Suit Against Danbury Mortgage Company

Involves Newtown Resident

By John Voket

A Newtown resident is among several defendants involved in two civil actions alleging corporate raiding. The case is also being investigated by Danbury Police Department’s Fraud and Financial Crimes Division.

The case has also triggered a lawsuit filed by Connecticut’s Attorney General Richard Blumenthal and the state Department of Consumer Protection commissioner.

Attorney General Blumenthal and DCP Commissioner Edwin R. Rodriguez filed suit Tuesday, October 3, against Nevada-based CTX Mortgage Company for illegally raiding its Danbury area competitor for employees and secret consumer lists.

CTX operates a residential mortgage financing office in Milford. One of its competitors, and the complainant in a civil suit, Charter Oak Lending, LLC, provides the same services out of Danbury doing business as Danbury Mortgage.

Danbury Mortgage President Deb Killian said she was pleased to learn the state and local officials were taking great interest on behalf of her company.

“We certainly appreciate the response from the governor, the Attorney General’s Office and Commissioner Rodriguez, as well as the Danbury Police Department on this matter. From the beginning, we felt this case had merit, and it is wonderful to see to what length our Connecticut and local officials will go to protect small business people,” Ms Killian said.

Ms Killian said her company currently employs a Newtown resident as office manager and serves several Newtown clients.

A former Danbury Mortgage employee, Sherry Sawyer of Newtown, is named as a defendant in the civil suit and is among those accused of taking proprietary information in the overarching suit against CTX, the Attorney General’s office told The Bee Tuesday.

Danbury Detective Roger Brooks declined to comment on whether Ms Sawyer is among individuals being investigated by his department’s Fraud and Financial Crimes unit, but confirmed that an investigation is proceeding locally.

According to a release from Mr Blumenthal, in September 2004, CTX met with one or more employees of Danbury Mortgage at a training conference in which it allegedly began a strategic effort to recruit Danbury Mortgage employees over the following months and years. The incident was ironic, according to Ms Killian, because her company paid for the former employees to attend the conference.

The state suit alleges that in exchange for bonuses and other benefits, CTX used these employees to continue recruiting additional employees from Danbury Mortgage and access confidential information about its competitor, including consumer lists, loan applications, and referral sources. CTX eventually opened an office in the Danbury area staffed entirely with employees it recruited from Danbury Mortgage.

Attorney General Blumenthal and Commissioner Rodriguez said in a joint release that CTX’s practices violate state law and public policy against corporate raiding and the misappropriation of trade secrets.

“CTX acted as a corporate parasite — illegally draining the lifeblood from its competition,” Mr Blumenthal said. “With cunning calculation, CTX raided Danbury Mortgage for employees and consumers over the course of several months. This unconscionable pillaging stifled competition and in some cases lead to some consumers paying higher interest rates on home mortgages.

“We will vigorously fight in court to ensure that CTX never engages in this type of conduct again and win restitution for consumers,” the attorney general added.

Mr Rodriguez believes that honest competition allows for a healthy economy that helps consumers.

“On the other hand, underhanded competition only results in consumers being shortchanged with less opportunity for a better deal. The integrity of the marketplace is an essential factor to ensure consumer confidence,” Commissioner Rodriguez said.

According to the state filing, in one instance, CTX mailed postcards to about 1,000 Danbury Mortgage customers and referral sources, informing them that their agents now worked for CTX. Those recruited agents were then directed to inform those consumers who had loans started at Danbury Mortgage that their loan would now be closed at CTX.

In some cases, these illegal transitions resulted in higher interest rates for consumers after they were switched to CTX, Mr Blumenthal contended.

In addition to consumer restitution, the state’s lawsuit seeks an order prohibiting CTX from using any consumer lists, files, documents, or information obtained through its illegal acts or practices for commercial gain; the return of all information obtained through these illegal practices back to Danbury Mortgage; an order prohibiting CTX from communicating with any consumers obtained through its illegal practices; and disgorgement of all ill-gotten gains.

Anyone with information related to this case is asked to contact Det Roger Brooks or Det Bruce Bertram at the Danbury Police Department at 797-4614.