Banking & Capital Markets

SEC May File HomeGold Charges

Following the testimony of his former finance chief, last week the ex-CEO of the mortgage products company was sentenced to 20 years in prison.
Stephen TaubFebruary 12, 2007

The Securities and Exchange Commission may file charges in connection with the collapse of Carolina Investors and its parent, mortgage products company HomeGold Financial, according to South Carolina’s Charleston Post and Courier.

“All we know is that it’s not been closed as an SEC investigation,” Jennifer Evans, chief of the state grand jury and lead prosecutor in the most recent trial, told the newspaper. The SEC would not confirm that a probe is under way, the paper added.

When Carolina Investors, which sold notes and debentures to the public, closed in March 2003, thousands of investors lost a total of more than $275 million. In June 2006, state attorney general Henry McMaster announced the conclusion of a 36-month probe into the collapse of the financial institutions, which resulted in six indictments of former HomeGold or Carolina Investors executives.

Five of the six have pleaded guilty or been convicted, reported the Post and Courier. Among them: HomeGold’s former chief financial officer, Karen Miller, who pleaded guilty to one count of conspiracy. Her sentencing was deferred while she cooperated with the grand jury.

Testifying last month in the trial of her onetime boss, former HomeGold chief executive officer Ronald Sheppard, Miller told the jury that she was wrong to use aggressive accounting procedures, according to the South Carolina Greenville News.

Miller reportedly added, however, that she was simply working at the direction of the CEO.

Sheppard — who had been indicted on 10 counts, including securities fraud, conspiracy, bank fraud, insurance fraud, forgery, perjury, breach of trust, and obtaining goods under false pretenses — was convicted last week of three counts of securities fraud. He was sentenced to 20 years in prison.