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Couple Claims CTX Stole Staff

Couple Claims CTX Stole StaffCharter Oak sues CTX

May 26, 2006

By LISA D. BURDEN
WASHINGTON correspondent for MortgageDaily.com

CTX Mortgage is being sued in Connecticut state court by a husband-and-wife team who say the Texas-based lender stole their employees using sales training seminars as recruiting grounds.Alleging unfair business practices in court documents, Charter Oak Lending Group of Fairfield, Conn., has accused CTX of stealing 10 of its employees.

Debra Killian, one of Charter Oak’s owners, said the employees resigned within 38 days of each other in 2004. She estimated that 80 to 90 percent of the company’s revenues were lost. “They basically walked off with our entire business,” she said.

She also claimed that CTX used sales training seminars in California and Florida as a “recruiting ground” for the workers.

Killian said that before the employees left, her company was one of the largest independent mortgage companies. In its heyday, Charter Oak had 32 employees and 2 field offices. Now the company is down to one office in Danbury manned by five employees.

Killian and her husband, Don DeRespinis, allege the workers also came away with Charter Oak’s trade secrets. Killian said several of her former employees admitted in depositions that they took information from her company with them to CTX. She said the workers defended their actions by saying the customer information belonged to them. But Killian disputed the claim, saying that the loan officers were employees paid via W-2 forms who had no ownership of the business and no right to take the customer information with them to CTX.

“In its simplest terms, this case is about a loan officer’s freedom of choice for employment,” CTX Executive Vice President for National Retail Production Danny Deaton told MortgageDaily.com in an e-mailed statement. “As mortgage bankers know, loan officers have a great deal of freedom to select where they work. In this case, several Charter Oak employees, who were already unhappy about opportunities available to them at Charter Oak and were pursuing opportunities with other lenders, became interested in CTX after having met some of our more successful people at a seminar.

“Apparently, the problems at Charter Oak included significant reductions in their loan officer commission structure,” Deaton continued. “These loan officers were at-will employees, and were legally entitled to seek a more stable environment. In the end, we are confident that the court will agree that at-will employees have the right to choose where they work, and that a competitive workplace is the backbone of the American free enterprise system.”

The Charter Oak employees who signed up with CTX received signing bonuses ranging from $15,000 to $60,000.

When read the CTX statement, Killian said it did not address the alleged theft of trade secrets. She admitted that CTX proposed, at its top producing loan officer’s insistence, a proposed change in loan compensation structure that was not implemented.

Brian E. Cotter, the couple’s attorney, believes the couple will prevail. He is relying on a case Conseco Finance Servicing Corp. v. North American Mortgage Company, in which the Eighth Circuit appellate court decided in 2004 that North American misused Conseco’s trade secrets to justify an unfair competition claim and made an award of punitive damages of $7 million. The case stemmed from North American’s successful hiring of several of Conseco’s office managers and loan originators after the company started downsizing its subprime lending services. Some of whom, according to the case, were solicited by North American.

Killian said the Connecticut Attorney General has signaled an interest in the litigation as a case of corporate raiding but has not yet gotten back to her with a final decision.

Killian and her husband are asking for as yet undetermined damages, attorney fees, court costs and an order to return or destroy all trade secrets, customer lists and copies of files that, they say, belong to the company.

Trial is set for 2008.


Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record.

e-mail Lisa at: burdenlisa@yahoo.com

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