NH House-Senate panel backs FRM compensation, without money
Conference committee OKs measure for un-funded dedicated fund
Six and a half years after the Financial Resources Mortgage Ponzi scheme unraveled, leading to investors lose tens of millions of dollars, the NH Legislature is on the verge of passing a bill aimed at compensating victims, but there’s no money in it, and accepting some responsibility, but without admitting guilt.
House and Senate conferees on Tuesday all signed off on Senate Bill 155, which opens with the words: “The general court hereby finds that there has been documented evidence that certain state agencies made mistakes knowingly or unknowingly that resulted in the continuation of the Financial Resources Mortgage (FRM) fraud causing financial harm to many victims.”
The FRM fraud exploded onto the political scene because of the numerous warning signs in the files of the Bureau of Securities Regulation, the Attorney General’s office, and especially, in the Banking Department.
It was the Banking Department that eventually forced FRM and a related company, CL&M, into bankruptcy in 2009, following the collapse of the Meredith mortgage company that was at the heart of the biggest Ponzi scheme in New Hampshire history.
Under the scheme, Scott Farah and Donald Dodge convinced hundreds of investors to part with a good portion of their life savings to invest in various commercial mortgages.
Both pleaded guilty to fraud and went to prison, leaving behind few assets and about $80 million in claims that are still being sorted out in a case that has piled up 2,500 legal filings. Many of the victims criticized the bankruptcy court for going after their assets, claiming victimization a second time.
There were numerous investigations into the matter, including one by the Attorney General’s office and the Securities Bureau and the Legislature.
Many of those involved in those inquiries have since moved on.
Kelly Ayotte, who was attorney general for many of the years when FRM was operating, is now a U.S. Senator. Then-state Sen. Maggie Hassan, who chaired the legislative committee investigating the matter, is now governor and running against Ayotte for her Senate seat. Mark Connolly, the former Securities Bureau chief, who loudly resigned in protest, charging a cover-up, is running for governor. Banking Commissioner Peter Hildreth quietly resigned and later moved out of state. And Jim Donchess, the attorney still serving as bankruptcy trustee is now mayor of Nashua.
Meanwhile, the victims of the fraud have gone on with their lives without any compensation.
Rep. Ken Gidge, D-Nashua, tried to set up a fund back in 2010, but “everything under the sun has happened” to his attempts since.
The original version of this bill, co-sponsored by him but introduced on the Senate side in January 2015, would have actually put some money into the fund – half of what was raised after expenses by Securities Bureau and Attorney General financial fraud cases. But the AG’s office was not happy about that, because it would single out the victims of one fraud scheme as opposed to another.
By the time the measure reached the House, that provision was stripped out, and after 14 work sessions, the House passed its own version – the version the conferees agreed to.
The dedicated fund would be listed in the law with other victim’s funds, including one concerning human trafficking. Gidge said that he is hopeful that attorneys who have been involved in the case would contribute some money, and perhaps future lawmakers would agree on a method to fund it.
Al McIlvene, an oft-quoted FRM victim in the past, knew that the bill contained no money, but he wasn’t complaining.
“I just wish to express appreciation that with bipartisan support, the entire Legislature recognized what we’ve been through for the last years. They did the right thing,” he said.
It’s not quite a mission accomplished. To be law, the conference report has to be approved by both chambers and Governor Hassan still has to sign it into law.
“With this bill, anything can happen,” Gidge said.