A federal grand jury in Florida returned a six-count indictment yesterday against the Ryland Group Inc.'s mortgage subsidiary, charging the company and three current and former officers with fraud.
If convicted on all counts, Ryland Mortgage Corp. could receive a fine of $1.5 million, stemming from charges that it defrauded the Resolution Trust Corp. during 1992, when it serviced thousands of loans held by the federal agency created to oversee failed thrifts.
The indictment, the culmination of nearly two years of investigation by the U.S. Attorney's Office and the Federal Deposit Insurance Corp. in Jacksonville, alleges that Ryland and three of its officers overcharged the RTC by $3.5 million and attempted to conceal information and impede the agency.
"Any criminal case charging both a corporation and individuals with felonies we consider to be a serious case," said Michael Seigel, first assistant U.S. attorney in Tampa, whose office is prosecuting the case. "The fact that the grand jury saw fit to return criminal indictments makes it a serious case."
Beginning in 1992, when Ryland became the first authorized servicer of RTC loans packaged as mortgage-backed securities
and sold to the public, the company processed nearly $4 billion worth of the savings and loan agency's loans.
As an RTC servicer, Ryland collected monthly loan payments and distributed dividends to the owners of the RTC-issued stocks.
A Ryland spokeswoman said yesterday that the company and the individuals are "wholly innocent" of the charges in the indictment.
"We believe the employees named, as well as Ryland Mortgage Corp., will be totally vindicated," said Anne C. Madison, a Ryland vice president. "The indictment is not a verdict, it's just the start of the judicial process."
The indictment marks the first in Ryland's 30-year history and the latest lingering effect of the savings and loan crisis that crippled the industry in the late 1980s and contributed to the commercial real estate depression earlier in this decade.
In all, the RTC sold $465 billion in failed thrift assets and closed nearly 750 financial institutions, at a taxpayer cost of $145 billion. The agency was dissolved by Congress at the end of 1995; the FDIC and other federal agencies now handle its outstanding business.
Two of the individuals named in the Ryland indictment -- Lavon Lutner of Ponte Vedra Beach, Fla., and Barry Stricklin, of Germantown, Md. -- left the company before the grand jury investigation.
Lutner was formerly vice president of Ryland's Jacksonville, Fla., loan servicing office. Stricklin held the same position in the company's Columbia office.
Another defendant, Walter Rigsbee, a Ryland Mortgage Corp. senior vice president who lives in Columbia, still works for the company.
None of the three individuals could be reached for comment. They face prison sentences of up to 30 years and fines of $1.5 million each if convicted on all counts.
Seigel said that arrest warrants were not issued for the three dTC men and they will be summoned to appear in federal court in Florida within 10 days. At that time, they will likely be formally arraigned. A trial could be as much as six months away.
Ryland Mortgage Corp. was formed in 1978, when the nation's third-largest homebuilder bought a mortgage firm in Cincinnati, Ohio. At the end of 1996, its mortgage servicing portfolio stood at $6.3 billion. Its Jacksonville mortgage servicing office was sold in March 1994 to Franklin Mortgage Capital Corp.