Ponzi scheme panel raps N.H. agencies
Looks at handling of complaints
CONCORD, N.H. — New Hampshire lawmakers propose spreading the blame — and recommend fixes — among three state agencies that failed to stop a Ponzi scheme by a now-defunct mortgage investment firm.
The House and Senate Commerce committees charged with reviewing the state’s regulatory structure for securities and investments issued a draft report yesterday. The group meets again in three weeks.
The report recommends changing state laws to clear up ambiguity about who is in charge of addressing consumer complaints. The report was critical of the Banking Department, Bureau of Securities Regulation, and attorney general’s office for not following through on complaints about Financial Resource Mortgage of Meredith. The firm is accused of defrauding investors of millions of dollars before it abruptly closed in November.
The draft report found the Banking Department was ineffective, failing to recognize the significance of multiple consumer complaints, to follow through on enforcement, and to share records with regulators.
Banking Commissioner Peter Hildreth is on paid leave of absence while Governor John Lynch seeks to remove him from office for his handling of the case.
The report also criticizes securities regulators for not pursing FRM and taking too narrow a view of their investigative and enforcement authority. Similarly, the attorney general’s office was faulted for automatically referring complaints to the Banking Department without considering whether the office had jurisdiction under its broad powers to protect consumers.
The report also stresses the need for better interagency communication and recommends that in cases where more than one regulatory agency is involved, one should have a lead role on specific complaints.
The report also recommends allowing consumers to sue a business if their complaint to a regulated agency isn’t dealt with to their satisfaction.
In addition, the draft recommends creating a regularly updated public database where consumers can find information about substantiated complaints or violations against companies.
The case has become an issue in the US Senate race. Paul Hodes, a Democratic candidate, has run ads critical of former attorney general Kelly Ayotte, who is seeking the GOP nomination, for not pursuing it.
Attorney General Michael Delaney issued a report in May that faulted the office and the other two agencies for not doing a better job of investigating complaints against the company.
Jeff Grappone, Ayotte spokesman, questioned the timing of the report’s release, two weeks before the Sept. 14 primary.