Ryland will pay up to end case Mortgage unit was accused of impeding RTC

Tab totals $8.7 million

3 ex-employees still charged, go on trial Oct. 13

August 01, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The Ryland Group Inc. announced yesterday that it will pay $8.7 million in fines, restitution and interest to resolve felony charges that its mortgage subsidiary defrauded the federal government.

Under an agreement with the U.S. attorney's office in Jacksonville, Fla., Ryland Mortgage Co. admitted to two counts of "impeding the functions" of the U.S. Resolution Trust Corp., when the unit of the Columbia-based homebuilder worked as a loan servicer in 1993.

Ryland, which at one time serviced nearly $4 billion worth of RTC loans, had been set to go to trial Oct. 13 on the charges. As part of the agreement, the government agreed to drop four other criminal counts against the company.

"Ryland Mortgage Co. has reached a resolution of this matter to the satisfaction of both the company and the government," said Timothy J. Geckle, the company's secretary and general counsel.

Charges are still pending against three former Ryland employees, who are scheduled for trial in October. If convicted on all counts, each would face prison sentences of up to 30 years and fines of $1.5 million.

As part of the agreement filed in U.S. District Court in Jacksonville, Ryland will pay $3.5 million in restitution; an expected $1 million in interest; and $4.2 million in fines. The court still must ratify the agreement.

"While the agreement represents a significant expense for Ryland Mortgage Co., it is not expected to have a material adverse impact on the overall financial position of the Ryland Group," the company said.

In addition to dismissing other charges, the prosecutor acknowledged that "the activities in question were limited exclusively to Ryland Mortgage Co.'s loan servicing area and that there were no grounds for concluding that any Ryland employee or agent engaged in the subject conduct, that the conduct was the result of any corporate policy or that the conduct is continuing at Ryland."

Ryland was indicted by a federal grand jury in May 1997 on six counts of fraud stemming from charges that it overcharged the RTC, the agency created to oversee failed savings and loans by $3.5 million. Ryland also was charged with attempting to conceal information and impede the RTC.

The indictment marked the first in Ryland's 30-year history.

As an RTC servicer, Ryland collected monthly loan payments and distributed dividends to the owners of the stocks issued by the RTC.

In agreeing to responsibility for the charges, Ryland stood yesterday in stark contrast to its position 14 months ago, when the indictment was returned.

At the time, the company said it was "wholly innocent" and expected to be "totally vindicated."

Ryland said yesterday that it agreed to settle the case to avoid a prolonged and expensive legal battle.

"Above all, this agreement allows us to move forward," Geckle said.

Pub Date: 8/01/98

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.