Harmon plan angers investors

Wednesday, Sept. 9, 1998 | 10:51 a.m.

A Clark County district judge has approved the repayment of more than $5 million to some individuals who made mortgage loan investments with the now defunct Harley L. Harmon Mortgage Co. of Las Vegas.

A majority of Harmon's investors remain in limbo, however.

Judge Stephen Huffaker said Tuesday he intends to approve a controversial motion by the Nevada attorney general's office to have most of those investors split any remaining Harmon loan assets after pooling those funds.

Deputy attorney general Doug Walther defended the pooling request, which would return on a pro rata basis funds to investors stuck with unpaid loans. In other words, an individual who invested $100,000 with Harmon would get twice as much out of the pool as an investor with $50,000 at stake.

There may be as much as $10 million in liquidated assets that would go into the pool, court-appointed receiver Bernie Chippoletti said. But as of Tuesday, he said only about $2,500 had been recovered for those investors.

Many investors oppose the pooling concept, however, because they said it would be unfair to those individuals who have the greatest chance of recovering at least some of their own funds. One such opponent is Loretta Eichelberger of Las Vegas, who invested in a loan for a mobile-home park.

"I put my $30,000 life's savings in, and I feel that I should get that back," she said. "I don't think I should be penalized based on what someone put in another loan."

Huffaker, however, tried to soothe the simmering emotions of investors who packed the courtroom.

"I realize with this many people you can't please everybody," Huffaker said. "I have all your letters. I've read every single one.

"I realize some of you are angry with the case. Maybe the state should have moved sooner (to close Harmon). You may be right on that. But that's not why we're here. We're trying to determine what to do to clean up this mess."

Harmon, operated by a former state assemblyman of the same name, was stripped of its license last December by the Nevada Financial Institutions Division for allegedly mishandling investors' funds. At the time the company went out of business, it was handling 44 separate loans using about $23.9 million worth of investments from 694 individuals.

Investors gave Harmon money expecting to receive up to 15 percent annual interest in return, but many individuals never saw any interest and lost their principal as well. Several individuals charged that Harmon used some investor money to pay off others and commingled loans without notifying them.

They've also lambasted the state because more than $3 million was invested with the company while it was under investigation. The public was unaware of the probe until the Sun reported it last November.

Huffaker ruled that Chippoletti, who has been given the task of liquidating assets such as real estate and buildings tied to the Harmon loans, be given up to 21 days to repay certain investors. These include investors in loans that have been repaid in full by the borrower, and others who have reached a settlement with the borrower for less than the amount of the loan.

At least 12 of the loans, totalling about $5.4 million and involving 165 investors, will be settled in this fashion.

The biggest question mark is the status of 23 other loans totalling more than $13.4 million that involve 471 investors. Chippoletti considers all these to be nonperforming loans, meaning the money hasn't been repaid by the borrowers. The pooling of funds recommended by the attorney general would involve these investors, but the amount of money they receive depends on the success Chippoletti has in liquidating the assets tied to those loans.

Like Eichelberger, fellow investor Ellen Rozario of Las Vegas believes the pooling concept is a bad idea unless all investors are involved. She objected to the fact that investors involved in "good" loans were getting repaid while others would be placed in the pool.

"But for the grace of Harley Harmon, I could have been in some of those good loans," said Rozario, who invested $335,000. "Nobody knew what they were talking about in court. The whole thing is a joke. It's terribly unfair."

Investors in at least four loans totalling $775,000 may get no money at all, however, because the assets in those cases have been liquidated. The money went to other creditors.

Huffaker ordered Chippoletti to immediately notify investors in any projects that have gone through foreclosure. Investors have only six months after a foreclosure to challenge in court the amount of funds recovered for such properties.