Founder of Ditech.com Quits Amid U.S. Probe
The founder and TV pitchman for mortgage lending leader Ditech.com abruptly resigned Monday after three of his top managers were indicted for allegedly trying to extort kickbacks from a Pittsburgh real estate services firm.
J. Paul Reddam, a former philosophy professor who stars in Ditech.com’s ubiquitous television commercials, has not been charged with any wrongdoing.
A spokesman for Ditech.com, a unit of General Motors Corp., said Reddam voluntarily resigned. He declined to comment on whether the departure of Reddam, who was chief executive, was related to the ongoing federal probe, which is being led by the U.S. attorney in Pennsylvania.
On Monday, agents for the Federal Bureau of Investigation raided Ditech.com’s headquarters in Costa Mesa and arrested two managers, Gregory Kenneth DeLong, 41, and Vincent Pozzuoli, 36, both of Newport Beach. A third Ditech.com manager, Jay David Marx, 36, of San Juan Capistrano, was expected to be arrested Monday night, said a U.S. attorney spokesman, Thom Mrozek.
Reddam, 44, founded Ditech.com in 1995 and immediately shook up the Southern California mortgage industry with his scrappy style and aggressive advertising. Though his techniques raised eyebrows, they were often copied by rivals, most notably his use of freeway billboards to advertise the company’s daily mortgage rates.
According to a grand jury indictment, the three managers allegedly solicited kickbacks from ATM Corp. of America, a Pittsburgh company that provides title insurance, notary closings and other mortgage services to Ditech.com.
In December, the men threatened to stop using ATM’s mortgage services unless the company agreed to pay them and put Marx’s father-in-law on ATM’s payroll as a “ghost employee,” according to the indictment. Ditech.com accounted for about 20% of ATM’s business.
Officials at GMAC Residential Mortgage Corp., which acquired Ditech.com last year, learned of the alleged extortion plot and contacted law enforcement, according to GMAC spokesman Rick Gillespie.
Officials at ATM Corp. could not be reached for comment. According to the indictment, ATM made its first payment to the men April 20 in the amount of $11,451.
Gillespie said the men have been put on indefinite leave, with pay, pending the outcome of the investigation. Pozzuoli was listed as the company’s vice president of loan originations in a 1998 financial statement. DeLong oversaw escrow services and Marks worked as an operations manager.
None of the men could be reached for comment.
GMAC officials have brought in a management team to handle day-to-day operations at Ditech.com, which employs 650 people in Orange County and 800 nationwide. Last year, the company funded about $4.3 billion in loans.
Gillespie said the probe should have no effect on the company’s borrowers. “No customers were affected by these alleged activities,” he said.
Ditech.com was one of the first lenders to embrace risky 125% home equity loans and has been a leader in online mortgage originations.
Last year, Reddam sold his company to GMAC in a deal valued by sources at up to $265 million. He retains an interest in some of Ditech.com’s assets, Gillespie said.
Last fall, Reddam paid $7 million in cash for an oceanfront property in Laguna Beach, plus $1 million for the home’s custom-made furniture, according to property records.
Reddam did not return phone calls Monday.