C. Paul Sandifur Jr., whose father founded Metropolitan Mortgage & Securities Co. half a century ago, resigned Tuesday as chairman and chief executive of the venerable but troubled Spokane company.
The company also announced that it is talking with attorneys and financial advisers about plans to “reorganize and restructure its financial affairs.” That statement, contained in a press release, is the closest Metropolitan has come to acknowledging it may seek Chapter 11 bankruptcy protection.
Sandifur will remain on Metropolitan’s board of directors, according to the press release. He owns controlling interest in Metropolitan and its Idaho-based sister company Summit Securities Inc.
Sandifur will be replaced by former vice president and long-time board member Irv Marcus, as acting chairman, president and CEO, the press release stated. The company said it will begin a search for a new president and “chief restructuring officer.”
Sandifur’s resignation comes after a tumultuous six months for the company, which has about 35,000 investors holding $580 million in stocks and unsecured bonds. Many of those investors are Inland Northwest residents.
“Metropolitan is entering a crucial stage, and I offered my resignation in an effort to try to put the distractions and controversies of the past year behind us,” Sandifur said in the press release. “I remain proud of the long history of our company, and I look forward to providing my help so the company can work through these issues.”
There’s been widespread speculation that Metropolitan will seek bankruptcy protection as it digs its way out of its problems, including allegations of securities fraud and two recently-filed lawsuits by investors.
In October, Metropolitan was fined $500,000 and forced to pay $2.8 million in restitution to a handful of investors, and establish an escrow fund of $1 million to repay others it may have misled about the risk of investments.
Since December, for the first time in its history, the company has not paid interest or dividend payments to its investors.
Last week, the national auditing firm, Ernst & Young LLP, announced that it was resigning as independent auditor of Metropolitan. The firm cited concerns over the accuracy of the company’s books.
Marcus has served on the board of directors since 1974. He was a company officer from 1974 through 1995, when he retired as senior vice president.
“The board appreciates that Paul acted with characteristic dignity and selflessness in recognizing that his resignation was for the good of the company,” Marcus said in the press release.
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