Securities fraud, it's an illegal practice where investors are deceived and manipulated. In the United States, it's a serious crime, but in the DFC securitization program it seems that was par for the course, particularly when it came to the $17.5 million in loans securitized from Glenn Godfrey companies. As the Senate and DFC hearings have shown, those loans were based on developments that never got off the ground. Well, in DFC hearings last week, Jane Longsworth, the manager of finance and information systems explained that the DFC had made what are known as representations and warranties in the securitization offering, and Godfrey's failed developments proved those claims to be false. She explained that it was a big deal at the DFC.
Jane Longsworth, Manager of Finance - DFC
“...you’ve seen it, that whole compile, there are several covenants in there and you’re held to that, you’re responsible for what you represented and warranted in those documents and we knew that the security was not consistent with what we said it was and according to the document these loans would now be considered defective. It was supposed to be pre-fab buildings erected on each of these locations for the different purposes and it was important.
One of the pieces of information we had to submit in the take was the relationship between the value of the security and the principal amounts on the loan and it had be something like eighty percent. And because the security was really not there, our saying that the loan to value ration was eighty percent was not true.”
Longsworth later explained that efforts were made to swap out the loans but because they were so big that could not be done. As we've reported, hearings have been suspended for the month of September and will resume in October.
