SEC Probing Mortgage Banker’s Loss of Job, Stock : Employment: Former regional director of Franklin Mortgage Capital says she was fired without cause and has been unable to collect the $943,000 her shares were worth when the firm was sold.
Barbara Bunte thought her success was evident and her retirement savings assured.
During six years as West Coast regional director of Franklin Mortgage Capital Corp., she built the operation into a major mortgage banking business, expanding it from 13 employees to 180, from funding $5 million in new home loans each month to funding $200 million a month.
So it came as a shock to Bunte that, while she was home in April recuperating from a broken ankle, her boss announced to the staff that she was resigning. But that wasn’t the case, she said: In fact, at age 55, she was unceremoniously fired.
Worse, she learned later, she may also have lost her retirement account: 100,000 shares of Franklin stock.
The company was sold in mid-December to Donaldson, Lufkin & Jenrette, a major New York brokerage and investment bank, for $30 million. That amounts to $9.43 a share, which would make Bunte’s stake worth $943,000.
Bunte alleges that Stephen P. Terry, Franklin’s former president, fired her without cause and then sold the Falls Church, Va., company to DLJ without informing her and without acknowledging that she owned a 3% interest in Franklin.
After trying repeatedly to get what she says is her due, Bunte filed a complaint with the Securities and Exchange Commission. The federal agency has referred the case to its enforcement division for investigation. An agency spokeswoman said such attention to a complaint by an individual is rare. Citing SEC policy, she would not comment further on the investigation.
Some other top managers at the Tustin operation--the largest of three Franklin Mortgage offices nationwide--have also said that they were forced out during the last few years and have complained that they were treated unfairly. Apparently none of them had a written agreement, though, as Bunte had.
Terry has not responded to several requests in the last three weeks for comment.
He was quoted in December in National Mortgage News, an industry magazine, as saying that Bunte resigned voluntarily and therefore forfeited the right to her 100,000 shares.
Thompson Dean, managing director of DLJ Merchant Banking Partners LP, said the Franklin Mortgage sale was not hindered by the SEC investigation of Bunte’s allegation. However, he said, DLJ has an agreement with Terry that the investment bank will not be responsible for Bunte’s claim.
“This is a matter between Steve Terry and Barbara Bunte,” Dean said, adding that DLJ plans to leave Franklin’s current management in place.
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Bunte and Terry met when they were both employed by Merrill Lynch. She was a senior vice president and regional director based in Tustin; he was a vice chairman based in New York.
Merrill Lynch closed its Tustin operation, but an investor purchased the branch and, in March, 1987, sold it to Terry’s newly formed Franklin Mortgage Capital Corp.
Under Bunte’s leadership, the West Coast operation became the most successful of the three regional operations of Franklin.
In 1992, the West Coast operation originated nearly $2.4 billion in loans, according to company documents supplied by Bunte’s lawyer. By comparison, the Virginia operation made $774.5 million in new loans that year, and the Texas operation made $16.3 million.
Bunte said that her efforts for Franklin helped make the company an attractive acquisition for DLJ. She says she was forced out at Franklin to prevent her from sharing the benefits of the deal. When she left Franklin, she was told that her shares were worth $490,000--about half of their value at the price subsequently paid by DLJ.
Bunte was unaware of DLJ’s interest in the company, she said, when she was pushed out.
Two weeks before she lost the job, Bunte had suffered a broken ankle and torn ligaments. She was at home recovering, she said, when Terry called and offered her a position that would have required her to travel by air.
Because of an ear problem, she said, she cannot travel in airplanes. Terry was aware of that, Bunte said, so was offering her a job that he knew she could not accept.
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On April 9, Terry announced in a memorandum to Franklin’s staff that Bunte had resigned. She tried to cash in her company shares at the time, she said, but Terry said he would not give her the money unless she signed an agreement not to compete with him in mortgage banking. She refused to do so.
Throughout the summer, the two continued to discuss a settlement, Bunte said, but could not agree. She filed the SEC complaint at the end of October.
“I trusted this man,” Bunte said. “I guess I trusted him to the point of being stupid.”
