Shustek, agency tangle on regulatory order

Grace Leong

Monday, Dec. 9, 2002 | 10:17 a.m.

Las Vegas commercial real estate financier Michael Shustek and Nevada regulators are fighting over whether one of Shustek's companies needs to be licensed as a mortgage company.

The state Financial Institutions Division last week ordered inVestin Nevada Inc. to stop engaging in what the state called unlicensed mortgage company activities in Nevada. Shustek on Friday demanded that the state withdraw the order, saying inVestin is not engaged in mortgage activities.

inVestin is located at 2901 El Camino Avenue, Suite 206 in Las Vegas, the same address where Shustek is chairman and chief executive officer of the publicly traded Vestin Group Inc.

Vestin Group, through its Vestin Mortgage subsidiary, is one of the largest commercial real estate financiers in Southern Nevada.

The Financial Institutions Division says inVestin portrays itself in Nevada as being able to offer loans secured by real estate -- an activity the state says requires a license under Nevada mortgage company laws.

Scott Walshaw, commissioner of the division, said the state issued the cease and desist order against inVestin after investigating inVestin's advertisements soliciting investment funds.

Unlike some high profile mortgage company cases handled by his office in recent years, no one has complained they lost any money investing with inVestin, he said.

"No one has been defrauded. There's no allusion to fraud or criminal activity," he said. "The state routinely issues cease and desist orders to companies we determine may be conducting business without a license."

"inVestin is a registered securities company with the Secretary of State's Securities Division. But that doesn't exempt them from needing to get a mortgage company license under provisions of the Mortgage Companies Act," he said.

"Vestin Mortgage, a separate legal entity from inVestin, is licensed under the Mortgage Brokering Act, which entitles them to broker loans or act as an intermediary between a borrower and lender or lenders," Walshaw said.

"inVestin may have assumed it doesn't need a mortgage company license, but the state concludes otherwise. Until that's resolved, the cease and desist stands in place. They must discontinue business as of Thursday until they obtain a license for that activity," Walshaw said.

Ira Levine, inVestin's attorney, disputed the state's accusations, saying the company isn't engaging in mortgage company activities.

"The state has provided us with absolutely no evidence that we're doing anything wrong. inVestin isn't conducting illegal mortgage activity. inVestin takes money from investors and invests in loans made by licensed mortgage companies," he said. "The cease and desist will have no impact on the investors or inVestin."

Shustek, in a letter Friday to the state division, also disputed the state's accusations that inVestin is buying or selling notes secured by real estate.

"The Financial Institutions Division believes investing in notes is the same as buying and selling notes. This interpretation is without basis and cannot be supported. inVestin is not buying and selling notes. When it invests in a loan, it is actually funding a loan that is originated by a licensed mortgage broker," Shustek wrote. "This activity is no different than any other wholesale investor who provides money to fund a loan to a licensed mortgage broker."

Shustek, in the letter, demanded a retraction of the state's cease and desist order, saying inVestin didn't advertise as a mortgage company or mortgage broker in an offering circular filed with the Secretary of State's Securities Division.

"Nothing in the offering circular states that inVestin is buying or selling notes or originating, negotiating or making loans secured by real estate," he wrote.