$8 Mil Missing from Bankrupt Mortgage Firm

SEC investigating National Consumer Mortgage

April 24, 2006

By PATRICK CROWLEY

Loder said the Securities and Exchange Commission, or SEC, is probing the company’s financial problems. The SEC is not commenting on the case and Loder said she couldn’t go into specifics.

Loder said a criminal investigation of the firm has also begun, but she refused to identify the agency conducting the investigation.

“I don’t think I can say,” she said.

The company is cooperating in the investigations, Loder said.

Loder did say the criminal investigations are focusing on $8 million allegedly “misappropriated” by Sam Favata, 46, a former star baseball player who worked at the firm and whose wife, Sandra Favata, is listed as the owner.

“That’s a large part” of the investigations, Loder said.

Favata’s wife was not aware of the withdrawals made by her husband, Loder said.

According to a copy of the company’s bankruptcy filing, “Sam Favata made unauthorized withdrawals of approximately $8 million during 2005.”

Favata has not been arrested and is “somewhere around southern California,” Loder said.

Asked if she knew why he has not been arrested or charged, Loder said, “I don’t know if it has gotten to that point.”

The firm lists debts of $32.8 million versus assets of just $1.1 million.

The SEC is probing the company’s sale of more than $20 million in unsecured investments to more than 250 people in California and Colorado. The firm had been promising returns of 8% to 12% on notes with terms of two to four years.

The company is continuing to operate and Loder said she is working on a plan to repay investors with assets of the mortgage brokerage, which operated separately from the investment operation.

“Assuming the mortgage market remains relatively good, we’ll use that side of the business to able to pay their investors back,” she said, adding that it may take a few years “to make that happen.”

On its Web site, National Consumer bills itself as a “locally owned and operated mortgage brokerage” that can help customers “even if other lenders have turned you down.”

The company caters, at least in part, to potential subprime borrowers, saying it is willing to work with borrowers who have “bad credit”, are “self employed” or are facing “liens, judgments or bankruptcies.”

Former Los Angeles Dodger star Steve Garvey has appeared as spokesman for the company through what Loder described as a “marketing arrangement.”

Favata was a one-time area baseball star. He played on Cal State Fullerton’s NCAA championship team in 1979 and holds several school records, according to the university’s Web site. He once hit four home runs in one game.

Favata was drafted into the major leagues but was slowed by a head injury after begin hit in the head with a ball. He eventually gave up baseball but did at one time coach high school baseball in southern California.

Favata may also have enjoyed the good life. He is quoted in an Orange County Register story from April of last year talking about the time and money he spent at a spa.

He is identified in the story as the operator of National Consumer Mortgage Company.

“Stress kills you,” Favata told the paper. “Getting revitalized is cleansing. This is like an energy boost that helps me conquer all the problems encounter in everyday life.”