CMG Mortgage Inc. is in the midst of a lawsuit accusing it of raiding nearly half of New Penn Financial LLC’s retail division. CMG is run by the Mortgage Bankers Association’s chairman-elect.
CMG Mortgage was established in 1993. While it was originally located in Pleasanton, California, it moved further north the following year into a larger space in San Ramon –where it is still based today.
Subsequently, CMG Financial Services was created as a holding company that included retail lending, wholesale lending and a net branch division at the time. A correspondent channel has since been opened.
Today, CMG’s founder Christopher M. George serves as the president and chief executive officer of CMG Financial. In addition, he is the chairman-elect of the Mortgage Bankers Association, where he has served as a board member since 2012.
CMG currently operates in 50 states and is approved by the major housing finance agencies.
Quarterly volume was recently reported at around $0.9 billion.
In a federal lawsuit filed last year
by Plymouth Meeting, Pennsylvania-based New Penn, CMG is accused of colluding with eight former New Penn managers and leaders to raid its retail division.
According to an amended complaint filed in May, the defendants
orchestrated a nationwide raid of New Penn’s employees in its retail division. Over a single weekend, CMG is accused of hiring more than 80 employees from 18 offices located in 13 states. The recruits included loan originators, production staff and administrative staff.
“Because of the raid, New Penn lost approximately 40-50 percent of its retail division, in both headcount and revenue,” the amended complaint states. “In doing so, defendants used pressure tactics and false information to force the resignation of New Penn employees. CMG’s raid of New Penn employees is ongoing, as CMG, in the last several weeks, has hired additional underwriters and information technology professionals from New Penn.”
Tony Giglio, the former senior vice president of retail lending for New Penn who became vice president and national retail production manager for CMG, is accused of spearheading the plan.
Even though he reportedly settled with New Penn in a prior lawsuit, he allegedly mistakenly copied New Penn in a subsequent email indicating the raid was still continuing.
In addition to recruiting the employees, the defendants are accused of diverting new customers and prospects from
New Penn to CMG. New Penn, which reported $6.5 billion in 2017 originations, claims it has identified 150 lost customers.
A vice president from New Penn’s corporate office who traveled to Arizona to terminate employees allegedly obtained a flash drive from one of the employees being terminated who was moving to CMG that had New Penn
customer information on it, according to the amended complaint.
On that same trip, the vice president allegedly found a note pad with more details about a plan for an originator at CMG’s headquarters to handle customers diverted from New Penn.
The former employee defendants, who New Penn claims signed restrictive covenants that prohibited disclosures of the company’s confidential information and included a one-year non-compete, allegedly absconded with New Penn’s trade secrets and customer information.
New Penn seeks in excess of $5 million in compensatory
damages in addition to statutory damages, punitive damages and disgorgement of all compensation to employees while they were working at New Penn for the benefit of CMG.
A pretrial conference is scheduled for March 28.
CMG declined to comment on the lawsuit.
