State hearings likely for Vestin companies

Kevin Rademacher

Friday, April 25, 2003 | 11:06 a.m.

Vestin Mortgage Co. and its subsidiaries will apparently have to defend themselves in front a state hearings officer on charges of misconduct leveled by the Nevada Financial Institutions Division.

The path was cleared for that hearing on Thursday when District Court Judge Sally Loehrer accepted an investigation by the state Financial Institutions Division into Vestin's dealings with developer Howard Bulloch.

Richard Linstrom, assistant solicitor general with the Nevada Attorney General's office, said the Financial Institutions Division will now issue an order for Vestin to appear in a hearing on the alleged violations.

Loehrer ordered division commissioner Scott Walshaw to launch the investigation in December after Bulloch sued, charging that previous claims had been ignored by Walshaw's agency.

"I don't think anyone in this room could say in the first round the Financial Institutions Division ever did anything other than blow (Bulloch) off," Loehrer said Thursday. "These are not just nickle and dime complaints. These are very substantial complaints."

Gov. Kenny Guinn is reviewing the matter, said Greg Bortolin, a spokesman for the governor.

"The governor is very disappointed and very concerned," Bortolin said.

"The governor and his general counsel (Keith Munro) will take the matter very seriously," Bortolin said. "They intend to review the judge's findings and comments ... This matter has the governor's attention."

Bulloch accused Vestin and other companies controlled by financier Michael Shustek of 13 violations. Walshaw's investigation found four possible violations.

The alleged violations range from improper distribution of loan payments to investors to inadequate record keeping.

The investigation also alleges that the findings violate a 1999 settlement with the state agreed to by Del Mar Mortgage Co., a Shustek controlled firm, in order to clear up an unrelated investigation.

In a statement released by Paul Connaghan, Vestin's in-house counsel, he said the suit by Bulloch was "proof of his obsession to harm Mike Shustek and one or more of the Vestin companies."

Reached by phone, Connaghan said Vestin denies the allegations "100 percent."

Connaghan and Linstrom both said that none of the investors in the loans have filed any complaints.

Loehrer on Thursday questioned the investigation's findings that no violations were committed in the disbursement of a $4.5 million payment made by Bulloch on a $13 million loan for property at Blue Diamond Road and Las Vegas Boulevard.

Charles Thompson, an attorney representing Bulloch, said the payment was disbursed to investors in another Bulloch loan on land near McCarran International Airport.

Linstrom said the transaction was not prohibited under Nevada statute at the time. Thompson said the move amounted to embezzlement.

Thompson said the fact that the Financial Institutions Division found no violations until ordered to take a closer look by the court constituted corruption. He went on to question the integrity of a future hearing into the violations run by Walshaw.

"I can see that being a third-rate dog-and-pony show," he said.

Linstrom said the hearing will be conducted by an impartial party from the state hearings division.

Walshaw did not attend the hearing, and the Financial Institutions Division referred questions to Linstrom.

"This court has not found any corruption and has not found any favoritism," Linstrom said. "The court found the Financial Institutions Division did not do their job."

Linstrom said Walshaw ordered different staff members to conduct the new investigation. "New people found different findings," he said. "It's not surprising given the complexities of the matter."

Loehrer said the court's role in the matter was concluded.

"The court has exhausted its power," she said. "Personally, I question some of the findings, but that's not my job."

Linstrom would not comment on the severity of the charges or a timetable for ordering the hearing.