Panel to seek flaws in financial laws

Monday, April 20, 1998 | 10:13 a.m.

A special legislative committee will investigate potential loopholes in the state's oversight of financial institutions, using the Harley L. Harmon Mortgage Co. loan scandal as an example.

At the request of Assemblyman David Goldwater, D-Las Vegas, the committee was formed Friday by the Legislative Commission, which administers the Nevada Legislature when it isn't in session.

The commission gave Goldwater's committee full subpoena power and a Jan. 15 deadline to come up with proposed new laws if deemed necessary. The proposals would then be considered by the 1999 Legislature.

More than 400 individuals invested at least $22.7 million in construction and real estate loans handled by the defunct Las Vegas mortgage company, owned by the former assemblyman of the same name. Though Harmon promised investors a return of up to 15 percent annually on their investments, many individuals never received payments or recovered their principal. Instead, they accused Harmon of using their money to pay off other investors.

The Nevada Financial Institutions Division revoked the company's license last December after a nearly year-long investigation. The state uncovered misconduct in the way Harmon handled loans for four construction projects.

Some individuals invested with Harmon while he was under investigation but were unaware of the state probe and remain bitter that they weren't informed. The state division countered that it would have been unfair to force Harmon to disclose the probe to customers if it turned out later that his company was cleared of any wrongdoing.

Goldwater, a financial adviser, took interest in the case because some of the investors are his clients. He said he would subpoena Harmon if he believed such testimony would help the committee.