Change Company, a mortgage lender set up to focus on poor and minority borrowers, has been accused by a former employee in a lawsuit of lying to the government and its bondholders about who is actually receiving loans.
(Bloomberg) — Change Company, a mortgage lender set up to focus on poor and minority borrowers, has been accused by a former employee in a lawsuit of lying to the government and its bondholders about who is actually receiving loans.
The lawsuit filed by Adam Levine, a former chief of staff who was fired from the company, alleges that the company misrepresented the race, ethnicity, and income level of its borrowers in reports to the US government. He is suing for unlawful termination.
Change Company hasn’t yet filed a response with the court, but Alan Wayne Lindeke, its general counsel, pointed to a restraining order that three employees at the company had obtained against Levine.
The firm is set up as a Community Development Financial Institution, a type of lender that focuses on communities that are underserved by other financial institutions. Change Company, which says it’s the largest CDFI lender in the US, has sold more than $2 billion of mortgage bonds across a series of transactions since its first offering, which was backed by loans to people of color and low-income borrowers, in early 2022.
Its board of directors includes Chairman Antonio Villaraigosa, former mayor of Los Angeles, and Chris Gardner, a former brokerage head whose life was dramatized in the Will Smith movie “The Pursuit of Happyness.” Villaraigosa and Gardner didn’t return requests for comment.
The lawsuit doesn’t offer specifics about how the company allegedly mischaracterized loans, but Levine claims he has “documented that (Change Company) falsifies information on its annual certification by mischaracterizing its loans.”
Levine claims in his lawsuit he was terminated after reporting his concerns to officials including Chief Executive Officer Steven Sugarman, the general counsel, board members, and regulatory authorities. In his suit, filed in California state court in Orange County last month, Levine seeks to be reinstated, receive missed pay and interest, punitive damages, and attorneys’ fees.
The complaint also says that the company’s alleged mischaracterizations enable Change Company to entice investors looking for socially responsible securities to buy mortgage bonds from the lender.
“For example, investors who believe they were supporting loans to low-income members of the community would not choose to purchase a (Change Company) security if they knew that the company falsely characterized its loans to wealthy individuals and even celebrities as low-income loans,” according to the complaint.
Change Company pointed to a workplace violence restraining order, issued by a California court judicial officer in April, that directed Levine to stay away from the homes of the employees as well as the schools of their children.
Lindeke, the general counsel, didn’t address Levine’s specific allegations about the company.
Levine, who served as an assistant White House Press Secretary under George W. Bush, declined to comment. David Lizerbram, one of the lawyers representing Levine, said in response to a question about the restraining order that “this is a blatant and shameless attempt to retaliate against a whistleblower.”
Change Company has provided $1.3 billion of loans in persistently poor areas, and has made $3.1 billion of loans to first-time homeowners since becoming a CDFI, among other loans, according to its website.
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