ST. PETERSBURG — The stakes in an ongoing lawsuit against Bill Edwards' Mortgage Investors Corp. were raised after the plaintiffs alleged the St. Petersburg power broker "looted" tens of millions of dollars from the company.
The plaintiffs — the U.S. Department of Justice and two mortgage brokers — stated in a court filing last week that Edwards made the financial moves to help shield the money in the event that he and his company lose the lawsuit, allegations Edwards' attorney described as baseless.
If MIC loses, it could be forced to pay an estimated $173 million. If neither the company nor Edwards could pay that amount, he could possibly have to sell assets including two downtown staples, the Sundial shopping plaza and the Tampa Bay Rowdies of the North American Soccer League.
The whistleblower lawsuit, first filed in U.S. District Court in Atlanta in 2006, claims that MIC overcharged veterans and defrauded the government. The plaintiffs recently added Edwards' name to the suit.
"As with any large business, Mortgage Investors Corporation has been involved in civil lawsuits over the years. This is one of them," Edwards said. "I cannot comment on ongoing litigation other than to say that I am confident we will ultimately prevail, and that this suit will not impact my other business endeavors."
MIC had every right to distribute money to stockholders and the plaintiffs are a long way from having any claim on the company's assets, said Edwards' attorney Lesli Esposito, a partner with DLA Piper in Philadelphia.
"None of this matters until the (plaintiffs) win the case, and we don't think they are going to win their case," Esposito added. "We wholeheartedly believe there is no merit to those claims whatsoever. I believe the $173 million is extremely exaggerated."
The lead plaintiffs' attorney, Jim Butler Jr., with Butler, Wooten Cheeley & Peek in Atlanta, declined to comment.
After a judge in June ordered MIC to turn over its 2013 and 2014 financial records, the plaintiffs' lawyers found the company's assets had plummeted by 87 percent in the past three years, according to the lawsuit.
In 2013, for example, MIC made a large payment to shareholders that was more than it listed as total assets in 2012, according to the amended complaint filed Aug. 18 in Atlanta. Edwards, the largest shareholder, received 78 percent of that payout. His ex-wife Linda Edwards, whom he divorced in 1998, is the company's second largest shareholder with 9 percent of the stock.
The lawsuit states that MIC and Edwards intentionally transferred money, so that it was "beyond the reach of the United States" and couldn't be seized.
If MIC is made to pay restitution and the company doesn't have enough money to cover that debt, the government could seek reimbursement from Edwards himself, according to Stetson University College of Law professor Theresa Pulley Radwan.
"It's presumable they would go after someone who owns 77 percent of the company," she said. "If he can't pay it all then they go through the collections process. They could go after his assets."
Esposito stressed Edwards would be on the hook personally only for the amount of money he received in the shareholder payouts in question should he lose the case.
MIC originated more than 300,000 VA loans worth more than $25 billion over a 15-year span during Edwards' leadership, according to a letter to customers that had been posted on the company's website.
The 2006 whistleblower lawsuit was brought by the Georgia mortgage brokers, Victor Bibby and Brian Donnelly, and the DOJ against MIC and seven other banks. The brokers are "whistle blowers" and will receive a percentage of any money paid in recovered funds or a settlement.
The lawsuit alleges the companies making VA loans, backed by the U.S. government's Veterans Affairs, charged veterans illegal fees and then doctored paperwork submitted to the VA to hide the overcharges. Whenever a veteran homeowner defaulted on a loan, the government backed it, so lenders such as MIC didn't lose any money. The suit states if the lenders weren't following the guidelines required for issuing or refinancing VA loans, then the government shouldn't have had to pay them back when loans went into default.
"We believe any fee that was charged was an allowable charge," said Esposito, Edwards' attorney. "We asked in discovery for proof of (illegal fees), and we are still waiting to see what the basis is for their claims."
When whistleblower suits are initially filed, the DOJ investigates the allegations and then decides if it will intervene in the case and take the lead role in trying to recover the money. The DOJ chose not to intervene in the MIC suit and the other VA lenders, leaving the lead role to the plaintiffs' attorneys.
"The government has been closely monitoring the case and retains the right to intervene in the case at a later date if the need arises," said John Horn, a U.S. attorney for the Northern District of Georgia.
In October 2013, Edwards laid off 476 people at MIC, including 256 at the company's headquarters at 6090 Central Ave. He blamed the near-shutdown on federal regulations under the Dodd-Frank Act, saying his company didn't have the technological capacity to comply with the myriad of new regulations.
MIC is the where Edwards earned the bulk of his wealth, but he has spent it throughout St. Petersburg in public and private ventures. Late last year, he opened the Sundial shopping plaza after an investment he pegged at more than $40 million. He bought the Rowdies in 2013 for an undisclosed amount.
All told, Edwards has a stake in more than 20 businesses, nonprofits or other projects in south Pinellas and has invested more than $90 million in real estate and other ventures.
Times researcher Caryn Baird contributed to this report. Contact Katherine Snow Smith at email@example.com.