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| The Nevada Mortgage Lending Commission has swooped in to take possession of a Las Vegas hard-money lender and revoked its license. And, in an out of court allegation straight from “America’s Unsolved Mysteries,” one source alleges that the “significant other” of one of the company’s workers — who met the worker through the Internet — moved in on the worker and the company’s assets.Nevada Mortgage Lending Commissioner Scott Bice took action this week against Private Capital LLC after discovering money shortages of several months duration for which the owner had no explanation. The company was also hit with an administrative fine of $80,000.
Licensed in July 2005, Private Capital is owned by Sheila Delk. The company brokers loans to private investors and maintains client and servicing trust accounts. The accounts are reconciled on a monthly basis by a Las Vegas-based outside certified public accounting firm. During an examination started about three weeks ago, the state’s Division of Mortgage Lending discovered money shortages in the company’s servicing trust accounts for March, April and May 2006. In addition, a reconciliation performed at the end of June by the company’s bookkeeper revealed a shortage for that month of $25,736.53. In July, Delk said she did not have sufficient funds to cover the June shortage. According to a complaint filed in state court, although the accountants told the company about the discrepancies, Private Capital did not attempt to discover the reason for the shortage or to correct them. The Division determined that there has been a shortfall in the servicing trust accounts since January 2006. According to the complaint filed by the Division, the reason for the shortages is unknown. However, a source familiar with the case fingered a man romantically involved with one of the company’s workers as the reason. The source said the couple met through the Internet and alleged that one of the company’s employees took her suspicions about the man to the authorities after a background check of the boyfriend, who had gone to work for the company, could not dig up facts beyond 2002 and after noting that the man’s revelations of the details of his personal life seemed to change. But the servicing accounts weren’t the only problem. The commissioner noted irregularities in the company’s interest reserve accounts. Private Capital maintains interest reserve accounts for each loan being serviced by the firm. The trust accounts contain 12 months of interest paid up front by the borrower, collected from the borrower at the close of escrow. The division discovered that the balances shown by Private Capital’s internal accounting system for the interest reserve accounts differed from the balance shown by the bank statements for the accounts for the majority of loans. The division’s examination discovered shortages of money in 10 interest reserve trust accounts. The division also found errors in the company’s disbursement of funds. For example, the interest reserve account for one loan showed, in addition to the eight regularly scheduled monthly payments, two additional withdrawals for several months while another loan showed no withdrawals for three months. In addition, $32,500 was transferred from the Servicing Trust Account to the Private Capital’s operating account on June 22, 2006. The division could not identify a reason for the transfer. The company’s average balances in its trust accounts for December 2005 was $2,275,614 in the client trust account and $109,440 in the servicing trust account. Private Capital’s financial statements as of December 21, 2005 showed a net worth of $79,653, which, the Division said, does not meet Nevada state law requirements for minimum net worth, based on the average balance in its trust accounts. Last week, Delk told the division that Private Capital only had one-third of the money in its operating account needed to cover its payables. The division also discovered that Delk and Bill Johnson, Private Capital’s operations manager, made a partnership agreement in 2005, where they agreed to share equally in the company’s profits and losses. The sale of the partnership was not reported to the division, in violation of Nevada state law. Johnson could not be located for comment. Private Capital has been charged with several violations of Nevada state law. The company declined to comment. |
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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: [email protected] |
