Allstate Home Loans Inc. Seized in Fraud Inquiry
Allstate Home Loans Inc., a Sherman Oaks mortgage loan broker accused by the state of defrauding investors of at least $900,000, was seized last week by a court-appointed receiver, and its owner has been temporarily suspended from conducting business.
A Los Angeles Superior Court judge took these steps after the California Department of Real Estate filed a complaint in July alleging that Allstate and its owner, Jerry Wexler, failed to return at least $306,000 to investors. State officials have since amended the complaint to include an additional $600,000 that they believe is missing.
Wexler did not return telephone calls, nor did his attorney, Fred Greenblatt. But in a previous interview, Wexler denied any allegations of fraud, blaming the company’s troubles on the sluggish real estate market.
William Moran, the Real Estate Department’s managing deputy commissioner, said a hearing has been set for next Wednesday to determine whether to continue the receivership. The department is also seeking to revoke or suspend Wexler’s license.
Allstate, which is not related to Allstate Insurance Co. owned by Sears, also faces a new civil suit. In a class-action lawsuit filed last week in Los Angeles Superior Court, investors alleged that Allstate failed to pass along interest and principal payments after receiving the money from borrowers. Allstate matches and services loans between private investors seeking a high rate of return with high-risk borrowers. Allstate issues second or third mortgages.
George Bochetto, a Philadelphia attorney who filed the suit, said he represents 18 investors who invested a total of about $1 million with Allstate. The suit could be amended to include as many as 350 people who invested $5 million, he said. These investors live throughout the country, including many in Southern California and Florida, he said.
“For some of the investors, it was their life savings,” Bochetto said.
Bochetto said he is seeking to have Allstate’s assets frozen. Bochetto speculated that Allstate might file for bankruptcy protection.
Besides Allstate Home Loans, the suit named Patricia Raymond and two other firms that Bochetto alleged were related to Allstate--Security Trustee Services Inc. and Allstate Home Funding Inc.
Raymond, whom Bochetto identified as an Allstate officer, did not return phone calls.
Barry Marks, president of Allstate Funding Inc., said Wexler is no longer an officer of his company, which he said does not deal with private investors. Earlier this summer, Wexler and other officers of Allstate Funding, including Marks, were trying to raise $500,000 in a private stock sale. But Marks said that did not go through.
