FRM victims' restitution fund stalls in NH House committeeUnion Leader State House Bureau
May 01. 2013 8:09PM
CONCORD - A House committee decided unanimously Wednesday to put off final action on legislation to set up a restitution fund for victims of the Financial Resources Mortgage scandal
FRM closed abruptly in 2009 after bilking investors of an estimated $33 million in a scheme state Senate President Peter Bragdon, R-Milford, has called "a complete failure of state government" with more than 70 violations of state laws.
The state Senate passed Senate Bill 180 by voice vote on March 28.
But the House Commerce and Consumers Affairs Committee on Wednesday voted 18-0 to retain the bill in committee.
Committee Chairman Edward Butler, D-Hart's Location, said after the meeting that while rules would allow the bill to emerge later in the current session, this month or next, "I am confident that won't happen."
He said the committee will continue to work on the bill and probably report it out early in the fall for action in the 2014 session of the Legislature.
The problem, said Butler, is identifying a reliable "funding stream" for the money that would go to victims.
Butler said restitution will cost the state between $20 million and $40 million.
The bill as it now stands calls for the money to come from money contributed by the state Bureau of Securities Regulation amounting to 50 percent of all income collected by the agencies in penalties against securities laws violators, less the amount necessary to meet its budget, and 50 percent of income from any "undesignated funds" received from settlement obtained by the state Department of Justice.
The bill says that after deducting administrative costs, the fund would be used for "awarding recovery assistance" for victims of the scandal.
Those seeking recovery are required under the bill to fill out a lengthy application form.
In addition to a recovery fund, the bill also sets up a recovery fund committee to include representatives of the state banking, insurance and justice departments as well as the Secretary of State's Office.
Rep. Donna Schlachman, D-Exeter, said during the executive session on Senate Bill 180 that a subcommitee "worked really hard on the bill on trying to make improvements, and the consensus was that there are some policy things we need to articulate better. We did not want to pass it on to the fiscal committee without solid funding recommendations that will work."
She said the subcommittee wants to discuss the bill further with the state Department of Revenue Administration and the governor's office."
She called the bill "incredibly important" and said it was not being retained in order to "kill if softly."
"It's time to do something, and it's time to do it well," Schlachman said.
In the FRM case, investors and others contacted state regulators at the Bureau of Securities, the Attorney General's Office and the Banking Department, and those complaints and concerns were ignored.
Many bills have been introduced in the last three or four years concerning the FRM scandal, but attempts to establish restitution funds have been unsuccessful.
Scott Farah, the former president of FRM of Meredith, is serving 15 years in federal prison on wire and mail fraud charges, and his co-conspirator, Donald Dodge, who was president of CL&M, a mortgage servicing company, is serving six years for wire fraud.