Vestin Group stock down just slightly

Kevin Rademacher

Monday, March 8, 2004 | 11:26 a.m.

Shares of Vestin Group Inc. were down less than 4 percent in trading this morning despite news that the company is the subject of an informal Securities and Exchange Commission inquiry.

Vestin Chief Executive Michael Shustek said Friday afternoon that SEC staff arrived at the Las Vegas commercial lender's offices on Feb. 25. He added that the focus of the inquiry into Vestin and its funds I and II is unknown.

Shustek owns 3.2 million shares in the company, about 60 percent of the 5.3 million outstanding shares, according to recent regulatory filings. Shares this morning were down 8 cents to $1.96.

Sandra J. Harris, associate regional director of enforcement for the SEC, would not comment on Vestin or confirm or deny the existence of an inquiry into the company.

Shustek said it appears that the same SEC investigators that in December took over the Global Express mortgage lending operation of Las Vegas financier Connie Farris are involved in the Vestin inquiry. He said he welcomed such an examination, particularly after the company recently resolved a dispute with Nevada regulators.

"It is this sort of examination by federal and state regulatory authorities that provide the necessary safeguards in our industry that investors need to feel comfortable with their investments," Shustek said.

In settling the state investigation into the company's handling of two loans to developer Howard Bulloch, Vestin predecessor Del Mar Mortgage admitted to one count of violating state lending laws. Shustek agreed to pay $5,000 in administrative costs to the state as part of the settlement.

Bulloch, who said he was not satisfied with the state settlement, supported the federal inquiry.

"We have felt for quite some time that there are matters there that need to be investigated," he said.

Bulloch's attorney, Charles Thompson, would not say if he had spoken with the SEC. "If we had the opportunity we would," he added.

Scott Bice, commissioner of the state Mortgage Lending Division, said the existence of an inquiry into a related Shustek company could illustrate a pattern.

"Where there's smoke, there's often fire," he said, adding that he did not know the specifics of the SEC inquiry. "People's business practices, like history, tend to repeat themselves."

Shustek said SEC officials have not limited the operation of the company during the inquiry and have only asked to review documents and interview "a few" employees. No subpoenas have been issued, he said.

"They haven't even asked to speak to me," Shustek said. "It's business as ususal."

Vestin has about 7,700 investors in its funds I and II, Shustek said. Through its Vestin Mortgage subsidiary, the company has arranged more than $1.5 billion in lending transactions, a company statement said.

As of Dec. 31, Vestin Fund I had 60 loans worth $51.3 million and Vestin Fund II had 61 loans worth $308 million, SEC filings said.

Last year, a U.S. District Court awarded Bulloch more than $5 million in a federal lawsuit over the disputed loan deal. Vestin has denied any wrongdoing in that case and filed an appeal.

In February 1999, Del Mar Mortgage was seized by the state regulators over allegations that the company was violating state regulations. A month later, the company was returned to Shustek in a settlement that required him to keep investors better informed.