Thursday, June 12, 2003 | 11:26 a.m.
Global Express Capital Mortgage was on its way to clearing up problem loans when the state placed the Las Vegas company in conservatorship, the company's president said Wednesday.
But the state Financial Institutions Division's order taking possession of Global cited 28 complaints it had received about the company since September 2001 and accused Global of fraudulent advertising, operating in an unsafe manner and of carrying a large number of delinquent loans -- jeopardizing the principal payments due investors.
The order accuses Global of several violations related to a portfolio of 144 loans totaling about $58 million. The alleged violations include the failure to notify investors of problems with financed construction projects, record keeping problems, the use of unregistered mortgage agents and placing investors in loans that "substantially exceeded the appraised value of the collateral held."
Connie Farris, president of the mortgage firm's parent company, Global Express Capital Corp., said the FID's complaints relate to three builders that defaulted on loans funded by Global Express in August.
Those loans totaled about $20 million and involved about 400 investors, she said.
Since August, Farris said property associated with all but 45 loans have been sold and all principal and some interest has been returned to investors. The 45 remaining loans should be cleared up by the end of the month, she said.
"No investor has been out a dime," Farris said. "If they wanted to send a conservator in, they should have done it in August when we started with this."
The order also accuses the company of placing an unauthorized advertisement on its Web page.
The order called the advertisement -- which, the order said, made claims that investors had never lost a penny of principal or interest -- "a material misrepresentation, deceitful and fraudulent."
"The large number of delinquent and non-performing loans and the projected 'shortage' in loan collateral values demonstrate that some interest is lost or not being paid and some principal repayments are at risk," the state order alleged.
Amanda Getzoff, a spokeswoman for the state Department of Business and Industry, which oversees the Financial Institutions Division, said the state would not comment on the order.
"The division has information and belief that Global is conducting business in an unsafe and injurious manner that may result in danger to the public," the order said.
The order directs officers of Global to "immediately turn over complete possession and control of Global to the Commissioner of the Division or his designated agent."
The order was signed Wednesday by FID Commissioner Scott Walshaw.
The cost of Global's conservatorship is paid for by the state and not investors in the company's loans, Getzoff said.
Earlier this week, Global Express filed a lawsuit seeking a restraining order that would have prevented the FID from appointing a conservator. The court had not acted on that suit when the conservator was appointed.
In the lawsuit, Global Express said it had challenged the review's findings after an informal hearing on April 16, and on May 31 gave up its Nevada mortgage broker license.
On June 3, Global Express Capital Mortgage also requested FID approval to close its office, the suit said. That company will remain in existence only until the final 45 loans are liquidated and investors are reimbursed, Farris said.
The parent company -- Global Express Capital Corp. -- is still headquartered in Las Vegas and has no plans to move, she said. The company, through subsidiaries, could still fund Nevada loans through licensed mortgage firms, Farris added.
She said a new company -- also named Global Express Capital Mortgage -- was opened in Billings, Mont., in March. That company was described in filings with the U.S. Securities and Exchange Commission as manager of the company's Global Express Capital Real Estate Investment Fund.
"Montana provides for a more favorable regulatory climate than Nevada with respect to real estate mortgage loans," the SEC filings said.
The fund, as of March 31, had 15 loans worth about $11.4 million and controlled an additional $11.9 million in real estate holdings, SEC filings said.
Asked why the FID would move in on her company if investors interests are being addressed, Farris said she did not understand.
"I guess there are certain rules for some mortgage companies and some for others," she said.
Global Express is the third mortgage company to be taken over by the state since Harley L. Harmon Mortgage Co. was seized in 1997. Del Mar Mortgage, now Vestin Mortgage, was seized in 1999 but was quickly returned to the control of founder Michael Shustek. Also taken over that year was Interstate Mortgage Co.
On Monday, the Financial Institutions Division is scheduled to begin hearings into allegations that Vestin mishandled loans to developer Howard Bulloch. An investigation into Vestin turned up alleged improprieties only after a District Court judge found that initial complaints brought by Bulloch were ignored by the Financial Institutions Division. Vestin has denied wrongdoing.
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