2003 letter to AG: freeze FRM assets

The New Hampshire Attorney General’s Office was asked in 2003 about freezing the assets of Financial Resources Mortgage Inc. — more than six years before the Meredith firm went bankrupt.That bankruptcy could cost hundreds of investors millions of dollars in what has been widely described as the biggest Ponzi scheme in New Hampshire history.An official from the Bureau of Securities Regulation wrote a letter on June 17, 2003, to a senior assistant attorney general while it prepared for a hearing about violations of the sale of unregistered securities on July 8. “I will wait to hear from you regarding the issue of securing assets for the benefit of the investors,” said the letter obtained Wednesday by NHBR through a Freedom of Information Act request. The name of the sender and the receiver of the letter were redacted.Apparently, no action was taken as a result of the letter.When asked if the office took any follow-up over the issue of securing assets, Deputy Attorney General Richard Head – who is leading a review of the state’s reaction to the FRM affair – said “no lawsuits were filed” after the letter was received, but any other action, or lack of action, would be part of his office’s review, which he said would take at least six to eight weeks to complete.“No,” said Securities Director Mark Connolly about whether his agency followed up the discussion of freezing assets, but said he would comment further in the next few days after his agency finished digesting records it reviewed at the Banking Department that have been withheld from the public. “We intend to talk about the communication in context when we finish with our review of state records in the next few days,” he said.The Securities Bureau, when it was run by current Banking Commissioner Peter Hildreth, was warned that FRM was involved in a possible Ponzi scheme back in 2000.The Securities Bureau ended up fining the company and forcing it to pay about $1 million in restitution in 2007, but had not heard about any problems following that — until shortly before FRM shut its doors, said Connolly. The Banking Department, which licensed the firm and regularly examined it, also received numerous complaints, some forwarded by the Attorney General’s Consumer Protection & Antitrust Bureau. The Banking Department has since said many of the complaints did not relate to residential mortgages, and could not be acted on by the agency, under state law, nor even passed on to investors who had made inquiries.The department’s staff did recommend issuing a cease and desist order based on its own examiner’s reports, but that too was never acted on. Complicating the matter was the recusal by Peter Hildreth — both as securities director and then as banking commissioner — from any action against the company because a brother of his was an investor in FRM.Rep. James Splaine, D-Portsmouth – who along with fellow Portsmouth Democrat Rep. Paul McEachern issued a call last for an investigation of the FRM affair — said that the legislative branch should conduct its own review of the matter.“I think it’s clear that a different branch rather than the executive branch do this to protect everyone’s credibility so there is no possibility of a cover-up. We need to know who knew what when, who did what when and who did not do what when and why.”Executive Council Debora Pignatelli said that “if there is a conflict of interest, the attorney general needs to hire an independent person to look into this. I need to hear from them if there is a conflict, and if they don’t think there is one, why they don’t.”But Executive Council Bev Hollingsworth was a little more confident that the Attorney General’s Office could conduct an objective review.“I hope they will be independent,” she said., adding that Attorney General Michael Delaney “has a very good record to do things by the book, and I’m very hopeful that he will make sure it will be a thorough review.”And Senate President Sylvia Larsen, D-Concord, put her full faith in the attorney general.“The impartiality of the Attorney General’s Office is unquestioned,” she said, noting that the attorney general in 2003 was a different person — Peter Heed, succeeded by current GOP Senate candidate Kelly Ayotte the following year.Deputy Attorney General Head said that the office was considering hiring an independent person or firm to help in its review — not because of any conflict of interest concerns, but to provide the necessary securities and banking expertise in the complex case. However, he said, no such decision has yet been made. – BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW