HARRISBURG – Attorney General Tom Corbett today announced the filing of a consumer protection lawsuit against nine individuals who were allegedly involved in a wide-reaching mortgage and investment “ponzi” scheme that collapsed in the fall of 2007, resulting in nearly $40 million in losses for more than 700 consumers throughout south central and eastern Pennsylvania.
Corbett said that all of the defendants named in the lawsuit are all officers or employees of several mortgage and investment businesses, including OPFM Inc.; Personal Financial Management, Inc.; Image Masters, Inc.; Mortgage Assistance Professionals, Inc.; Mortgage Assistance Professionals II, Inc.; Discovered Treasures, Inc.; and D.I.V.I.D.I.T., Inc.; all operating from offices located at 4700 and 4714 Perkiomen Ave., Reading; 1270 Shelbourne Road, Reading and 1672 Manheim Pike, Lancaster.
“Consumers were drawn to OPFM and related companies with promises of lower interest rates, early pay-offs for their mortgages or higher returns for their investments,” Corbett said. “In reality, the money from new loans and new investments was used to pay-off older accounts, conceal company losses and support OPFM until the entire scheme collapsed in late 2007.”
Corbett said the following individuals are named in the lawsuit:
– Wesley A. Snyder, Oley, Berks County, President and sole shareholder of OPFM, Personal Financial Management, Image Masters and related companies.
– Sydney Snyder, Oley, wife of Wesley Snyder and Human Resources Manager for the companies.
– Jacquelyn Hepford-Rennie, Lansdale, Montgomery County, a Mortgage Consultant for the companies.
– Julie Ann Musser, Sinking Spring, Berks County, a Mortgage Consultant for the companies.
– Susan Louise Hunt, Reading, a Mortgage Consultant for the companies.
– Amy Lou Styer, Birdsboro, Berks County, a Mortgage Consultant for the companies.
– Kenneth Roger Bennetch, Denver, Lancaster County, a Mortgage Consultant for the companies.
– Cheryl Ann Bennetch, Denver, the Office Manager and Accountant for the companies.
– Alicia Mary Waid, Fleetwood, Berks County, the Office Accountant for the companies.
Wrap Mortgages & Equity Slide Down Loans
Corbett said that according to the lawsuit, Wesley Snyder and the other defendants all participated in a scheme where consumers were encouraged to mortgage their homes or refinance their existing mortgage loans, borrowing more than was necessary to purchase the home or refinance their old loan. Consumers agreed to the larger loans based on the promise that the additional funds they borrowed would be invested by OPFM in order to reduce their interest rate and/or pay-off their loan earlier than scheduled.
Consumers were drawn to these “wrap mortgage” and “equity slide down” loans by advertisements that were placed in local newspapers, typically offering interest rates that were substantially lower than the rates being offered by other lenders in the region.
According to the lawsuit, consumers who agreed to the “wrap mortgage” or “equity slide down” programs were convinced to enter into two different mortgage agreements – first, with a traditional bank or lending institution, for the full amount of their loan, followed by a second loan agreement, with Image Masters, Inc., another company operated by Wesley Snyder. The Image Masters agreement was normally signed about one week after consumers had executed the mortgage with their bank.
Corbett said that when consumers executed their mortgage agreements with Image Masters, they were informed that they would only be responsible for paying a reduced monthly payment. This reduced payment was allegedly based on the amount of “savings” being generated by the investment of the excess money the consumers had borrowed.
According to the lawsuit, consumers were told that all of their monthly loan payments and all communication about their loans must be handled through Image Masters and OPFM.
Consumers were encouraged to establish “direct deposit” plans so that funds would automatically be transferred from their bank accounts to Image Masters on a monthly basis, and were also given “change of address” letters to be sent to their original mortgage lenders, directing all loan statements and notices to be sent to a post office box in Oley, Berks County, which was used by Wesley Snyder’s companies.
Corbett said that some consumers believed that their mortgages had been assumed by Image Masters, though their original loans were actually still in place. Consumers also believed that their monthly payments to Image Masters, along with the proceeds from their “investments,” were being held in a separate account, to be used exclusively to cover their mortgage expenses.
“Based on what consumers were told by the mortgage consultants, along with monthly statements and annual tax documents they were given, these victims believed their payments were being used to reduce the balance of their loans and earn money to keep their monthly payments low,” Corbett said. “In reality, much of the money was actually being used to support company operating expenses and conceal millions of dollars in losses that were being generated by Wesley Snyder’s companies.”
According to the lawsuit, the defendants engaged in deceptive behavior in marketing and executing the “wrap around” and “equity slide down” loans, including:
– Failing to contact the consumers’ mortgage lenders in order to transfer the original loans and failing to properly record the mortgage agreements with Image Masters.
– Falsely representing that excess money borrowed by consumers would be invested and used to lower monthly mortgage payments.
– Failing to invest the additional funds borrowed by consumers.
– Encouraging consumers to make advance payments on their loans in the false belief that the additional payments would be used to reduce the principal due on the loans (pre-payment amounts were not applied to individual consumers’ loans, but instead were used to cover general company operating expenses or other loan payments).
– Failing to provide consumers with loan documents prior to the scheduled closing.
– Creating statements which falsely showed that the excess money consumers had borrowed was being applied to their loans.
– Creating monthly statements which falsely indicated that pre-payments made by consumers had been applied to the balance of their loans.
– Creating statements which falsely indicated that consumers had paid off the balance of their loans.
– Executing change of address requests to prevent consumers from receiving any statements or notices from their original lending institution that might contradict the information being provided by OPFM, Image Masters and related companies.
– Combining all consumer payments in a single corporate account that was used to pay all company expenses.
Corbett said that when OPFM, Image Masters and related companies ceased operation in September 2007, the difference between what consumers had paid to Image Masters and the amount that the companies had paid to the actual mortgage lenders was in excess of $36 million.
Loan Participation Agreements
Corbett said that in addition to mortgage loans, Snyder and his companies also advertised various investment products, including “loan participation agreements.” These investments were marketed as a safe alternative to bank certificates of deposit, with annual interest rates as high as 14% – far greater than the rates being offered by traditional banks.
According to the lawsuit, consumers were told that their investment in these loan participation agreements was secured by various real estate holdings.
Initially, the loans were supposedly secured by buildings and other real estate that was actually owned by OPFM or other related companies. Later, investors were told that the loans were secured by the mortgage loans on the homes of consumers who had obtained “wrap around” loans from Snyder’s companies.
Corbett said that consumers were not shown the mortgage documents that allegedly “secured” their investments and were not informed that Snyder’s companies had no recorded mortgages or legal claims to the properties. Additionally, consumers were not informed that these loan participation agreements were not registered with the Pennsylvania Securities Commission, as required by state law.
Corbett said that the high interest rate that was offered for these investments, combined with the assertion that they were “secured” and “safe,” prompted some consumers to invest their life savings or retirement savings in the program.
As of September 2007, consumers had invested over $3.5 million in the loan participation agreements.
Business Operations
Corbett said that according to corporate tax returns, OPFM, Image Masters, Mortgage Assistance Professionals and other related companies owned by Wesley Snyder accumulated losses in excess of $40 million over the past 10 years. Tax returns also indicated that some of the companies had operated at a loss since 1990.
According to the lawsuit, all incoming payments made by consumers were merged into a single bank account which was used to pay all expenses, including the payroll for all of the individuals named in this lawsuit. In addition, consumer funds were allegedly used to pay personal debts accumulated by Wesley Snyder and to provide gifts to family members.
Corbett said that Wesley and Sydney Snyder were both directly involved in the operation of OPFM, Image Masters and other related companies, and both share a legal responsibility for their roles in the fraudulent operation of these businesses.
Additionally, Corbett said the mortgage consultants and accountants named in the consumer protection lawsuit are all accused of actively participating in this scheme by providing false and misleading information to consumers, as well as by failing to inform consumers or government authorities about the fraudulent nature of the business and the potential loss of their investments.
“This was a classic ponzi scheme disguised as a mortgage and investment business, using money from new consumers to pay-off older loans and cover expenses,” Corbett said. “Like most ponzi schemes, victims were attracted by promises of financial rewards – in this case either low-interest loans or high-interest investments – until it became impossible to bring in enough new money to support the monthly expenses, causing the scheme to collapse.”
The lawsuit seeks the following:
– Restitution for consumers.
– The return of all profits derived from unfair or deceptive acts.
– Civil penalties of $1,000 per violation ($3,000 for each violation involving a victim over the age of 60).
– Payment of the cost of investigation and prosecution.
– Forfeiture of the defendants’ rights to do business in the Commonwealth of Pennsylvania until all restitution, penalties and costs have been paid.
Corbett noted that the Attorney General’s Office has received complaints from consumers in 19 counties, including Adams (1); Berks (309); Bucks (1); Carbon (6); Centre (1); Chester (19); Columbia (1); Juniata (1); Lackawanna (1); Lancaster (263); Lebanon (12); Lehigh (18); Luzerne (1); Monroe (1); Montgomery (12); Northampton ( 21); Schuylkill (17); Snyder (1); York (7); along with 8 complaints from outside Pennsylvania.
Corbett thanked the Pennsylvania Department of Banking, the Pennsylvania Securities Commission, the U.S. Attorney’s Office, federal postal inspectors and the federal bankruptcy court trustee for their cooperation and assistance with this investigation.
The lawsuit was filed in Berks County Court of Common Pleas by Senior Deputy Attorney General William A. Slotter, of the Attorney General’s Bureau of Consumer Protection.