US Title LLC, a company with strong links to convicted Ponzi schemer Doug Vaughan, has filed a petition for a Chapter 7 liquidation in U.S. Bankruptcy Court in Albuquerque.
The company, which ceased operation at the beginning of August, was sued Sept. 5 in a civil action alleging it was an insider in Vaughan’s scheme to swindle $75 million from upwards of 600 investors. The bankruptcy petition was filed about a week later.
US Title had attempted to distance itself from Vaughan, who founded the company in 2002, but was never able to overcome rumors that it was struggling financially due to fallout from the scandal, said Judson McCollum, the company’s board chairman.
“If we had been able to, we would have stayed open,” he said. “It was the most efficiently run title company in town at the time we closed.”
US Title was in merger talks with another title company, but he said the talks ended with the threat of the lawsuit by Judith Wagner, court-appointed trustee in charge of liquidating the bankruptcy estate of the long-gone Vaughan Company Realtors.
The 10-count lawsuit she filed in Bernalillo County District Court alleges negligence, civil conspiracy, unjust enrichment and other violations of civil law. It does not specify a dollar amount being sought, but is likely targeting the company’s liability insurance coverage.
The lawsuit reviews the connection between US Title and Vaughan prior to the Feb.22, 2010, filing of parallel bankruptcies by Vaughan and Vaughan Company Realtors.
Vaughan was on the payroll of US Title at the time he filed bankruptcy, serving as board chairman. He was at times also US Title’s CEO.
Just after the filing in late February 2010, Vaughan was arrested in the parking lot of the US Title office by agents of the New Mexico Securities Division, launching the public scandal that climaxed with his sentencing earlier this month to 12 years in federal prison.
Wagner’s lawsuit also links US Title to Martha Runkle, the bookkeeper at Vaughan Company Realtors who admitted to a criminal charge in connection with helping to perpetuate Vaughan’s swindle. The lawsuit identifies Runkle as US Title’s chief financial officer for a time.
US Title’s bankruptcy petition lists three current shareholders – Jonathan LeVann of Ashland, Ore.; Victor Rosenthal of Placitas; and Marie Yeh and the Yeh Family Trust of Albuquerque. They also are targets of ongoing clawbacks by Wagner in the Vaughan Company Realtors case.
The clawbacks against LeVann, Rosenthal and Yeh allege some level of insider status with Vaughan.
Another shareholder in US Title is Yvette Gonzales, the court-appointed trustee in charge of liquidating Vaughan’s personal bankruptcy estate.
Once the majority stakeholder in US Title, Vaughan had used most of his shares in US Title as collateral to secure loans from a select few investors, according to his original bankruptcy petition. Gonzales basically inherited the 5 percent stake that remained free and clear when she took over his bankruptcy estate.
US Title’s bankruptcy petition lists assets of $777,134 against liabilities of $653,094.17. The biggest asset is its office condo at 8300 Carmel NE, valued at $720,000, while the biggest liability is a $588,000 mortgage on the condo held by Charles “Tommy” Hightower of Albuquerque. He is US Title’s biggest shareholder with a 21 percent stake in the company.
Company revenue from title insurance and closings had dropped by half from $2,261,346 in 2010 to $765,424 this year through the petition date. Projected through the end of 2012, revenue would have been about $1.1 million this year.
About 16 employees lost their jobs when the company closed.
— This article appeared on page B1 of the Albuquerque Journal