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Shareholder sues loanDepot’s top executives

The complaint accuses managers of misleading statements and omitting information in connection with the company’s IPO

Anthony Hsieh
Anthony Hsieh, founder and CEO of loandepot

California-based nonbank lender loanDepot is the target of a new shareholder lawsuit. 

Investor Tuyet Vu accuses seven top executives and board members, including loanDepot’s founder Anthony Hsieh, of making misleading statements and omitting information in connection with the company’s initial public offering (IPO). 

LoanDepot debuted in the stock exchange in February 2021, raising just $54 million. 

The suit was filed in the U.S. District Court in Delaware on March 11. Two other federal securities fraud class action lawsuits are pending in the U.S. District Court for the Central District of California. 

The complaint lists as defendants Hsieh, the chief financial officer Patrick Flanagan and the chief accounting officer Nicole Carrillo. It also includes four board members: Andrew Dodson, John Dorman, Brian Golson, and Dawn Lepore.  

In the shareholder derivative lawsuit, Vu accuses the executives of unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets and violations to the Securities Exchange Act. 

LoanDepot did not respond to requests for comment.

According to the lawsuit, from February 2021 through August 2021, executives allegedly failed to disclose that loanDepot’s refinance originations and margins had declined substantially at the time of the IPO, negatively impacting revenue and growth. 

In addition, management allegedly failed to disclose that “revenue and growth were artificially buoyed by overcharging of interest from at least 2016 to 2019 and by the closing of loans without proper documentation in the period preceding the IPO.”

Meanwhile, defendants benefitted from lucrative insider sales of $164,595, the suit claims.

The complaint alleges that the “truth” about the company’s poor performance emerged on August 3, 2021, when loanDepot reported disappointing earnings for the second quarter of 2021.

As a consequence, the price per share of the loanDepot’s Class A common stock fell to $8.07 by August 3, down 42% since the IPO. 

The shareholder complaint mentions another lawsuit, this one filed by Tammy Richards, formerly loanDepot’s chief operations officer.

In September, Richards dropped a bombshell in the mortgage industry alleging that, between at least 2016 and 2019, loanDepot and its subsidiary Closing USA had engaged in interest overcharging. 

According to the executive, the company was “charging loan refinance borrowers double daily interest during a period when CUSA had failed to timely pay off original loans, but new loans had already been originated.”

Richards also alleged that Hsieh directed individuals to close loans without proper documentation. 

The nonbank mortgage lender disputed the claims made by Richards, who worked in senior roles at Wells FargoBank of AmericaCaliber Home Loans and Countrywide Financial (one of the bad actors in the subprime loan crisis) before joining loanDepot. 

“LoanDepot is committed to operating at all times according to ethical, responsible and compliant business practices,” a statement from the company in September read.

“The claims in the lawsuit, which we take very seriously, were previously thoroughly investigated by independent third parties and found to be without merit,” loanDepot said, without providing further information about who conducted these investigations and when they occurred. “We intend to defend ourselves vigorously against these outlandish allegations…”

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