Fifteen brokers who sold Metropolitan Mortgage & Securities Inc. stocks and bonds have been accused of violating the Securities Act of Washington.
The charges brought by the state Department of Financial Institutions are not criminal. They could lead to the revocation or suspension of brokers’ licenses, censure, and fines ranging from $10,000 to $30,000.
The 15 brokers named in a 41-page charging statement sold $162 million worth of Metropolitan investments from 2001 to 2003.
Securities chief Mike Stevenson said the probe began in January. It was spurred by more than 100 written complaints and hundreds of telephone calls from upset and concerned investors who felt they were misled about the safety of investing in Metropolitan.
More than 50 registered representatives of Metropolitan Investment Services were investigated by state securities attorneys Andrea Sato and Chad Standifer. MIS was Metropolitan’s brokerage affiliate.
The central allegations are that brokers targeted older, financially unsophisticated investors. Stevenson said most of those people needed low-risk investments during their retirement years, yet the Metropolitan brokers steered them to stocks and bonds of a company losing money.
Many brokers, including several charged Thursday, lost tens of thousands of dollars they personally invested in the company.
Metropolitan paid steady interest for 50 years on debentures – a type of unsecured bond backed by the company’s promise to repay.
The solid record was a major selling point to investors. Many claimed that brokers wrongly compared the debentures to secured investments like certificates of deposits issued by banks when they should have alerted investors to the substantial risk.
For example, Metropolitan lost $7.6 million in 2000, followed by a loss of $8.9 million in 2001.
In 2002, the company entered into questionable real estate deals designed to show a paper profit even when executives at the time knew the multi-million-dollar deals would fall apart, alleged a June report by an independent examiner appointed by federal bankruptcy Judge Patricia Williams.
During the same period, brokers increased debenture sales and Metropolitan’s debt to investors grew from $199 million in 1999, to more than $300 million in 2002.
The failure of Metropolitan is the largest bankruptcy in Spokane history. About 16,000 people – most living in the Inland Northwest – invested $580 million with the company.
Company officials say investors may receive about 15 cents on the dollar after Metropolitan’s assets are liquidated. More money may be dispersed depending on the success of lawsuits and claims filed against auditors and others that may be found liable.
The Securities Division seeks to revoke or suspend the licenses of nine brokers. They are Gordon E. Adams of Walla Walla; Suzanne T. Adams of Walla Walla; Ross E. Bruner of Woodinville; Steve F. Haug of Vancouver; Ronald H. Mayfield of Spokane; Theodore R. Metoyer of Spokane; Randal M. Saccomanno of Deer Park; Ronald J. Saccomanno of Spokane; and Ryan S. Saccomanno of Spokane.
According to the charges, the Securities Division will attempt to censure six others, including Elizabeth Adams Armstrong of Beaverton, Ore.; Gary T. Hundeby of University Place; Lori L. Masterson of Greenacres; Michael H. McMillen of White Salmon; Lamar J. Miller of Veradale; and Annette O. Miller of Veradale.
Phone messages seeking comment about the charges were placed to several brokers. No calls were returned by deadline.
In past interviews, former Metropolitan brokers said they provided information from the company to investors and informed them of risks.
They have blamed Metropolitan executives for inaccurate information based on now-discredited financial audits.