in May states. “By using RoundPoint Mortgage Co.’s proprietary loan application process, a loan applicant can complete an application in fifteen minutes and can receive underwriting approval online.”
RoundPoint’s former president, German Florez, began working for the company’s parent, RoundPoint Financial Group Inc., in March 2008. He moved to RoundPoint Mortgage in August 2010 and became president and director in August 2011.
He resigned this past February.
Florez allegedly started scheming in the fall of 2012 to launch another online residential origination company that would compete against RoundPoint.
An amended complaint filed on June 11 indicates that before he left RoundPoint, Florez allegedly obtained financing from Fortress Investment Group.
He also started recruiting RoundPoint employees to join his new employer, Sebonic Financial, a division of Fortress-subsidiary Cardinal Financial Company LP, according to the lawsuit. This included his wife and RoundPoint executive Erica Price, RoundPoint loan originator Deanna Collins, RoundPoint vice president Julia Beckelman and RoundPoint processing manager Maria Harrison.
Although Florez tendered a letter of resignation in December 2012, he resumed his job as president in January while he negotiated to extend and restructure his employment with RoundPoint even as he allegedly continued negotiating with Fortress and Cardinal to fund a business that competed with RoundPoint and recruited RoundPoint employees for the new venture.
Florez allegedly even began soliciting Bank of America employees in December 2012 for Cardinal.
RoundPoint claims that Price, Collins, Beckelman and Harrison — who are all named as defendants in the lawsuit — breached employment agreements by soliciting employees and taking trade secrets. In all, 61 RoundPoint employees were recruited for the new company.
The lawsuit cited $35,000 that RoundPoint spent obtaining for originator and broker licenses for 10 loan officers — nine who subsequently resigned are believed to have joined Cardinal.
In addition, Florez is accused of stealing trade secrets from his employer. This included newly digitized onboarding materials such as proprietary and confidential training and workflow instructions and processes for internal use. The onboarding materials were stored securely online and required login credentials.
Other allegedly stolen trade secrets included loan pricing data, employee personnel data and vendor information.
RoundPoint reportedly paid $1 million to develop a website that it claims was copied by Sebonic.
Florez allegedly used RoundPoint resources to develop mortgage software that was actually intended for his new venture.
The lawsuit claims that Florez — who oversaw all the company’s business operations including employee hirings and terminations, the development of onboarding materials, the development and implementation of loan application processes and strategic planning — had a fiduciary duty to act in good faith in the best interest of RoundPoint.
“RoundPoint Mortgage Co. asserts claims for breach of fiduciary duty, misappropriation of trade secrets, conversion, breach of contract, civil conspiracy, and unfair and deceptive trade practices in violation of North Carolina law,” the amended complaint states.
