New suit alleges self-dealing by Interstate Mortgage president

Grace Leong

Friday, July 28, 2000 | 10:37 a.m.

More investors are suing insolvent Interstate Mortgage Group Inc. of Las Vegas and its president, David Ferradino, accusing them of self-dealing and illegal business practices that put their investments at risk.

Interstate Mortgage was seized Nov. 2 by the state Financial Institutions Division, which cited a loss of collateral securing $5.7 million in loans because IMG released seven liens to Champion Homes without having been repaid for the loans.

Investors Robert and Ruby Rogers of Arizona sued IMG and Ferradino in U.S. District Court on July 13, alleging the defendants released, without their knowledge, a lien that secured their $33,000 investment on Champion Village so that Champion Homes could get new funding using the same property as collateral. That investment and another $77,000 investment in another project are in default, their lawsuit says.

Two other lawsuits were filed last year by three investors leveling similar allegations. In all, IMG had about 1,000 investors.

The Rogers' suit also alleges self-dealing by Ferradino.

It says he and Champion Homes engaged in numerous land development deals in which Ferradino had ownership interests but made no capital contributions and in which IMG was the lender -- often using relaxed underwriting standards and no appraisals. The suit said Ferradino failed to disclose to IMG investors that he owned a substantial interest in many of the borrowers in the mortgage loans in which their money was invested.

The suit said Ferradino claimed to have learned in 1998 the proceeds of several loans to Champion Village LLC had not been used for construction there and that the money had been diverted to an unrelated project in New Mexico.

Rather than inform IMG investors of this fact, Ferradino allegedly reconveyed the property serving as collateral for the loans to Champion Homes owner Terry Manley and another Manley-owned project, the Iron Mountain Ranch -- which just emerged from bankruptcy -- and investors who owned the deeds of trust on such properties received no compensation for the reconveyance.

The suit said Manley then used the reconveyed properties to obtain new loans from other mortgage companies. Part of the proceeds of the new loans were used to "buy" Ferradino's interest in Champion Village for $1.5 million, and to "directly pay off some investors (but not the Rogers) who lost interests in the reconveyed properties."

But Ferradino disputed the allegations in a lawsuit filed July 13 against Manley and Champion Village. He said he agreed to reconvey some of the loans in Champion Village on Manley's alleged promise that Champion Homes would resecure the investment on Iron Mountain Ranch and that upon its eventual sale, the reconveyed investors' principal would be paid off. But he said this wasn't done. Manley has denied wrongdoing.

Pamela Lawson, Ferradino's attorney, declined to comment on the Rogers' allegations. But she said: "Judging from the small number of investor lawsuits so far, it shows Ferradino still has the majority of their confidence and support."

While the Financial Institutions Division still intends to revoke Ferradino's mortgage license, it has agreed to postpone administration action against IMG so -- in compliance with District Judge Lee Gates' order of June 30 -- as not to affect sales of the properties needed to raise funds to repay investors.

Kaufman and Broad Home Corp. bid $31.5 million to buy 466 acres of the Iron Mountain property and a hearing on receiver George Swarts' motion to approve the sale is set for Aug. 14, said Aviva Gordon, attorney for Swarts.