EAST HARTFORD — 1st Alliance Lending closed today amid a battle with the state over business practices, but the company’s founder and CEO John Delorio said on Thursday he hopes to reopen in another state.
The company’s turmoil in recent months is the result of a whistleblower complaint alleging it was involved in unlicensed mortgage origination activity. After an investigation by the State Banking Department, the Department determined that there was sufficient evidence to proceed with administrative enforcement action.
Delorio said Thursday he believes his company is being attacked by “a hacking agency,” which is effectively putting the company out of business by revoking its mortgage lending license. He also aimed at Bank Commissioner Jorge Perez.
“We have a real problem over there,” Delorio said. “We have an executive over there who doesn’t have the character or the fitness for the job.”
Banking Department spokesman Matthew Smith keeps the agency abiding by state laws and best practices.
“We stand by our process,” Smith said.
He declined to comment further, instead referring to a department statement released in August, which said the department protects the best interests of consumers.
“It is the department’s goal to apply the law fairly to all regulated businesses so that they have an opportunity to thrive and prosper here in Connecticut,” Smith said in August, adding that the department’s goal is to ensure that all companies doing business in the state play by the same rules.
In July 2018, the department offered to enter into an agreement with 1st Alliance to resolve the dispute. The agreement would have required a statement from the company that it admits no wrongdoing, does not use unlicensed employees to make mortgage loans, pays a civil penalty and does not make any public statements denying the allegations or saying they are without factual basis .
The company rejected the settlement, and Delorio said Thursday that “1st Alliance no longer has the resources to defend itself,” prompting Delorio to lead the Banking Department’s remaining administrative hearings.
Months ago, Delorio said he told employees the company would run out of resources by the end of October. An emergency crew remains on the job, however, but only “a handful” will remain over the next 30 days if the company disbands, he said.
Before the controversy with regulators, 1st Alliance had 178 employees in 46 states. As of August, the company had shrunk to 17 and now has five employees, but currently has no licenses from banks or badges to issue mortgages, he said.
“It’s a corporate shell,” Delorio said.
Delorio said there are plans for a new unit to begin operations in either Rhode Island, Massachusetts or New Hampshire, and a small workforce in Houston, Texas.
The state is seeking a $1.5 million repayment as part of the now-defunct agreement with the Department of Economic and Community Development, Delorio said.
DECD allocated $3.5 million to the company before its legal issues came to light, after which 1st Alliance repaid $2 million in unspent funds and the balance in a $1.5 million loan converted, “which we can’t pay back,” Delorio said.
He added that he is not in settlement negotiations with the state as hearings are taking place.