Pennsylvania's attorney general yesterday filed a consumer-protection lawsuit in Berks County against the alleged perpetrators of a mortgage and investment scheme that cost 800 consumers nearly $40 million before it collapsed last year.
Attorney General Tom Corbett's 88-page complaint in the Berks County Court of Common Pleas is at least the fourth lawsuit seeking restitution for victims of Wesley A. Snyder and his Berks County companies.
Other lawsuits in federal and state court are trying to tap 21 banks that lent money through Snyder's mortgage brokerage, including some of the nation's largest, for restitution.
Under the scheme, consumers - most of them in Berks and Lancaster Counties - borrowed more than they needed. Snyder took the extra money, promising to use it in a way that reduced the borrowers' interest rate by 1 percent to 1.5 percent. That would cut monthly payments.
The borrowers were told to send their smaller loan payments to Image Masters, a Snyder company that was supposed to take care of monthly payments to the original lenders.
"In realty, the money from new loans and new investments was used to pay off older accounts, conceal company losses, and support OPFM (another of Snyder's companies) until the entire scheme collapsed in late 2007," Corbett wrote in a statement.
Among the borrowers who fell for Snyder's scheme were 19 in Chester County and 12 in Montgomery County.
After Snyder and his six related companies filed for bankruptcy protection in September amid the credit crunch that rocked Wall Street, homeowners started receiving notices from their original lenders saying they owed thousands more than they thought they did.
A criminal information filed last fall by the U.S. attorney for the Middle District of Pennsylvania said that Snyder's company received $65.6 million in payments from victims of the scam but forwarded only $39.1 million to the original lenders. Between 1999 and September 2007, Snyder and his wife paid themselves $3 million in salaries, according to court documents.
Snyder pleaded guilty to mail fraud and is scheduled for sentencing July 2, said Nils Frederiksen, spokesman for the state Attorney General's Office.
Snyder's attorney did not return a call seeking comment on yesterday's charges that he, his wife and seven others employed by his companies violated Pennsylvania consumer-protection laws.
It is unclear how much money will be available for consumers. Frederiksen said federal prosecutors and state investigators had found "no secret stashes, no offshore bank accounts."
Asked about the attempt by private lawyers to go after lenders, Frederiksen said, "We don't have any evidence . . . that any of the banks believed that these were anything but legitimate loans."
Michael J. Willner, a lawyer with Cafferty Fauchey L.L.P. in Philadelphia, which is helping with three lawsuits against banks, welcomed the attorney general's lawsuit. "We don't see anything but good coming from the AG's case," he said.
Read the complaint at http://go.philly.
Contact staff writer Harold Brubaker at 215-854-4651 or firstname.lastname@example.org.