Thursday, March 15, 2007
The Securities and Exchange Commission ("Commission") today announced that it has reached settlements in pending litigation against two former executives of Metropolitan Mortgage & Securities Co., Inc. ("Metropolitan"), former Controller Robert A. Ness, Jr., and former Vice President Thomas R. Masters, and a former Metropolitan business associate, Dan W. Sandy, relating to an alleged financial reporting fraud at the company. Final judgments by consent were entered for each defendant by the Honorable John C. Coughenour in the case SEC v. C. Paul Sandifur, Jr., et al., Case No. CV-05-1631 JCC, in the United States District Court for the Western District of Washington.
Metropolitan was a long-standing Spokane, Washington finance and real estate company that collapsed in 2004. Metropolitan filed for bankruptcy in February 2004, devastating nearly 10,000 investors throughout the Pacific Northwest who had invested approximately $450 million in debt securities and preferred stock offered by the company. As alleged in the Commission's amended complaint, Metropolitan's management falsified the company's 2002 financial results by reporting profits from circular real estate sales where Metropolitan purported to sell property to buyers who, in fact, received all or nearly all of the money to pay for the purchases from Metropolitan or its affiliates. In addition to Masters and Ness, the Commission sued former Metropolitan Chief Executive Officer C. Paul Sandifur, Jr., and former executive officer Thomas G. Turner for their participation in the fraud.