Printer Friendly

Million dollar mess.


The Plot Thickens At First Republic Mortgage As Another Seven-Digit Lawsuit Hits The Courts

The growing saga of First Republic Mortgage Corp. and Ed Riffel has reached the point where lawyers are suing lawyers, an indication that things are getting really messy.

In the complicated trail of mortgages that First Republic left behind no one is sure who is to blame. But, what's certain is it's going to take plenty of litigation to figure it out.

And an FBI investigation.

Take the case of B. Jeffrey Pence.

Gary Rogers and Phil Dixon of the Dover & Dixon law firm filed a $957,000 negligence suit on March 26 in federal court against Pence, a partner in the Little Rock law firm of Jacoway-Sherman & Pence.

The suit was filed on behalf of the Title Insurance Co. of Minnesota (TIC), which had to pay out the money on 10 claims resulting from invalid mortgages filed through First Republic Mortgage.

Pence is TIC's local agent hired to review title records, issue title insurance commitments and policies and collect premiums. The suit alleges that Pence didn't do his job and allowed First Republic to sign his name to documents that cost TIC dearly.

For his work, Pence was paid 65 percent of the premium value for each title insurance policy he issued for TIC. The suit alleges that he also collected closing fees from First Republic in the transactions, which could violate the conflict of interest clause in his agreement with TIC.

Pence couldn't be reached for comment.

This lawsuit is the latest development in the abrupt closing of First Republic Mortgage last year by Riffel, who now lives in New York City.

The FBI is investigating charges of fraud in connection with invalid mortgages eaten by TIC and other transactions handled through First Republic. Officials at the U.S. Justice Department "can neither confirm nor deny" such an investigation.

The lawsuit against Pence is the second big case related to First Republic to hit the courts since the mortgage company sued its accounts for negligence in August.

First Republic, which had offices in El Dorado, Jonesboro, Fayetteville and Conway, asked for $2.25 million in compensatory damages and $4.5 million in punitive damages against Foster & Lovett Inc.

The suit alleges that firm misrepresented First Republic's financial health and failed to reveal the company's serious money problems until it was too late.

The problems surfaced publicly when First Republic bounced a few hundred thousand dollars in escrow checks at abstract companies around the state.

"I'm not trying to get anything out of it," Riffel says of the suit and any monetary judgment. "I'm trying to get the creditors paid off. That's what I've been struggling to do for the last two years."

First Republic hasn't filed bankruptcy but the company is technically bankrupt, Riffel agrees.

Skeptics in the legal community believe Riffel's lawsuit is a preemptive strike designed to protect him from any criminal charges and jail time that might arise from the chaos.

By laying the blame on the doorstep of the accountants, so the scenario goes, Riffel is trying to establish that he isn't the cause of First Republic's money woes.

If the issue of criminal intent is removed, Riffel becomes a victim along with his creditors. It's a version of the popular "maybe I was stupid, but I'm no crook" defense.

"The books were wrong is what I'm trying to say," Ed Riffel states. "I had no idea.

"I've been bashed around pretty bad by all this. I've heard all sorts of rumors, that I've taken this money and put in my pocket. I've heard rumors that I gambled it away.

"I've even heard that I spent it all on cocaine. I've never seen cocaine much less used it. Certainly, my reputation has suffered through all this."

Riffel is selling commercial real estate in New York City these days.

Surviving The Fallout

Beach Abstract & Guaranty Co. in Little Rock was among the list of abstract companies around the state to receive a bad check from First Republic last summer.

Beach Abstract tried to cash an $80,000 check, but it bounced. Riffel told Beach to run the check through again because a bank error had kept it from clearing the first time.

It bounced again. Riffel sent a $10,000 check through his lawyer and an unsecured note for the balance. Beach Abstract rejected the offer and turned the matter over to the hot check division of the Pulaski County Sheriff's office.

Riffel called in a panic and said he couldn't pay the full $80,000. The company ended up accepting $30,000 in cash and a mortgage on a piece of land in Conway that was paid off a few months later.

"I think I'm the only one who got all the money owed before they shut down," says George Pitts owner of Beach Abstract. "If you get on it quickly, it's the one who gets there first who usually gets their money."

The First Mortgage snafu led to the "Good Funds" bill passed by the legislature this session. This law requires closing agents to only accept cashier's checks or wired funds on real estate transactions.

To put things in perspective, Ticor Title Insurance Co. in Los Angeles took a $50 million hit on title insurance claims in Houston 1987.

Ticor was the largest title insurance outfit in the world at the time. But this nasty hickey reduced the company's reserves by about one-third and moved Ticor down the list.

"That sort of thing happens elsewhere, but it usually just doesn't happen here," observes Pitts.

History Repeated?

Some remember when a similar situation happened at Arkansas Abstract Co., and wonder if it parallels what's really gone on at First Republic.

Ed Briscoe, president of Arkansas Abstract Co. in Little Rock, was indicted on three counts of fraud in January 1975. In a plea bargain, he pled guilty to one count and was sentenced to 90 days in jail and 33 months of probation.

Briscoe obtained mortgages from lenders after making false statements that the property was not encumbered by other mortgages or liens.

He filed for bankruptcy in February 1974, almost three years after buying a 7,000-SF mansion on Edgehill for a reported price of $128,000.

Mississippi Valley Title Insurance Co. in Jacksonville had to cover $150,000 in title insurance claims as a result of policies Briscoe issued on behalf of the company.

In an odd twist of fate, Mississippi Valley Title is now owned by the Title Insurance Co. of Minnesota -- the company now embroiled in First Republic's troubles.

And the roster of litigants and lawyers keeps getting longer.

PHOTO : UNDER THE WIRE: George Pitts Jr., owner of Beach Abstract & Guaranty Co., managed to collect on an $80,000 check that First Republic Mortgage Corp. bounced last year. The Little Rock mortgage company bounced checks totaling several hundred thousand dollars at abstract companies around the state before closing its doors. "I think I'm the only one who got all the money owed before they shut down," Pitts says.

PHOTO : LAWYER'S PARADISE: The demise of Ed Riffel's First Republic Mortgage Corp. in Little Rock has spawned a flurry of suits, crossclaims and motions. Gary Rogers (pictured above) of the Dover & Dixon firm is among a growing list of attorneys to participate in the action. The litigation has reached the point where it seems like practically every law firm in Little Rock is involved

PHOTO : GONE BUT DEFINITELY NOT FORGOTTEN: Another tenant has taken First Republic Mortage Corp.'s place in the One Financial Centre Building. Owner Edward R. Riffel Jr. closed up shop after money problems surfaced last summer and moved to New York City. Riffel, who is selling commercial real estate in New York City these days, is suing his accountants for $6.25 million.
COPYRIGHT 1991 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:includes related article; lawsuits against First Republic Mortgage Corp.
Author:Waldon, George
Publication:Arkansas Business
Date:Apr 15, 1991
Previous Article:Taking the rap.
Next Article:Progressive printers prevail; computerization, new processes drive printing industry.

Related Articles
Who's who in wholesale: the big players are pulling in large amounts of new business.
Legal warfare.
Four Arkansans face lawsuit over failed mortgage company: investors pumped in more than $10 million before Colorado Venture went bankrupt.
Ohio AG sues Freddie Mac over subprime mortgage losses.
Judge says countrywide must face ATRS lawsuit.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters