{seesmic_video:{“url_thumbnail”:{“value”:”http://t.seesmic.com/thumbnail/KejW715Xuk_th1.jpg”}”title”:{“value”:”RCG Home Seach is now Powered by Estately! “}”videoUri”:{“value”:”http://www.seesmic.com/video/jiq1MJ4ieo”}}}
The bankruptcy trustee in charge of MILA’s Chapter 11 case says there is evidence that MILA’s founder and CEO allegedly collected $32 million from MILA during the years before its demise, “improperly draining the Mountlake Terrace company’s assets as its fortune declined.”
From the Seattle Times:
“I think the executives at MILA knew by 2004 that this bubble was bursting and did their best to take out as much money as they could before it became obvious to everyone else,” says Brian Esler, who represents the bankruptcy trustee in the suit.
The suit claims Sapp, who owned about 90 percent of MILA, paid himself more than $10 million in dividends in 2004 and 2005 when the company was already “functionally insolvent,” meaning it had insufficient capital to continue normal operations and should have been preserving cash.
It also alleges he took $11.5 million in salary for each of those years, though “by March 2005, MILA was already delaying payments, even to important customers, to conserve cash.”
The trustee’s suit also claims that Sapp damaged MILA — and its creditors — in other ways:
He “surreptitiously seized” the mortgage software MILA developed and had another of his companies bill MILA for using it; charged MILA exorbitant amounts for his private yacht and business jets; and, in a “theft of corporate opportunity,” created separate companies to own a four-story office building and a parking lot that were leased to MILA, rather than having MILA buy the properties.
Sapp’s attorney, Jack Cullen, declined to discuss the allegations in detail but said: “We consider the claims nonsense. We don’t think they are founded in law or fact.”
Sapp did not return a call to his Hunts Point home.
Esler is asking the court to freeze $12 million in cash belonging to Sapp, to keep it available to creditors.
Bankruptcy Trustee Esler’s plan is to convince the court that MILA was technically insolvent for over two years before the company abrubtly closed it’s doors in April of 2007. Esler cites improper accounting and a twelve-fold increase in the number of loans MILA was required to repurchase from 2002 to 2004.
To protect creditors, the suit says, as early as 2005 “Sapp should have attempted to sell, liquidate or reorganize MILA at a time when it still had significant value, instead of continuing to manipulate and loot it for personal gain for another two years.”
The suit also takes a microscope to transactions among the various entities owned by Sapp. One example: The company that owned his 130-foot yacht billed MILA $395,374 over two years — although “MILA used that yacht only twice for asserted business reasons,” the suit says.
MILA’s creditor claims have ballooned up to 2 billion dollars. By asking the court to freeze Layne’s personal assets, is the Bankruptcy Trustee is gathering evidence to try and make a case that the corporate veil was pierced? This means Layne might have co-mingled corporate assets with personal assets. An example of that would be if personal expenses were paid for with corporate funds. This will be an interesting local case to follow.
Bankruptcy Trustee:
Miller Nash
Brian Esler
206-622-8484
Lisa Peterson or Bruce Rubin
360-699-4771
MILA Legal Counsel:
Jack Cullen
Foster Pepper
(206) 447-4689
UPDATE: Found her. She’s the one on the left, of course. Looks like Mommy…except for the tattoos. She is my youngest of 3 daughters and a tattoo artist in Venice Beach, CA
********************
Way off topic, but my daughter is in this magazine and we can’t find it here on the Eastside. If anyone sees it or knows where we can get it, can you shoot me an email please? The cover should say “Ink n Iron Convention” and she’s in that section. Thanks! I know…WAY off topic 🙂
Watch live on CNBC here. Speaker Nancy Pelosi addressing the House.
Voting on the AMDENDMENT now taking place.
So far:
263 Yea
171 Nay
218 needed
Update: Here’s the roll call.
Here’s how Washington State’s Representatives voted (district map)
Hat tip SeattleBubble:
YES:
NO:
CNBC reporting rumor that Fed will do an emergency 50 bps cut after the bill passes …hat tip CR
Will the bailout bill do what it’s suppose to do: help “stabilize the economy?” Perhaps the markets have been rescued…for now.
“This is a time for serious people…and your fifteen minutes are up…We have serious problems to solve, and we need serious people to solve them. And whatever your particular problem is, I promise you, (X) is not the least bit interested in solving it. He(/she) is interested in two things and two things only: making you afraid of it and telling you who’s to blame for it. That, ladies and gentlemen, is how you get elected.”
Whether it be quotes from The American President above, or Jerry Maguire or any number of movies that hold you to a higher standard, there is no mistaking that Hollywood plays its part in elevating one’s ideals. I was once accused of being “The Jerry Maquire of Real Estate Agents”, but in these serious times I am looking to Andrew Sheperd for inspiration. It is not enough in this market to have “heart” or to “care about your clients”. Serious times call for serious leaders, and we are the leaders on the ground in the everyday real estate transaction.
If you are an agent who is attending classes on “how to convince people to buy” in this market, then I say to you “your 15 minutes are up”. These are serious times, and the order of the day is helping both buyers and sellers make good and best choices in these difficult times. If you are watching the news or waiting for a vote to solve your everyday real estate concerns, then maybe it’s time for you to get a job until this rainy day passes.
Time and again over the last few days I see people looking at the various bailout proposals for answers that will help the individual buyers and sellers. The reality is that our leaders are in the awkward position of needing to be elected. The reality is that there is no leader for an agent to turn to for answers, because in the room YOU are the leader. Whether you are helping a buyer make the difficult choice of WHAT to buy and what to pay for it should someone be inclined to buy, or helping a seller decide whether or not to sell…YOU are the leader in that room.
These are serious times and this is a time for serious people.
Spending time at the Snohomish Co. excise tax and recording office today afforded me the opportunity to pull some records on current Notice of Trustee Sales recorded from Sept. 1, 2008 to today. There were more than the 36 in my sample before I became restless and bored with basically the same theme that I knew would play out.
All were purchased within the last 4 yrs, most of the sample from 2006, one in 2008. One was for $3 million in arrears, another for $1.28 million in arrears and even one at $56,000.00 So, foreclosures are affecting all property types and income strata.
Here’s the tally of when the homes were purchased in my quick sample:
2004: 2
2005: 4
2006: 18
2007: 11
2008: 1
Lenders represented (again no surprise):
WaMu, Countrywide (several), Flagstar, First Franklin, AEGIS, Homecomings, GMAC, Indymac, Everhome Mtg, HSBC, EMC, Wells Fargo, First Horizon (now Metlife), Greenpoint and US. Bank.
Side note: Short sales are taking 60-90 days from the sampling we are closing in our office. It is UNREALISTIC for agents to expect anything sooner. If it happens sooner then great, but do not expect quick responses. On Monday, we received approval/clearance on a short sale from a Purchase & Sale agreement signed around from this past JUNE.
It is not terribly efficient to have borrowers lock in interest rates two months prior to receiving short sale approval. We are seeing this happen. The downside for the borrowers in this volatile mortgage market speaks for itself.
Watching the Senate testimony and voting on the Bailout Bill via C-Span. I hear that Maria Cantwell and Patty Murray are coming out against the bill from statements posted on their website. Hat tip perfectfire at SB.
Democrat Majority Leader Harry Reid is making a speech pleading for passage.
So far the Ayes are adding up very fast.
Cantwell votes NO.
Murray votes YES.
McCain: YES
Obama: YES
Yes: 74
No: 25
Now the bill will go back to the House.
I recently had a newly preapproved client ask me that question. It’s quite a timely one! Before this market, I would say that a preapproval letter used to be good for about 90 days assuming that none of the information on provided on the loan application has changed. Now-a-days, you have to factor in guideline changes and interest rates. You’re really not approved by the sales price or loan amount, it’s based on the total mortgage payment and funds for closing (down payment, closing costs, prepaids/reserves, etc.) along with any other conditions (such as having a certain amount in your savings account after closing).
Assuming that the loan program you’re preapproved with does not have guideline changes and still exists, before you write an offer on a home, I recommend that you contact your mortgage originator to make sure you’re still approved based on that home’s property taxes and current interest rates. In fact, it wouldn’t hurt to get an updated Good Faith Estimate with current rates and actual property taxes. If you’re asking the seller to pay closing costs, let your mortgage originator know so they can verify the amount will be allowed per guidelines. If you’re offering less than you’re preapproved for, your real estate agent may want to have a preapproval letter that is written specifically for the offer (especially if you’re asking the seller to pay closing costs).
Program changes? Boy, we’ve had a few. There are also changes with private mortgage insurance and various lender guidelines too. I recommend that people who are in the market right now as “preapproved” buyers, check in with their mortgage originator on a weekly basis (if you’re actively looking) and before you present that offer to make sure it meets current guidelines and that you are still qualified based on the present rate.
Don’t be surprised if your mortgage originator requires you to provide your most recent paystubs and copies of your asset accounts (where your down payment is coming from) before providing an updated preapproval letter.
Last note: Be careful when searching blogs for information on mortgage programs and guidelines. If the posts are even a few months old, the information may very well be outdated (if it was correct in the first place).
Note: I have modified this post. I had incorrect data (kind of ironic).
The House votes on Monday and the Senate apparently will vote on Wednesday. Here is the “Draft Proposal on Financial Rescue Legislation”
From Office of Speaker Nancy Pelosi — Sept. 28, 2008
REINVEST, REIMBURSE, REFORM
IMPROVING THE FINANCIAL RESCUE LEGISLATIONSignificant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets — including cutting in half the Administration’s initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers’ funds. If the government loses money, the financial industry will pay back the taxpayers.
3 Phases of a Financial Rescue with Strong Taxpayer Protections
Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes
CRITICAL IMPROVEMENTS TO THE RESCUE PLAN
Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable — protecting American taxpayers and Main Street — and these elements will be included in the legislation
Protection for taxpayers, ensuring THEY share IN ANY profits
Cuts the payment of $700 billion in half and conditions future payments on Congressional review
Gives taxpayers an ownership stake and profit-making opportunities with participating companies
Puts taxpayers first in line to recover assets if participating company fails
Guarantees taxpayers are repaid in full — if other protections have not actually produced a profit
Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families
Limits on excessive compensation for CEOs and executives
New restrictions on CEO and executive compensation for participating companies:
No multi-million dollar golden parachutes
Limits CEO compensation that encourages unnecessary risk-taking
Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate
Strong independent oversight and transparency
Four separate independent oversight entities or processes to protect the taxpayer
A strong oversight board appointed by bipartisan leaders of Congress
A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse
An independent Inspector General to monitor the Treasury Secretary’s decisions
Transparency — requiring posting of transactions online — to help jumpstart private sector demandMeaningful judicial review of the Treasury Secretary’s actions
Help to prevent home foreclosures crippling the American economy
The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year
Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures
Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks.
Brad DeLong has a better idea: nationalization and “it’s the best way to deal with the moral hazard problem.”
Paul Krugman agrees with Brad DeLong but ponders whether nationalization has broad political support.
Nouriel Roubini says the bailout is a “Disgrace and Rip-Off.”
This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.
Seems like the only people who are happy with the draft proposal are the politicians. Seems like both presidential candidates are supporting it.
“This is something that all of us will swallow hard and go forward with,” Republican John McCain said in an interview with the ABC television network. “The option of doing nothing is simply not an acceptable option.”
Democrat Barack Obama said he was likely to back the package. “My inclination is to support it,” he told CBS television’s “Face the Nation.”
Update: Here is the 108 page PDF of the bill, now called the ‘‘Emergency Economic Stabilization Act of 2008’’.
Several news sources are reporting that a bailout bill agreement has been tentatively reached between congressional leaders and the White House.
Update: the “Summary of the Draft Proposal to Rescue U.S. Financial Markets” has been posted inside the comments.
From the Wall St Journal
“Senate Majority Leader Harry Reid (D., Nev.), in an appearance on the Senate floor Saturday, said there are only a “handful of issues still lingering” for lawmakers to finalize. He said his goal was for the Congress and the Bush administration to at the very least release an outline of the bailout plan before Asian markets open Sunday evening.
Saturday evening, a Senate aide familiar with the talks said a number of specific ideas appeared to be gaining traction, most notably the concept of creating a “financial stability” fund financed by Wall Street…
Also gaining steam was a proposal to eliminate the tax deductions for companies on executive compensation for top officers that is above $400,000….
One issue still to be resolved was how the $700 billion authority to Treasury to buy up toxic assets will be meted out.
Lawmakers want Treasury to receive the authority in tranches, receiving $250 billion immediately and another $100 billion if needed as certified by the president. The remaining $350 billion would be subject to a Congressional vote, giving lawmakers the opportunity to vote to rescind the funds. But a Senate aide familiar with the discussions said Treasury was pushing for a larger initial authority, likely around $500 billion.
Lawmakers appeared to have the advantage on the issue ahead of the evening talks, the Senate aide said, though no part of the deal had been completely finalized.”
From Reuters
WASHINGTON (Reuters) – U.S. congressional leaders on Sunday said they had reached the broad outline of a deal to put in place a $700 billion bank bailout but were awaiting details on paper before declaring it final.
“We’ve made great progress,” House of Representatives Speaker Nancy Pelosi told reporters after a night of marathon talks. “We have to get it committed to paper so we can formally agree.”
Jillayne here. So, they’ve reached an agreement, but they still have some disagreements. To me this sounds like we still don’t have an agreement, but the pressure was on to announce that perhaps they’re closer.
I’d like to know if we the taxpayers are going to be able to read the agreement and give our feedback to our elected representatives BEFORE the House votes.
