×

Ayotte may testify in Ponzi hearings



Last modified: Saturday, May 29, 2010
A legislative committee investigating the state's oversight of a failed mortgage company may seek testimony from Kelly Ayotte, the former state attorney general now seeking the Republican nomination for U.S. Senate.

Sen. Maggie Hassan, chairwoman of the special committee, said panel members "will be weighing" whether to question Ayotte about her knowledge of Financial Resources Mortgage, the Meredith firm alleged to be at the center of a years-long Ponzi scheme. Ayotte was the state's top law enforcement official from 2004 until last year, the period in which Financial Resources Mortgage swindled hundreds of people out of millions of dollars, prosecutors claim.

Jeff Grappone, a spokesman for Ayotte, said she would appear before the committee if asked. He also accused Rep. Paul Hodes, a Democrat running for the Senate, of "politicizing" the investigation into Financial Resources Mortgage. Grappone referred to a report earlier this month by Attorney General Michael Delaney, who succeeded Ayotte last year, saying that Ayotte had "no personal knowledge of the matter."

"Nevertheless, Kelly has called for the release of all of her e-mails and schedules, she fully supports the release of her interview, and has previously indicated that she is willing to answer questions from the Legislature," Grappone said.

Delaney's report found numerous failures - across state government - to rein in Financial Resources Mortgage, despite years of complaints and other warning signs that the company was endangering its customers' money.

Delaney said his office received several consumer complaints about the company, which it forwarded to the Banking Department without following up. His office also received three criminal complaints, and a private attorney met with investigators on the attorney general's staff to discuss suspicions that Financial Resources Mortgage was breaking the law. But the Attorney General's Office never took action against the company until it closed without warning - and with no money left in its accounts - in November.

Since then, federal prosecutors have charged Financial Resources Mortgage's president, Scott Farah, and his former business partner with several fraud counts. Accounts very, but officials say Farah may have diverted as much as $80 million in his clients' money. His company has been forced into bankruptcy, and former clients have brought lawsuits seeking to get their money back. Officials say Farah lured lenders by persuading them to invest in real estate projects at high rates of return. But, prosecutors say, he actually diverted much of that money to himself, his family and a Center Harbor church run by his father.

Delaney's report offered no evidence that Ayotte was aware of Financial Resources Mortgage's alleged fraud, but some of her opponents in the Senate race have questioned whether she bears responsibility for the state's failure to detect the alleged scheme earlier.

A legislative panel has been hearing testimony for weeks on what role state regulators played in allowing Farah's alleged scheme to flourish despite signs of trouble dating back a decade. Yesterday's hearing drew a crowd of people who lent money to Financial Resources Mortgage, and about 10 of them addressed lawmakers. Some shared details of their dealings with the company and Farah. But they all voiced a similar frustration and outrage at state regulators, particularly the Banking Department and its commissioner, Peter Hildreth. They encouraged lawmakers to hold the state's top regulators accountable for missing the alleged fraud.

"The laws didn't fail us; people failed us," said Peter Martino of Epsom. "So before you start changing all our laws and growing our government, make sure we have the right people there. Because, apparently, New Hampshire doesn't have the right people."

"We have learned the great and tragic lesson that neither Farah nor the government can be trusted," said Arnold Olsen, a pastor from Amherst who lent money to Farah. "You probably perceive that I am more than a little angry."

Hassan echoed some of that frustration yesterday. She said she and other committee members were not satisfied with the answers they got from Hildreth when asked to explain why his staff did not take action against Financial Resources Mortgage despite the company's checkered history, including reports detailing years of law-breaking by the company.

"I think it's fair to say that the level of astonishment we felt when we read the Banking Department's reports did not seem to match the department's demeanor when it was here," Hassan said.

Hassan said she expects the committee to ask Hildreth to appear before them again.

Many lenders yesterday also expressed resentment toward the court-appointed trustee overseeing the dissolution of Financial Resources Mortgage in federal bankruptcy court. That trustee, Steven Notinger, has argued that any real estate deal financed through Farah falls under the court's authority and may have to be liquidated to recover money to be dispersed equitably among lenders. But many lenders say they have a distinct claim to specific properties and don't want to have to hand over any earnings from those properties to the trustee.

"He's trying to come in and take what we legally own because of what he calls fraudulent monies in a co-mingled account," said Susan McIlvene, a Maine woman who lost more than $800,000 to Farah, of the bankruptcy trustee.

At other times, legislators wondered how people could have been lured into a scheme that, at least in retrospect, appears too good to be true.

"I'm no financial guru, but I wouldn't be lending 50 or 60 grand without some insurance," said Rep. Rip Holden, a Goffstown Republican. "But maybe I'm just a cheap Yankee."

To which Ken Miller, an Amherst man who lost hundreds of thousands of dollars to Farah, replied, "When you're duped like we were, there's not much you can say. We were duped."