A former high ranking employee in a nonbank Change Company CDFI (TCC) filed a lawsuit in California accusing the company of retaliation after it reported employees to executives for “misappropriating loans” for apparently skirting federal reporting requirements.
Thank you for reading this post, don't forget to subscribe!The lawsuit, filed in Orange County, alleges that Adam Levine, chief of staff to CEO Steven Sugarman, began reporting illegal activity by company employees to Sugarman and other officers and board members in February 2023.
However, he claims that instead of investigating the complaints, the company’s leadership fired Levin.
Representatives for The Change Company and Levin’s attorneys did not respond to a request for comment.
Levin, who was White House assistant press secretary under President George W. Bush and vice president Goldman Sachs Listed several alleged violations related to lending practices, ahead of its debut as a lender in 2021.
The list includes potential irregularities with respect to Community Development Financial Institution (CDFI) regulations, specifically a rule that requires lenders to provide annual documentation certifying that 60% of their loans go to target markets that are certified. US Treasury Department,
“Plaintiffs document that TCC falsified information on its annual certification by misrepresenting its loans. This includes misrepresenting the race, ethnicity and income level of borrowers,” Levin’s attorneys wrote in the lawsuit.
The lender claims that since becoming a CDFI in 2018, it has disbursed more than $25 billion in loans to more than 75,000 households.
The lawsuit cites potential securities fraud when investors are induced to buy a lender’s loans in the secondary market based on misrepresentations on borrower profiles. The lawsuit states that investors supporting low-income families would not buy the lender’s loans if they knew they were provided to wealthy individuals or celebrities.
In its seventh securitization on 14 June, The Change Company attracted 16 investors offering $306 million, including wealth managers, banks, insurance companies and private funds. The lender said the loans in the pool had a weighted average FICO 740, LVT 71.1%, 43-month reserve and 8.72% note rate.
Other allegations made by Levin include after-hours parties at the lender’s premises and recordings of private conversations at the company’s Pacific Palisades office. Those accused include Steven Sugarman and his older brother Jason Sugarman, who founded The Change Company.
Levin claims Steven Sugarman tried to stall a lawsuit when he directed the plaintiffs to leak confidential documents to a journalist doing a profile on short-seller Carson Block, with whom Sugarman has a civil lawsuit.
Meanwhile, Jason Sugarman potentially infringed Securities and Exchange Commission (SEC) orders to engage with the securities industry – it has been barred since February based on a consent judgment regarding a scheme to defraud Native American Pension Funds, the lawsuit says.
The lawsuit states, “In light of Jason Sugarman’s known work at TCC, Plaintiffs strongly encourage Steven Sugarman to hire an outside law firm to certify to regulators, investors, shareholders and other stakeholders that Jason Sugarman had no material business relationship with TCC.” “Steven Sugarman refused to do so and retaliated against Plaintiff by stating that Plaintiff’s business dealings should be investigated.”
Levin claims that he brought his concerns to the appropriate regulatory authority on March 5, and that his attorney notified the company the next day. Plaintiff claims she was fired a few weeks later without bonus pay and equity compensation because she had “rightful ownership”.
