Top Execs Leave Bankrupt Subprime Mortgage Lender Fremont
Bankrupt subprime lender and servicer Fremont General saw its top executives resign, effective July 5, after a bankruptcy reorganization plan called for a scaling back of their responsibilities, according to a regulatory filing. Richard Sanchez resigned on June 4 as interim president and CEO of Fremont and Fremont Reorganizing Corp. (FRC) after experiencing a "material demotion" when his duties were slashed as of the confirmation date of a Chapter 11 bankruptcy reorganization plan dated May 11, 2010. Sanchez said his resignation fell under the terms of his employment agreement that entitles him to compensation and other benefits if he terminates his employment "for good reason," according to the regulatory filing. Thea Stuedli resigned as executive vice president (EVP) and chief financial officer (CFO), and Donald Royer resigned as EVP and general counsel of Fremont and FRC, also effective July 5. Stuedli and Royer also claim rights compensation under the terms of their employment agreements. But the company may fight them on their claims to additional compensation. "On June 10, 2010, the Company’s outside securities law firm received an email from counsel to Signature Group Holdings, the [bankruptcy reorganization] plan's proponent, which indicated that Signature did not agree with the position taken by the aforementioned executive officers," according to a filing with the Securities and Exchange Commission (SEC). The filing adds that Signature plans to prompt Fremont, after the effective date of the reorganization plan, to dispute the executives' claims that their resignations were for "good reason." The three joined in November 2007, when Sanchez filled the role of EVP and chief administrative officer, Stuedli stepped into EVP and CFO and Royer stepped into EVP and general counsel roles. They followed former colleague and co-founder of Commercial Capital Bancorp (CCBI), Stephen Gordon, who joined the company as chairman and CEO. When Gordon stepped down in September 2008, Sanchez stepped into the role of interim CEO. Stuedli and Royer retained their positions at the company. Fremont was one of the largest lenders and servicers of subprime mortgages during the housing boom, before selling its $4bn subprime business in March 2007. On June 18, 2008, Fremont filed for Chapter 11 bankruptcy protection and continues to operate its business as “debtor-in-possession,” with residential and commercial real estate lending operations in Arizona, California, Florida, Georgia, Illinois, Maryland, New York and Texas. Fremont said in March it would settle more than $89m in tax obligations to the Internal Revenue Service (IRS) without actually paying a majority of the back taxes. Write to Diana Golobay.