Met exec quits, says he was “misled’
Wed., July 21, 2004
The man who some describe as the internal whistle-blower at Metropolitan Mortgage & Securities Inc. has resigned to accept a job closer to home in California.
Metropolitan gave him no hint of the company’s impending financial troubles when he was hired Aug. 4, 2003.
“I was misled as much as any investor was misled,” William Smith said. “I’ve done everything I’ve been asked to do here. I’ve focused on the employees and creditors completely.”
Smith revealed many of the company’s questionable financial practices, said Ford Elsaesser, the attorney who is representing Metropolitan’s sister firm, Summit Securities Inc., as both companies wade through bankruptcy. Some 35,000 investors currently hold more than $500 million worth of Metropolitan’s unsecured bonds and preferred stocks and are waiting to see what repayment, if any, they will receive.
Smith served as CFO of Metropolitan and Summit, as well as CEO of Summit. His resignation is effective Thursday.
“He was the one who said, ‘We can’t go on this way,’ ” Elsaesser said of Smith. “Certainly on the major deals, he called them into question, from the inside, which is very risky.”
P.J. Grabicki, attorney for Metropolitan’s creditors, said Smith is “as honest and ethical an executive as you could ever find. He was certainly the one voice of truth and honesty. He said the emperor has no clothes.”
Elsaesser said Smith had the integrity to confront senior management on many of the issues subsequently raised in a court-ordered independent examiner’s report. The report revealed a company in which losses were hidden through inter-company transactions and schemes were concocted to make the company appear profitable.
The company is scheduled to file a plan by Aug. 30 spelling out its future. Offers already have been made on many of Metropolitan’s properties, including its 17-story office tower, its land on the Spokane River’s north bank and the Metropolitan Performing Arts Center.
Chief Restructuring Officer Bill Romney has said in the past that Metropolitan and Summit likely will cease all but basic bookkeeping operations by Nov. 1. Investors will be organized into creditor trusts, which will be designed to collect money and distribute it. Smith said Metropolitan currently has only 25 employees, including those at a mortgage service operation and at the Met theater. That’s down from 600 employees several years ago.
Metropolitan and Summit’s boards of directors Tuesday accepted Smith’s resignation and replaced him with Maggie Lyons, who has been working with the restructuring team for both Metropolitan and Summit for about four months.
Lyons is a certified public accountant who has extensive experience with turn-around work and bankruptcy filings. She was chairwoman of the creditors’ committee when Spokane-based Output Technology Corp. filed for Chapter 11 in the mid-1990s with debts of about $9 million. The company subsequently submitted a reorganization plan that called for paying 100 percent of all creditor claims, with interest, over a five-year period, according to accounts in The Spokesman-Review.
Lyons also served as the court-appointed CFO for Schweitzer Mountain Resort during the ski resort’s bankruptcy filing in the late 1990s. The resort was sold to its biggest creditor, U.S. Bank, which turned around and sold it to Harbor Properties of Seattle, the company that operates Schweitzer today.
“Maggie Lyons is superb,” Smith said. “She is 100 percent committed on anything and everything that will deliver a return to investors.”
Lyons said it’s too soon to tell what return Metropolitan’s creditors will see on their investments, but she is encouraged that they appear to be prepared to wait to get the best prices for company assets.
“I don’t think they’re in any hurry to just do a fire sale,” Lyons said.
Lyons said the rest of the restructuring team remains in place and is committed to completing the job.
“The loss of Bill Smith is most unfortunate,” Lyons said. “But we are so far into the process now and the plan is so close to being ready. Bill Romney is still here and will be until the plan is filed. We’ll do the best job we can.”
Smith is leaving to take a job he said he couldn’t pass up. He’ll become senior vice president and chief financial officer of the California State Automobile Association, based in San Francisco. The 100-year-old organization has 4.2 million members and insures a quarter of all the state’s cars. It has 6,000 employees and $4.4 billion in assets.
Smith came to Spokane from Southern California but never purchased a home here, due to Metropolitan’s instability, he said. “This allows me to be back with my family,” he said. “I’d like to see my son and my wife. It’s a wonderful opportunity.”
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