The trustee handling Cameron Financial’s Chapter 7 bankruptcy is alleging that the company’s two former top executives and their accountants engaged in fraud, negligence and misrepresentation in their financial dealings.
Trustee Jerry Namba filed what the court calls an adversarial proceeding in February against E. Shannon Faries and Carey Fierro, co-owners of the now-failed San Luis Obispo company, and an Irvine-based accounting firm, Kushner, Smith, Joanou and Gregson.
According to the trustee’s complaint, Faries, who was Cameron Financial’s president, and Fierro, who was its chief executive officer, took more than $5 million in investment property held on the books of Cameron Financial.
The mortgage-lending firm, which also did business under the names 1st Choice Mortgage and Cameron Equity Funding, offered riskier lending, such as home loans without down payments and financing for borrowers with “bruised credit” affected by bankruptcy, foreclosure or tax liens, according to its now-defunct website.
Faries, who received an annual salary of about $90,000 in 2007, also gave himself an additional $754,000 in 2007, shortly before the company filed for Chapter 7 bankruptcy, according to the trustee.
The company also paid his personal federal income tax bill in 2005 and 2006 of more than $1 million, the complaint alleges.
Fierro is alleged to have taken an $800,000-plus bonus for himself in 2007 and had the company pay his personal federal income taxes of an estimated $1.3 million in 2005 and 2006.
Namba alleges the transfers were meant to hinder, delay or defraud one or more of the creditors and alleges that the partners’ actions contributed to the insolvency of the company.
Namba is seeking to recover Faries’ and Fierro’s transfer of real estate or funds they’ve taken out of the company.
He also believes the two received other fraudulent transfers and seeks permission to amend his complaint when his investigation is completed, according to his filings.
Faries — now a manager of Harbor Lending Inc. in San Luis Obispo — and Fierro have not responded to the trustee’s allegations to date. Namba alleges that Fierro left the country in 2009 but more recent records show they are trying to find him in Grover Beach. Namba is seeking a default judgment.
Incorporated in 2009, Harbor Lending — which also does business as Hipotecas Puerto Seguro to cater to the Spanish-speaking market — specializes in government-sponsored home loans.
Faries did not return The Tribune’s repeated calls to Harbor Lending asking for comment. Fierro could not be located.
With $28 million in debts, the San Luis Obispo-based subprime, wholesale mortgage lender filed for bankruptcy in 2008. Cameron Financial declared less than $984,000 of assets, according to records filed at U.S. Bankruptcy Court in Santa Barbara.
In another lawsuit filed in the bankruptcy proceedings, Richard Brenneman — a Santa Maria lawyer for the trustee — is suing Cameron Financial’s accounting firm for conspiring with Faries and Fierro to fraudulently transfer real property and other assets out of the company’s possession to Fierro and Faries, according to court filings.
Namba also alleges the accountants prepared and published false financial statements and audits showing a financially healthy and viable business entity, when in fact the company was not.These representations purportedly induced banks and other lenders to continue to provide and extend credit to Cameron Financial and hold off debt collection, the filings state.
Kushner, Smith, Joanou and Gregson audit partner Dana Joanou wrote in an e-mail to The Tribune that the firm believes the claims to be “groundless and without merit,” and stated that the company plans on vigorously defending itself against them.