Update 2009-04-29: U.S. Bankruptcy Court Judge James. M. Marlar has ordered attorneys to rewrite the complaint filed in a $1 billion lawsuit against former First Magnus executives. Speaking of the 200-page complaint, the Arizona Daily Star quotes Judge Marlar saying the document had "so much editorializing and excess wording that I don't think it's fair to the defendants."
"Attorney Michael McGrath, who represents First Magnus founders Thomas Sullivan Sr. and Thomas Sullivan Jr., moved in March to dismiss the complaint or at least strike nearly all of the first 100 pages to remove material they called redundant, immaterial, impertinent or scandalous."
Marlar denied McGrath's motion to dismiss the lawsuit, but noted the complaint was "more story than a recital of facts to which defendants could respond." Attorney Jamie R. Welton who filed the complaint on behalf of First Magnus creditors said he could "shorten it."
Discussion about the lawsuit on our forums continues. Click here to jump to the latest comments.
Update - 2009-02-27: The Arizona Star today reported a lawsuit has been filed against former First Magnus executives for $1 billion, accusing them of excessive spending that "would make even the most pampered and precocious movie star blush." Among 40 individuals named in the complaint filed on 2009-02-26 as an adversary proceeding by Bankruptcy Trustee Larry Lattig are Gurpreet Jaggi, Thomas Sullivan Sr., Thomas Sullivan Jr., Bill Gaylord, Gary Malis, Dominick Marchetti and Karl Young (now president of StoneWater Mortgage Corp.).
"They were paying themselves like the Phoenix Suns," Lattig's attorney Jamie R. Welton said in a telephone interview Thursday night.
An attorney for a number of those named including Jaggi and Young issued a statement denying the allegations and the claim as "absurd" and "libelous." The complaint also accuses the former First Magnus executives of "theft for taking computer programs to the new mortgage company StoneWater."
Read the entire 200-page complaint here. Discussion on our forums has re-ignited as a result.
Update - 2007-08-22: The following was sent out to notify employees that First Magnus has sought bankruptcy protection:
Dear Friends and Former Colleagues:
Since being forced to cease operations on August 16, 2007 due to our secondary market investors withdrawing prior agreements and freezing First Magnus's accounts, we have been assessing how to best wind down operations and repay all of our creditors, including you, our former employees. From the outset, we have been focused on making the August 20, 2007 payroll and explored all options that would have permitted that result. Regrettably, despite our efforts, we were unable to do so.
As a result, First Magnus today filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Arizona. As part of the filing, we asked the Bankruptcy Court for permission to access currently unavailable funds to pay wages due to you, our former employees. Obtaining an order from the Court approving release of funds for payment of wages will insure that your wages will not be subject to other creditors' claims. Unfortunately, this process will take weeks to complete.
In order to help some of you through this difficult time, we have set up an Employee Assistance webpage on which we will disseminate information that may be of interest to you. This page, which can be accessed from www.firstmagnus.com, will be periodically updated. Currently, you will see information about the job fair Monday, August 27, 2007 from 10 am to 1 pm at the Westin La Paloma that already has more than a dozen potential employers attending, as well as job assistance agencies. We also have a classified section that contains information from potential employers across the United States with whom you may be able to find employment.
We are deeply saddened by the events of this past week. Our hearts and our thoughts are with each and every one of you and we wish you all the very best in your future endeavors.
Please visit the Employee Assistance webpage for additional information over the coming days and weeks.
The First Magnus Executive Management Team
Update - 2007-08-18: The second article above points out that 6,000 people have been laid off, and a bankruptcy filing is possible.
Original Listing - 2007-08-16: Many have forwarded on to us an emailed announcement from First Magnus that appears to have been sent late yesterday evening that indicates they have ceased funding loans:
FIRST MAGNUS IS NO LONGER FUNDING ANY MORTGAGE LOANS
In light of the collapse of the secondary mortgage market, First Magnus will not fund any future mortgage loans, and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated and not yet funded. We explored all options before taking this action but were left with no viable alternative.
First Magnus values the relationships we have formed with all of our broker partners over the years and appreciate the trust you have shown in us. We are saddened that we will no longer have the opportunity to work with you.
For information about loans already submitted to First Magnus, please call 520.618.9000.
The Arizona Daily Star has reported on the closure here:
An e-mail Wednesday evening told branch managers of Great Southwest Mortgage, the retail arm of First Magnus, that the parent company was no longer funding loans. First Magnus ranked 61st in the Star 200 survey of the biggest employers of Southern Arizona, reporting 800 full-time-equivalent local employees.
"We will not be funding loans tomorrow," wrote Erik Lutz, the president and founder of Great Southwest. A manager with the company, who spoke on condition of anonymity, said he was told Wednesday evening that First Magnus was closing. However, he said Great Southwest hopes to stay in business by brokering loans elsewhere. "All my employees were unaware until I told them, and they were pretty shocked," the manager said late Wednesday. "As loan officers, we're going to move on to some different companies. We're still going to stay in our field. We're going to regroup and figure out the best places to go."
Ron Briskman, a Great Southwest branch manager in Scottsdale, said he's not convinced First Magnus is closing. "It could very well be that the company goes into a Chapter 11 (bankruptcy) situation," which would give the company time to reorganize, he said.
"Nearly all the people that I care about in this world have relied on this great company to raise their families and grow professionally," Lutz wrote. "While many of the questions that you will have I cannot answer tonight, I wanted to give each of you some time to call your people before that notice goes out."
First Magnus was founded in July 1996 by Tom Sullivan Sr., Tom Sullivan Jr. and G.S. Jaggi. The elder Sullivan helped start Title Security Agency of Arizona in the early 1970s and provided initial funding for First Magnus.
None of the three could be reached for comment late Wednesday.
Headquartered at 603 N. Wilmot Road, First Magnus has described itself as "one of the largest privately held mortgage banking operations" in the country, lending in all 50 states.