ST. PETERSBURG, Florida — The stakes in an ongoing lawsuit against Bill Edwards’ Mortgage Investors Corp. were raised last week after it alleged the St. Petersburg power broker looted his company so it can’t cover $173 million in costs it could end up owing.
If found guilty, MIC would be forced to pay back the estimated judgment. If he doesn’t have the cash on hand, it could possibly complicate Edwards’ ownership in a number of properties, including two downtown staples — the Sundial shopping plaza and the Tampa Bay Rowdies of the North American Soccer League.
The lawsuit, first filed in U.S. District Court in Atlanta in 2012, claims that MIC overcharged veterans and defrauded the government. The plaintiffs, the U.S. Department of Justice and two mortgage brokers, recently added Edwards’ name to the suit.
Edwards’ attorney said MIC had every right to distribute money to stockholders and that the plaintiffs are a long way from having any claim on the company’s assets.
“None of this matters until the (plaintiffs) win the case and we don’t think they are going to win their case,” said Lesli Esposito, a partner with DLA Piper in Philadelphia. “We wholeheartedly believe there is no merit to those claims whatsoever.”
After a judge in June ordered MIC to turn over its 2013 and 2014 financial records, the prosecuting attorneys found the company’s assets have plummeted by 87 percent in the past three years, according to the lawsuit.
In 2013, for example, MIC made a large payment to shareholders that was more than it listed as total assets in 2012, according to the amended complaint filed Aug. 18 in Atlanta. Edwards, the largest shareholder, received 78 percent of that payout. His ex-wife Linda Edwards, whom he divorced in 1998, is the company’s second-largest shareholder with 9 percent of the stock.
The lawsuit alleges that MIC and Edwards intentionally transferred money that could have satisfied the $173 million debt so that it was “beyond the reach of the United States” and couldn’t be seized.
If MIC is made to pay restitution and the company doesn’t have enough money to cover that debt, the government could seek reimbursement from Edwards himself, according to Stetson law professor Theresa Pulley Radwan.
“It’s presumable they would go after someone who owns 77 percent of the company,” she said. “If he can’t pay it all then they go through the collections process. They could go after his assets. It doesn’t have to be assets bought with the money” that came from the shareholder payouts in question.
Specific financial amounts in the lawsuit aren’t shown so it’s unclear how much Edwards collected when MIC transferred money to shareholders. But based on earlier MIC financial reports the prosecution believed the company could cover restitution if it had to and now, after making transfers to shareholders, it doesn’t.
MIC originated more than 300,000 VA loans worth more than $25 billion over a 15-year span during Edwards’ leadership, according to a letter to customers that had been posted on the company’s website.
The lead attorney with the prosecution, Jim Butler Jr., an attorney with Butler, Wooten Cheeley & Peek in Atlanta, declined to comment.
The 2012 lawsuit against MIC (and now Edwards) is a companion to a 2006 lawsuit brought by the same Georgia mortgage brokers, Victor Bibby and Brian Donnelly, and the DOJ against MIC and seven other banks. The brokers are whistleblowers and will receive a percentage of any money paid in recovered funds or a settlement.
It alleges the companies making VA loans guaranteed by the U.S. government’s Department of Veterans Affairs charged veterans illegal fees then doctored paperwork submitted to the VA to hide the overcharges.
Whenever a veteran homeowner defaulted on a loan, the government backed it so the lenders such as MIC didn’t lose any money. The suit states if the lenders weren’t following the guidelines required for issuing or refinancing VA loans, then the government should not have had to pay them back when loans went into default.
“We believe any fee that was charged was an allowable charge,” Esposito, Edwards’ attorney, said.
When whistleblower suits are initially filed they are investigated by the DOJ, which decides if it will intervene in the case and take the lead in prosecuting it. The DOJ didn’t choose to intervene in the suit against MIC and the other VA lenders.
“The government has been closely monitoring the case and retains the right to intervene in the case at a later date if the need arises,” said John Horn, a U.S. attorney for the Northern District of Georgia.
In 2011, MIC asked the court for a summary judgment, a ruling made before all evidence is presented. After the judge denied it, prosecutors allege, Edwards began moving money out of MIC.
In October 2013, he laid off 476 people at MIC including 256 at the company’s headquarters at 6090 Central Ave. He blamed the near-shutdown on federal regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 saying his company didn’t have the technological capacity to comply with the myriad of new regulations.
MIC is the where Edwards earned the bulk of his wealth, but he has spent it throughout St. Petersburg in public and private ventures. Late last year he opened Sundial shopping plaza after an investment he pegged at more than $40 million. He bought the Rowdies in 2013 for an undisclosed amount. All told, Edwards has a stake in more than 20 businesses, nonprofits or other projects in South Pinellas and has invested more than $90 million in real estate and numerous ventures.
Times researcher Caryn Baird contributed to this report.
