Bill Edwards, a St. Petersburg businessman and majority shareholder of Mortgage Investors Corp., loaned the company millions of dollars even after it stopped making new loans.
Edwards loaned the money so the company could maintain its corporate records and support the costs of defending itself in a lawsuit that could go to the U.S. Supreme Court, according to documents filed by Mortgage Investors in a voluntary petition for Chapter 11 bankruptcy.
The company filed for bankruptcy on May 14 in federal bankruptcy court in Tampa. It said it has $148,553 in assets in cash, used office furniture and equipment, old customer and sales leads lists, domain names, copyrights, and trademarks. It owes over $8 million in debts, most of that to Edwards, who is owed $7.5 million, according to the filing.
Edwards is a high-profile business leader in St. Petersburg. He is CEO of The Edwards Group and owner and operator of Sundial shopping center downtown. His Big 3 Entertainment Group manages the Mahaffey Theater. He previously owned the Tampa Bay Rowdies, before selling the soccer team to the Tampa Bay Rays in 2018.
Related: Catalyze 2021: Bill Edwards
Mortgage Investors refinanced and service home mortgage loans that were guaranteed by the U.S. Department of Veterans Affairs. It was one of the largest refinancers of VA loans in the country, employing more than 500 people, when the Federal Trade Commission filed a complaint against the firm in 2013, alleging telemarketing violations.
Mortgage Investors agreed to pay a $7.5 million civil penalty in June 2013. The company stopped originating loans in October 2013, citing concerns over the cost of regulatory compliance and uncertainties over the impact of future laws and regulations on the mortgage loan origination business. In June 2014, the company sold its remaining mortgage loan servicing portfolio.
Nearly all its employees were let go in 2013 but a handful stayed on for the next five years to address post-closing mortgage loan issues and defend ongoing litigation claims, the bankruptcy filing said. Once Mortgage Investors’ cash was depleted, Edwards loaned the company money because the company had no ability to continue to pay legal fees on its own, the filing said.
After considering alternatives, company officials determined that a liquidating Chapter 11 filing would be the best way to address debts and serve the interest of creditors. The company will liquidate its remaining assets and make distributions to creditors from those proceeds, the filing said.
Besides Edwards, the largest creditors are DLA Piper, a law firm in Philadelphia that is owed $389,314, and several other professional services firms.
The company also lists potential litigation claims from a whistle-blower lawsuit. The plaintiffs, Victor Bibby and Brian Donnelly, are mortgage brokers who specialized in VA mortgage loans. They initially filed suit against Mortgage Investors in 2006, alleging the company charged veterans impermissible closing fees and then bundled the unallowable charges with allowable ones. In 2011, Mortgage Investors began to transfer assets to its shareholders, according to court filings. The filings said Mortgage Investors transferred more than $242 million to Edwards.
In 2016 Bibby and Donnelly amended the complaint to add a state law fraudulent claims transfer against Edwards.
A district court dismissed the fraudulent transfer claim for lack of standing and granted Mortgage Investors summary judgment. But in February, the 11th U. S. Circuit Court of Appeals reversed the district court’s ruling on summary judgment and said Edwards may be included in the False Claims Act lawsuit, according to Law.com Daily report.
Mortgage Investors intends to pursue an appeal to the U.S. Supreme Court, the bankruptcy filing said.