EAST HARTFORD, CT—A mortgage firm locked in a long battle with the state Banking Department is closing for good, the company’s CEO announced Thursday.
1st Alliance Lending is wrapping up its operations within the next month, and its remaining few staff members, down from 170 at the company’s peak, are working on the last details of discontinuing the business.
CEO John DiIorio said he puts the blame for the business closing entirely on the state, which is seeking a $1.5 million penalty in a license revocation case that has been pending for about a year and a half. The state has claimed that 1st Alliance misled consumers through its use of call center employees, who are alleged to have performed tasks that require licenses.
“1st Alliance is dead. There is no path forward for this company,” DiIorio said. “We have worked very hard and in good faith with both the banking department and the DECD to find a path forward, and it simply can’t be done.”
The state says those call center workers in the mortgage pre-approval process were performing duties that require state licenses, like negotiating terms of a loan. But 1st Alliance says they did not have any role in the approval process, and could not have been confused with a decision-maker.
“Most of our bureaucrats are very honest, hard-working people. I think they’re here to serve the people that live in this state, and I think they get a bad rap 90 percent of the time,” DiIorio sad. “Unfortunately this company ran into a few bad apples who have acted in bad faith from the day they got here and lied about their purpose.”
Hearings on 1st Alliance’s case have been going sporadically since September on enforcement the banking department began late last year. DiIorio attended another hearing session Thursday, where he would begin representing the company on his own rather than continue using dwindling resources to pay attorneys to attend the hearings. DiIorio is still using the attorneys, but he’s not making them attend the hearings.
DiIorio said he no longer has a job with his company closing, and that he is devoting all of his time to fighting to retain the company’s reputation.
He said he will also work on starting a new company in New Hampshire, Massachusetts or Rhode Island next year.
“We will see this through and we will come back,” he said.
1st Alliance has no active licenses, and its dozen remaining staff members were informed Oct. 31 that they would no longer be kept on with the hope of resuming operations at a later date.
Banking Department spokesman Matthew Smith said Thursday that the company closing has no impact on the ongoing hearing. Before Thursday there had been a handful of hearing days with the state interviewing just one witness, the department’s primary examiner in the 1st Alliance case.
He said the attorney for the Banking Department has shown that the screeners working for 1st Alliance were performing credit checks and doing duties that could be considered negotiating loan terms.
“We believe that’s taking an application. Under Connecticut law you need a license to conduct that kind of activity,” Smith said.
Most enforcement cases the Banking Department brings are resolved through settlements, so the ongoing hearing process is unusual. After the administrative hearings, which are conducted by a hearing officer appointed by the department, a decision can be appealed in Superior Court.
The case began with what the state calls a whistleblower complaint last year. Examiners conducted interviews with 1st Alliance staff, and settlement talks in July 2018 broke down before the state issued a notice of its intent to revoke the company’s license at the end of 2018.
“The Department will continue to work toward a fair resolution of the allegations against 1st Alliance but must ensure that companies doing business in Connecticut play by the same rules,” Smith said in a statement Thursday.
1st Alliance had received a $3.5 million incentive package from the state Department of Community and Economic Development toward the relocation of its call center to a vacant building in Putnam. About $2 million of the funding was returned, and the remaining $1.5 million has been converted into a loan, but DiIorio said the company has no ability to pay it back.