E-mails reveal ’07 N.H. probe of ex-FRM appraiser

The New Hampshire Attorney General’s Office was preparing a case against an appraiser for Financial Resources Mortgage Inc. nearly three years before the Meredith company’s massive Ponzi scheme collapsed, according to an e-mail from Maine’s attorney general.The case was against Philip J. Korkosz, who conducted half of the appraisals for FRM. Many of the company’s victims said that they made millions of dollars of commercial loans based on these appraisals, but were only left with worthless paper when the company shut its doors in November 2009.According to an e-mail, dated Feb. 15 and obtained by an FRM victim from Maine, a New Hampshire assistant attorney general, Maryanne Mueller, was “working on a case against Mr. Korkosz and would appreciate getting a copy of the recording of the 2/13 (2007) hearing and a copy of all of the exhibits.”The e-mail was from a Maine assistant attorney general to its appraisal board, which was working on its own case against Korkosz and revoked his license in March for a number of violations, including accepting fees in return for preparing appraisals to match predetermined values of properties and showing “a total lack of integrity.”The Maine board informed the boards of appraisers in both Vermont and New Hampshire that it was revoking the license in February 2007 – according to the Maine e-mails released to an FRM victim — Vermont followed suit in July 2007, but the New Hampshire board said it only became aware of the matter in 2008 and waited until February 2009 to pull the license.Buy it had not been known until now that the New Hampshire attorney general was involved in the matter in 2007.According to Deputy Attorney General Richard Head, the involvement of Mueller in the case stemmed from her role as a lawyer in the offices Civil Bureau, through which she was assigned to the state Real Estate Appraiser Board. “In that capacity, she would represent the board and answer any legal questions it may have regarding board functions,” said Head in an e-mail to NHBR. “She was not a prosecutor and did not initiate or prosecute administrative actions before the board.”Nevertheless, the involvement of a lawyer in the AG’s office might indicate one more instance when it failed to follow up on red flags involving FRM, even though it was the AG’s office that issued the initial report on state agencies’ failure to adequately regulate the firm.Ironically, FRM and Korkosz came to the attention of the AG in the company’s closing days, a fact buried in the original FRM report but detailed in a supplement. The information came before the Environmental Protection Bureau when Assistant Attorney General Peter Roth was investigating a developer who had filed for bankruptcy and was trying to obtain financing from FRM.In September 2009, Roth noted there was “something not right” about a lending opportunity that was being advertised by FRM. He noted that the house on the FRM website was listed for $2.8 million but was selling for $750,000. And it was appraised by Korkosz, who by then had lost his license in three states. The state Bank Department appeared ready to follow up with a referral to the new Financial Crimes Unit that the AG was setting up.But by then, it was too late. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW