SFG responds to Securities Division charges

Would a state commission entrusted with protecting security owners take actions that might make the securities worthless?

That was one of the issues that underlay the argument of the Stevens Financial Group Inc. at a hearing Feb. 7 in Jefferson City. The Springfield finance com-pany's lawyer argued its motion to dismiss a cease and desist order before Douglas Ommen, commissioner of the Missouri Division of Securities.

A cease and desist order against SFG was issued by Ommen's predecessor, Douglas F. Wilburn, at 4:10 p.m. Jan. 5, Wilburn's last day in office. Feb. 8 Ommen dismissed out some of the respondents, but kept SFG, Clarence Stevens, Stevens Management and Patrick J. Robarge in the suit.

Wilburn claimed the company didn't have enough income to service its debts to investors as the reason for issuing the cease and desist order and demanded it stop selling securities.

But "the real issue here is the investors," said SFG attorney Helen Chaitman in an interview before the Feb. 7 hearing. "The commission is charged with protecting the investors, and by destroying SFG ... they are going to create a tremendous loss for 5,000 Missouri residents who don't deserve to lose their money."

The hearing concerned SFG's claim that "there are no allegations (that form) the basis for the issuance of the order," Chaitman said. In fact, SFG's answer to the cease and desist petition stated there were no allegations of personal wrongdoing by any of the named parties. Further, SFG stopped selling securities Dec. 29, 2000, so the whole issue was moot.

"We don't seem to get the state to recognize that destroying SFG will (not) do anything for anybody," Chaitman said. "... What we are trying to do is to protect the investors about whom we care a great deal."

SFG's investors are "simple retired people who put their money in this company and believe in the kind of lending we were doing. We are all struggling so hard to make sure there is no default to these people" because of the commission's actions, she said. "We are searching for a solution to protect the investors. (The commission) won't even meet with us."

In her legal brief to the commissioner, Chaitman wrote, "What is patently absent from the 111 paragraphs (in the cease and desist petition) is any allegation that any of the respondents committed a violation of securities laws ... the order is remarkably lacking in any factual allegations that there was a failure to disclose, or a fraudulent misrepresentation of, information that would be material to an SFG investor."

In its answer to the cease and desist petition, SFG stated "Representatives of the division did not do an objective random review of SFG's computer files. Instead they deliberately chose to look at files containing accounts that were originated in 1997 or earlier, knowing that consumer loans generally mature after three years."

The company stated the review was of "1 percent of SFG's total files" and using that incomplete information, concluded that 75 percent of "the accounts reviewed" were uncollectible.

"Had the division reviewed on a random basis, the information SFG provided on its core business, which currently accounts for 100 percent of its new business, it would have found that SFG's consumer installment portfolio on that core business is at least 83 percent collectible," the answer stated.

In a related offensive move, SFG on Feb. 2 filed a civil rights action against Ommen, Wilburn, John L. Ellis, Mary Hosmer, and Rebecca McDowell Cook claiming racial discrimination.

Ellis is the chief enforcement officer of the Securities Division; Hosmer is an assistant commissioner; and Cook was secretary of state at the time the cease and desist was issued. The suit also asked the court to enjoin the commission from further action against SFG.

The federal civil rights action claims persecution of SFG by the former commissioner and his employees based on race. "(SFG) has been the target of a malicious and personal vendetta on the part of (Wilburn)," SFG President Clarence Stevens said at a press conference Feb. 2, in which the filing of the civil rights lawsuit was announced.

"The Wilburn administration sought to shut down our business because we make loans to people who are not necessarily white, and who are not necessarily rich," Stevens said.

The federal action is based in part on the Civil Rights Act, which ensures the right of all persons regardless of color to "equal benefit of all laws." It also protects persons from racial discrimination by persons "under color of any statute, order, regulation ..." and can be used against officers of governmental bodies who misuse their power to discriminate against a person because of race.