AG’s office defends, targets Hildreth

At the same time the New Hampshire Attorney General’s Office is drawing up its case to remove Banking Commissioner Peter Hildreth over his actions – or lack of actions – in investigating the alleged Financial Resources Mortgage Inc. Ponzi scheme, it also is defending Hildreth in a suit filed by Frank Marino, an FRM victim.On Sept. 17, Marino tried to fend off a state motion to dismiss his lawsuit, citing the very words in a previous report by the AG’s office that faulted the Banking Department for its alleged failures in regulating the company. Marino charges that because of the department’s “grossly inaccurate information” he lost his life savings.Marino’s suit stems from an alleged phone inquiry in February 2009 of Michelle Kelleher, an employee of the Banking Department. Marino said he told Kelleher he was thinking of investing more money in FRM and wanted to know if it was properly licensed, in good standing and if there were any complaints or lawsuits filed against it.According to the suit, Kelleher told him “there had only been one complaint ever filed against FRM from an impatient borrower claiming his loan had taken too long to close and that the complaint was promptly resolved.” Marino said he invested $32,000 on Sept. 11 2009, and $230,000 on Oct. 23, 2009. The company shut its doors on Nov. 9, 2009, and the Banking Department soon and the AG’s office forced it into bankruptcy.The bankruptcy trustee now says the company was involved in a giant Ponzi scheme, and that investors will probably only get a fraction of their investments back.This past August, the AG’s office filed a motion to dismiss Marino’s suit, arguing that by accepting Marino’s argument it “would be tantamount to turning the state into a risk manager for an investor” The AG’s office also asked that the complaint against Hildreth be dismissed, arguing that there were no complaints about the actions of the commissioner himself, so only the state should be named in the suit.On Sept. 17, Marino countered that the state’s contention that it had no duty to Marino was a “myopic view of the Banking Department’s responsibilities” and that it “overlooks and discounts the Department’s authority and responsibility to receive complaints, conduct investigations, compile statistics and respond to inquiries from individual consumers about its licensees.”Citing information from the AG’s report issued earlier this year on FRM, Marino response says that at the time when he made his inquiry, the department was “rife with reports and investigations of wrongdoing by FRM,” including numerous complaints, three lawsuits and seven examinations that showed “significant and repeated violations” that led to a staff attorney’s recommendation to revoke the company’s license. It was a recommendation the department never followed.Kelleher’s response “completely masked the scandalous rap sheet on FRM which the Banking Department had compiled over a decade,” charges Marino.Marino adds that while it is one thing to say that the department does not disclose complaints or the results of examination, once Kelleher “elected to provide the information concerning FRM to Mr. Marino, she had a duty to do so completely and accurately.”Marino does say he is prepared to drop the suit against Hildreth if the state assumed responsibility.Meanwhile, the AG’s office is hiring outside counsel to present a petition of removal to the Executive Council, outlining why Hildreth should be dismissed over his handling of the FRM matter.Hildreth will have at least 45 days to respond to such a petition, so the hearings will probably not take place until after the Nov. 2 election. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW