State ‘recovery fund’ for FRM victims endorsed by N.H. Senate
Scott Farah walks with his lawyer after pleading guilty in Federal Court in Concord, NH to bilking investors of millions of dollars in a Ponzi scheme through his company Financial Resources Mortgage; Monday, Oct. 4, 2010. (Alexander Cohn/ Monitor Staff).
In the years before Financial Resources Mortgage collapsed in late 2009, regulators from three state agencies failed to detect the Meredith-based firm was engaged in massive fraud, according to later reviews. More than 250 investors lost about $33 million in the scam.
The two men who ran FRM were sent to federal prison in 2011. Now, the Senate thinks the state government should pay its own penance for failing to stop them.
Legislation that would establish a special “recovery fund” for FRM victims was endorsed yesterday by the Senate on a voice vote. It now goes to the Senate Finance Committee for a second look, and will come back to the floor for a final vote later this month.
“It’s clear that the state was remiss in its duties. That’s pretty evident,” said Sen. Lou D’Allesandro, a Manchester Democrat who introduced the bill. “And as a result, we should work hard to do some kind of restitution.”
D’Allesandro’s bill is co-sponsored by Senate President Peter Bragdon, a Milford Republican. If it becomes law, the new fund would receive $3 million a year from the state’s general fund “until all claims have been satisfied,” according to the bill as amended by the Senate Executive Departments and Administration Committee.
Under D’Allesandro’s original bill, the fund would accrue money from fines levied by the state departments of state, banking, insurance and justice – not by drawing on the state’s tax-supported general fund. Bragdon said yesterday the Finance Committee would look at the issue, but D’Allesandro said he doesn’t like relying on the stressed general fund for cash “because you’ll never get it.”
The FRM victims’ fund would be overseen by a four-member committee: the banking commissioner, the insurance commissioner, the attorney general and the secretary of state, or their designees. The committee would review applications from victims and approve payments to them, with awards “limited to the amount of the claimant’s original investment” and reduced if the investor received restitution from any other source.
“You’re never going to do all of it,” D’Allesandro said. “But some of those people were very, very severely hurt. And . . . because of material that came back from the state, they believed that everything was okay. And that’s not a good thing.”
FRM closed its doors in November 2009, and president Scott Farah was sentenced in January 2011 to 15 years in federal prison. His business partner, Donald Dodge, was sentenced to 6½ years in prison.
A number of reviews – including reports by Attorney General Michael Delaney, a special legislative committee, and conducted on behalf of Secretary of State Bill Gardner – faulted three state agencies for failing to stop the fraud: the Banking Department, the attorney general’s office and the Bureau of Securities Regulation, which is part of Gardner’s office.
The agencies failed to cooperate with one another, the reports found, and didn’t follow up on numerous warning signs that something was amiss at FRM.
The then-banking commissioner, Peter Hildreth, eventually retired as the Executive Council considered removing him from office over his role in the case.
In other action yesterday, the Senate voted to posthumously free 14 slaves who lived in Portsmouth during the late 18th century.
“Passage of this bill will allow the New Hampshire Legislature to make amends to injustices of the past,” said Portsmouth Democratic Sen. Martha Fuller Clark, “by voting in favor of the petition that was filed in 1779 by 20 African slaves from Portsmouth requesting their freedom in recognition of their dedication and participation in the Revolutionary War.”
The petition was heard by the House in 1780, but no action was taken. According to state records, legislators decided to delay a decision until “a more convenient opportunity,” but it doesn’t seem to have come up again.
Six of the slaves who signed the petition were later freed by their owners, so Fuller Clark’s bill was amended to free only the 14 who died enslaved.
It passed the Senate on a voice vote and now heads to the House.
The Senate also passed a bill to eliminate tolls at Exit 12 off Everett Turnpike in Merrimack.
As originally introduced by Bragdon, the bill would also have eliminated the tolls at Merrimack’s two other turnpike ramps, at exits 10 and 11. But the Senate Ways and Means Committee amended the bill to leave those tolls in place.
Bragdon appealed to senators yesterday, on behalf of the “beleaguered citizens of Merrimack,” to pass the bill. But D’Allesandro argued that if legislators want to improve the turnpike system, they should “do it across the board,” not piecemeal.
The bill passed on a voice vote with some opposition and heads to the House, which last year killed legislation that would have eliminated the tolls on all three ramps in Merrimack.
R&D tax credit
And the Senate, on a voice vote, concurred with the House version of a bill to expand and make permanent the state’s research and development tax credit.
The Senate passed the bill unanimously Jan. 31, and the House on Wednesday passed a slightly different version. Yesterday’s vote sends the bill to Gov. Maggie Hassan, who has said she’ll sign it.
(Ben Leubsdorf can be reached at 369-3307 or
firstname.lastname@example.org or on Twitter @BenLeubsdorf.)