Has the Department of Financial Institutions Turned Bitter?

The Department of Financial Institutions (DFI) recently charged the corporate officers of an Arizona company with unlicensed activities in Washington state. It seems that the company conducted loan modification services in 2008 and 2009 without a mortgage broker license. What is interesting about this case is that the DFI proceeded to charge all the corporate officers it found on the company’s website. That included technical workers who had nothing to do with loan modifications: the IT manager and the web site manager were both charged. During the subsequent litigation, the Rosenberg Law Group, PLLC was able to have charges against one of the technical workers dismissed for lack of personal contacts with the state of Washington. The Rosenberg Law Group, PLLC was able to show that Respondent had no personal contact with Washington state: he had never visited here, never spoke with anyone on the phone from Washington regarding the business, and did not know that the company was conducting business in the state. The Rosenberg Law Group, PLLC also showed that the one witness that the DFI produced to tie this client to Washington signed an affidavit produced by an assistant attorney general without understanding its contents. At deposition that witness asked for an attorney to defend herself from the possibility of perjury charges.The Department of Financial Institutions still wanted its pound of flesh from the other technical workers. Two of the other Respondents were shown to have taken “help” calls from company representatives in Washington. While those Respondents may not have understood the implications of answering that phone, and had nothing to do with the business model, by answering the phone they were inextricably tied to the case. The company had gone out of business. The principals who did know about the company’s operations in Washington had disappeared. So, DFI decided it would stick all the fines and the restitution upon the two remaining Respondents irrespective of their role in the matter. And when the two Respondents stated that they could not pay what was being asked and requested terms, the DFI cut off all discussions and insisted on a hearing. Those two Respondents cannot even afford an attorney at this point.This writer’s best guess is that the DFI has chosen to make the remaining two Respondents examples, even though their role was marginal at best, and they have no ability to pay whatever fines might be imposed. The lesson for the community at large, however, is that you will pay a price if you engage in unlicensed activity. Those two respondents did not direct the company to modify loans in Washington state. They did not modify loans in Washington state. They simply provided technical support to their company and assumed the company had the right to engage in those activities. DFI is requiring a due diligence that most employees would not consider their responsibility to do. What is lesson, then? It is that DFI can be bitter, and when it cannot get the responsible parties, it will stick it to anyone left holding the bag no matter what their culpability is.