Investor-alert bill backed by lawmakers

Wednesday, Aug. 26, 1998 | 9:15 a.m.

The subcommittee to investigate regulation of mortgage investments met Monday to discuss what lawmakers can do to prevent another company from collapsing like the Las Vegas-based Harley L. Harmon Investment Co. did.

"Somewhere down the line we have to stop protecting everybody but the victim," said Assemblyman Barbara Cegavske, R-Las Vegas. "That is what is happening."

The state suspended Harmon's license in December, more than eight months after a Nevada Financial Institutions Division investigator recommended in a confidential memo that the division immediately issue a press release on problems at the business. The press release never was issued and people continued to invest.

Much of Monday's hearing centered on why it took the Financial Institutions Division so long to suspend the license of Harmon, a former assemblyman who served as majority leader in 1979.

Deputy Attorney General Doug Walther said he needed the time to develop an iron-clad case against the mortgage company.

"We didn't sit down in February (1997) and decide it would take eight months to investigate," Walther said. "We didn't want to get embroiled in litigation."

"One thing that is going to change is the state's attitude so that we start protecting peoples' life savings, rather than protecting the state's liability," said Assemblyman David Goldwater, chairman of the study panel.

While the state was probing the company, an additional $3 million was poured into the company by investors, some who had read Harmon's newspaper advertisements that raved about his company's success.

The actual loss by investors in Harmon's company has not yet been calculated, although there are reports that it could be as much as $22 million.

Financial Institutions Division Administrator Scott Walshaw said he could back a bill that defines when he can publicize ongoing investigations against mortgage companies.

But he said mortgage companies would suffer financial ruin once he revealed publicly they are undergoing an investigation.

Goldwater, D-Las Vegas, plans another hearing in October. He has asked for Harmon to testify but expects he won't because he's the subject of an ongoing investigation.

No criminal charges have been filed, but Goldwater said a criminal investigation has started.

During the hearing, Ellen Rosario, an investor who lost $305,000, expressed dismay because Harmon "is still walking around playing golf at the (Las Vegas) Country Club."