A shareholder filed a suit against loanDepot in mid-July alleging the lender misled investors in the lead-up to
The lawsuit, filed in the Delaware Chancery Court by Hee Do Park, a current shareholder of loanDepot stock, is
The new shareholder derivative complaint accuses former CEO Anthony Hseih, some board members, the company's former chief financial officer and its former chief accounting officer of breaching their fiduciary duty by not being honest with the investing public concerning the company's home lending practices, prospects, and capabilities. The lawsuit was first reported by Law360.
Some former and current loanDepot executives are being accused by the shareholder of concealing dubious practices from investors that inflated the worth of the company. These included allegedly artificially beefing up origination volume by flouting underwriting guidelines, as previously outlined in a
LoanDepot declined to respond to a request for comment, noting that litigation is currently pending.
Park's suit claims that the company improperly charged interest to borrowers who were refinancing their existing mortgages between 2016 and 2019 and opted to not reimburse all borrowers impacted, which "served to boost the company's financial condition heading into the anticipated IPO."
Further, the lawsuit brings up that starting in September 2020 Hseih was supposedly "relentlessly [pressuring] Richards to engage in illegal and unethical mortgage underwriting and approval conduct to boost and inflate the company's loan volumes to ensure the IPO's eventual success." The former COO alleged that she refused, but the lender still pushed on with the practice.
The suit claims that as a result of this practice "tens of thousands of loans" were closed that violated "various laws, regulations, and contractual obligations" and the lender had to repurchase some of these loans from investors.
Additionally, the plaintiff asserted that defendants misrepresented earnings so that loanDepot would be able to repurchase its own stock at artificially inflated prices. The company repurchased on Feb. 19 2021 nearly 2.7 million shares of Class C common stock at $14.00 per share for a total of $37.8 million. "The stock was only worth $8.07 per share, the closing price on August 17, 2021," Park's filing states.
The suit filed by Hee Do Park is at least the fourth complaint against loanDepot over its alleged misrepresentations. Two class action lawsuits filed last year alleging the lender of securities fraud remain pending in the U.S. District Court for the Central District of California, while the one filed in the California Superior Court for Orange County seems to have been settled. Details of the suit have not been made public.
Park is seeking unspecified damages, the establishment of a constructive trust over profits obtained by the defendants as a result of their unjust enrichment, and a ruling that declares that the defendants "breached their fiduciary duties to LoanDepot, been unjustly enriched, and wasted corporate assets."
The lawsuit comes one month after an announced
