AG's office says no favoritism shown in Harmon swindle case

CARSON CITY -- The state Attorney General's Office Friday denied it dragged its feet on an investigation of a Las Vegas mortgage company that allegedly misappropriated up to $22 million from investors.

Senior Deputy Attorney General Doug Walter issued an 11-page letter that said there was no favoritism shown in the handling of the case of the Harley L. Harmon Mortgage Co. case, which involved 300 to 400 investors. Harmon was a former Assemblyman and his father is prominent in financial circles in Las Vegas.

At a hearing earlier this month, state legislators criticized the attorney general's office and the state Division of Financial Institutions for taking a year to close the company. Harmon collected money from hundreds of investors, including several prominent Nevadans, with promises of a return of up to 15 percent a year.

Assemblyman David Goldwater, D-Las Vegas, chairman of the legislative committee, said the Harmon company should have been closed months earlier. Other committee members agreed.

Walther said he never got a chance at the Las Vegas hearing to answer charges that the state mishandled the case. In his letter Friday to Goldwater and investors, Walther said, "Every single penny ... was already at risk at the time the state conducted its financial examination in January, 1997, which led to the investigation."

He said these investigations take months to complete and the state needs evidence to close down a business. Without sufficient cause, the state could be sued and be liable for damages, Walther said.

"'Premature notification of the public would have jeopardized the investigation and caused further harm to the public and Harmon investors," Walther said.

Deputy Financial Institutions Commissioner Burns Baker recommended in February 1997 that the company's license be immediately suspended. But Baker met with his boss Scott Walshaw and the attorney general's office to discuss the issue. At that meeting, Baker concluded the state did not possess sufficient information to warrant regulatory action.

In this case, Walther said he was contacted about the case on Feb. 25 and the license of the company was revoked in December 1997. He said the attorney general's office and the financial institutions division have recommended the pooling of assets to allow all investors to share in the recovery of funds. "We will continue to take every possible step to insure that additional assets and remedies are pursued to maximize the recovery for every investor," said Walther.

This case might have been avoided, Walther said, if the Legislature had accepted recommendations made by the financial Institutions Division on several occasions, dating as far back as 1981. They included a recommendation to prohibit a mortgage company from disbursing or collecting on loans it brokers and prohibit or limit the use of powers of attorney.

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