The owner of a California mortgage company and his father-in-law were sued by the government over allegations they misappropriated $10 million earmarked for loan fundings and used it to cover losses at other companies owned by one of the defendants. In other mortgage-related investor litigation, a $38 million settlement has been proposed in the bankruptcy of mortgage firm that collapsed well ahead of the financial market crisis.
MoneyGram International agreed to an $80 million cash settlement in a federal securities class and stockholder derivative action pending in U.S. District Court for the District of Minnesota, according to a February filing with the Securities and Exchange Commission. All but $20 million will be paid from the company’s insurance coverage.
MoneyGram said the claims were tied to subprime-related losses in 2007 and 2008.
A $38 million settlement has been proposed for investors of Metropolitan Mortgage & Securities, which filed for protection under Chapter 11 of the Federal Bankruptcy Code on Feb. 4, 2004. Buisness Week reported that the settlement includes money from Ernst & Young, PriceWaterhouseCoopers and Roth Capital and an insurance company.
Lawrence “Lee” Loomis and his father-in-law, John Hagener, were charged in a lawsuit filed on Feb. 23 in U.S. District Court for the Eastern District of California by the SEC, a press release said. Also named as defendants are Loomis Wealth Solutions LLC and Lismar Financial Services LLC.
Investors were attracted through wealth seminars advertised in the newspaper and in direct-mail marketing, the SEC said. The two Sacramento, Calif., men allegedly misappropriated around $10 million from 100 investors who were falsely promised their capital would fund residential loans at returns of 12 percent. The investments were promoted as safe, guaranteed by a third party and “liquid high-yield accounts.” And as they were misappropriating the money to fund other failing businesses owned by Loomis, they allegedly collected hundreds-of-thousands of dollars in management fees.
Las Vegas-based Vestin Mortgage Inc. announced last month that the California Superior Court in San Diego ruled in its favor in a three-year-old class action lawsuit. Vestin was accused of engaging in a “roll up” when it merged two funds into real estate investment trusts during 2006. The plaintiffs reportedly claimed that the dissenters, those who had voted against the mergers, were entitled to roll-up rights.
A related case pending in Nevada uses the same strategy as the California lawsuit — which Vestin said it will “vigorously defend.”
In an SEC filing earlier this month, Triad Guaranty Inc. said that a Feb. 6, 2009, complaint filed on behalf of James L. Phillips in U.S. District Court for the Middle District of North Carolina purports to represent investors who purchased or otherwise acquired Triad’s common stock between Oct. 26, 2006, and April 1, 2008. Triad is currently waiting hear back from the judge on its motion to dismiss the case.
A class-action lawsuit in U.S. District Court for the Southern District of New York against Canadian Imperial Bank of Commerce and four of its executives was dismissed, according to published reports. The plaintiffs claimed CIBC committed securities fraud by making at least 14 misrepresentations between May 2007 and May 2008 and hiding risk from mortgage-backed securities it owned.
In re. MoneyGram International
(U.S. District Court for the District of Minnesota).
Securities and Exchange Commission v. Lawrence “Lee” Loomis et al.
Case No. 2:10-CV-00458-MCE-KJN, Feb. 23, 2010 (U.S. District Court for the Eastern District of California).