Mortgage renegotiator Apply 2 Save Inc. was undone by the bad faith of a lender and a potential business partner, President Derek Oberholtzer said Friday.
Oberholtzer told the trustee wrapping up the affairs of his bankrupt Coeur d’Alene company that the doors would still be open if Fair Finance Group LLC had lived up to the original terms of a loan contract that called for an immediate infusion of $1 million, with an option for two $5 million loans later.
Fair Finance delivered only about $200,000, just enough to make a February payroll, Oberholtzer said. And with each subsequent call for more money by Apply 2 Save, Fair Finance modified the terms until, after lending about $810,000 to the company, Fair Finance and owner Klee Irwin held one-third of Apply 2 Save and controlled the company’s bank account, he said.
“He had me over a barrel every step of the way,” Oberholtzer said after the hearing. With the full $1 million, he added, “We would absolutely have made it.”
Irwin is the founder of Irwin Naturals and frequently appears in infomercials touting the company’s dietary supplements.
Oberholtzer said Apply 2 Save found itself at the mercy of Fair Finance when a pending merger with Federal Loan Modification Law Center collapsed because the Federal Trade Commission sued that California company. Oberholtzer said Apply 2 Save, expecting a boost from the merger, had doubled staffing to more than 300. When that business evaporated, company officers hoped Irwin’s money and media access would generate the leads to keep everybody busy.
“I made the bad decision to keep all the employees on,” he said.
Trustee Ford Elsaesser said he has just begun looking at the Apply 2 Save/Fair Finance connection as he searches for assets that might provide partial compensation to employees and other creditors.
Despite an FTC lawsuit filed against Apply 2 Save after its May closure, Oberholtzer said he believes the company kept many of its 9,000 clients in their homes.
“We built a great company,” he said, one that used local vendors and paid $3.2 million in wages.
Employees who spoke at the hearing, most unpaid for their last weeks of work, questioned Oberholtzer’s business judgment, but also thanked him for offering a pleasant work environment in which they established many friendships.
Oberholtzer, who had no experience in the mortgage business before founding Apply 2 Save, said his failure to provide for them was “crushing.”
“I’m sorry,” he said.
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