Publicity, Pressure Force Decision
For years, Brian Chisick has kept his cool amid accusations of discrimination against minorities, overcharging the poor and stiffing his stockholders.
Just a few weeks ago, the dapper founder of First Alliance Corp. was confident he would settle his latest legal problems just as he had all the others. He stepped down as president last month to devote full energy to settling the suits.
But in recent days, the London native finally lost his composure after a blistering portrayal of his company on ABC News’ “20/20.” The 60-year-old company chairman was devastated and decided--after 29 years in the business--to throw in the towel.
“It’s been very hard for him,” said company President Francisco Nebot, who joined the Irvine company in July 1998. “He’s known some of the employees for 25 years. He’s taking this very hard. There were a lot of tears.”
After an emergency board meeting this week, Chisick decided to close down and put his company in bankruptcy.
He could not be reached for comment Thursday.
Employees said Chisick made an emotional goodbye at a hastily called meeting Thursday morning, when about 325 First Alliance employees learned they would be laid off. The offices shut down Thursday.
Employees interviewed outside the company’s headquarters in Irvine said that Chisick handed out printed referral sheets listing similar job openings in the area. One loan processor interviewed supported Chisick.
“He’s doing what he needs to do to take care of himself, his business and his family,” said Shannon, 29, who declined to give her last name. “Unfortunately, we lost our jobs.”
Chisick and his wife, Sarah, founded First Alliance in 1971 as a consumer finance lender. He eventually expanded into home-equity loans and sub-prime lending, which makes loans to borrowers with poor credit.
Chisick owns 70% of the company’s stock, but those shares have fallen steadily in value in recent years.
Still, Chisick has accumulated vast wealth through First Alliance. Since the company went public in 1996, he and his family have reaped nearly $140 million. Chisick took home a salary of about $400,000 last year.
Property records show the Chisicks own a five-bedroom, 5,148-square-foot Anaheim home assessed at $914,463, and another estate in a gated area of Cowan Heights, assessed at $2.25 million. They also have a Honolulu condominium, which they purchased in 1996 for $1.15 million, records show.
First Alliance specialized in sub-prime lending, making loans to people with blemished credit and charging them higher fees and interest rates to offset the extra risk. But the amount of profits the company generated even made others in the industry uncomfortable.
Former American Savings & Loan President William J. Popejoy said Thursday that he was asked several years ago to become a First Alliance director. But “nothing came of it” because he served on the board of a company with a conflicting agenda, and he felt uncomfortable with the huge charges consumers paid for First Alliance loans.
“I ran a company that was 30 times their size, and we never made anything like that money,” Popejoy said. “And of course it was the fees, which were just enormous.”
Critics said that a large portion of the company’s profits came from scores of unsuspecting consumers that were duped into doing business with the company. And over the years, First Alliance had been sued by five states, including California in the late 1980s. That suit, along with a class-action claim filed in the state, were both settled, although First Alliance denied any wrongdoing.
“Our company has always followed all the state and federal forms for disclosure,” Chisick said in an interview with The Times in 1998. “These suits are more for publicity than anything else.”
For the Chisicks, the mortgage business was a family affair. His wife, Sarah, serves on the company’s board. Their sons, Mark and Brad, followed their father into the mortgage business, founding Coast Security Mortgage Corp.
But they too ran into regulatory problems. The Orange-based company was the target of two state investigation into questionable lending practices. Last summer, the elder Chisick bailed them out, buying Coast Security for $4 million. None of the family members could be reached for comment Thursday.
Times staff writers Leslie Earnest and E. Scott Reckard contributed to this report.
* QUITTING
First Alliance Corp. of Irvine abruptly declares it’s going out of business. A1
