Former Exec Sues Ameriquest

Lee, who says he turned Ameriquest affiliate Argent Mortgage Co. into a respected and profitable company, attached a seven-page consulting agreement to the complaint. The agreement purports to show that Ameriquest Capital Corp., or ACC, agreed to pay him a total of $50 million over five-years for consulting services after he resigned. Lee’s lawsuit alleges a breach of “express written contract.”

And, mincing few words, Lee also claimed in court documents that Arnall’s decisions concerning the running of Argent and Ameriquest in the wake of Lee’s departure have caused both companies to go downhill.

“Mr. Lee’s complaint is a ridiculous work of fiction,” Bernard LeSage, an attorney for the company, wrote in an e-mailed statement to MortgageDaily.com. “It is disappointing that Mr. Lee is attempting to use baseless and inflammatory allegations to extract money to which he is not entitled. The company will vigorously contest his claims.”

Ameriquest has not yet filed a response in court.

Lee’s attorney, Irvine, Calif.-based Mark Kemple, indicates that it is clear what ACC should do.

“The consulting agreement is black-and-white,” Kemple said. “We were surprised that Ameriquest has flagrantly breached their obligation to our client and refused to permit him to compete in the industry,” Lee told MortgageDaily.com in a telephone interview.

Kemple also said Ameriquest is for sale and has refused to pay Lee so as to burnish the company’s numbers to potential buyers.

A sale of ACC Capital Holdings is imminent, according to prior coverage from MortgageDaily.com. Subsidiaries of the entity include Argent Mortgage, Ameriquest, AMC Mortgage Services, Inc. and Town & Country Credit Corp.

“It appears they are doing this for the purpose of inflating, under false pretenses, the value and competitive position of Ameriquest to would-be buyers,” Kemple said. “They’ve taken a very talented executive out of competition and then refused to pay him the money they owe him, thereby improving their bottom line.”

Lee said he worked for companies affiliated with Ameriquest for 15 years. He was reportedly president of wholesale mortgage lender Argent from 2001 to 2004. Lee claims he turned Argent into one of the most successful and respected mortgage companies in the country.

In 2004, Lee was named the chief executive officer of ACC Capital Holdings, Inc., giving him the opportunity to oversee the operations of both Argent and retail mortgage lender Ameriquest. Lee said that, unlike Argent, Ameriquest was plagued with allegations of corruption and financial improprieties. Lee pointed out in court documents that Argent was not among the affiliates accused of predatory lending practices.

Lee said he tried to bring to Ameriquest the legal policies and procedures and financial controls that had characterized Argent’s business practices. But, Lee said in court documents, he was stymied by Arnall, who allegedly balked at the new measures, in his attempts to reform Ameriquest.

Lee claimed that, contrary to prior assurances, Arnall repeatedly blocked his attempts to put into place cost and operational reforms for the affiliated companies. Lee said that while Argent’s brokers are independent, Ameriquest’s branch offices were organized so that branch managers had supervisory authority over its personnel responsible for determining whether a borrower qualified for a loan, apparently called in Ameriquest lingo, loan coordinators.

Believing that the system was flawed because the managers had the authority and, perhaps, the motive as commissioned sales people, to influence and to override the supposedly objective decisions of the loan coordinators, Lee tried to change the system so that Ameriquest loan coordinators would not directly report to sales personnel.

“Arnall blocked this and other reforms,” Lee said in the complaint.

Lee resigned in 2005 after just 11 months at the helm of the two companies.

In a written statement issued by Ameriquest at the time of his departure, Lee was quoted as stating that he had left both Ameriquest and sister company Argent to take on new challenges and to explore new opportunities.

Lee said Arnall asked him to stay on as a consultant to ACC for five years for $50 million. Lee said ACC agreed to pay him $20 million within eight days of the signing the agreement and the remaining $30 million in $6 million annual increments starting in June 2006 and payable every year until June 2010.

The consulting agreement also included a five-year non compete clause requiring that Lee not compete against ACC and its subsidiaries.

Lee said ACC paid the initial $20 million payment due under the agreement but then refused, one year later, to send him the first of the five yearly $6 million payments. Lee said ACC’s outside counsel said that if he took the matter to court, “ACC would drag out the case for years.”

Lee seems to have scant appreciation for Arnall’s business acumen. He accused Arnall in court of raising the rates Ameriquest charged for its loans “above prevailing market rates in an apparent belief that he could move the market price and increase margins.” Lee said Arnall also raised the rates charged by Argent beyond prevailing market rates in the pursuit of higher margins. Lee said both strategies backfired as both companies have lost substantial business to competing lenders with more competitive pricing.

Arnall, who was recently appointed the U.S. ambassador to the Netherlands, was not named as a defendant in the lawsuit.