GM Unit's Founder Quits as Execs Indicted
COSTA MESA, Calif. - J. Paul Reddam, founder and president of Ditech.com, resigned Monday after three other executives of the home equity lender were indicted on charges of extortion.A spokesman for GMAC Mortgage, Ditech.com's parent, said it was Mr. Reddam's decision to resign. He was not charged with any wrongdoing.
According to a statement from the U.S. Attorney for the western district of Pennsylvania, Ditech.com executives Jay David Marx, Gregory Kenneth DeLong, and Vincent John Pozzuoli were indicted by a federal grand jury in Pittsburgh on charges of extorting kickbacks from ATM Corp. of America, a Pittsburgh company that sells title insurance and other services.
Ditech.com specializes in lending up to 125% of a home's value. Mr. Reddam, 44, founded the company in 1995. GMAC Mortgage, a Horsham, Pa., unit of General Motors, bought it in April 1999. GMAC Mortgage has sent several of its own executives to help Ditech managers run the business, the spokesman said.
- Marc Hochstein
Lehman Named in Subprime Lender Lawsuit
NEW YORK - Lehman Brothers was named a co-defendant in a class action against First Alliance Corp. of Irvine, Calif., a subprime lender that filed for bankruptcy in March.In the suit, filed Monday in Federal Bankruptcy Court in Santa Ana, Calif., plaintiffs Jacqueline Bowser and Irene Huston allege that First Alliance induced "low-income, credit-impaired minority and elderly homeowners" to "enter into illegal, unfair, discriminatory, and fraudulent high-cost mortgage loans." Lehman is First Alliance's investment banker.
An attorney for the plaintiffs argued that Lehman's responsibility is clear. "We don't see it as an extension of liability, given the fact that Lehman has an equity stake and that they put the packages together," said Daniel J. Mulligan, a partner with Jenkins & Mulligan of San Francisco.
A Lehman spokesman said the firm "does not nor did it ever have an equity stake in First Alliance." He said Lehman held warrants on First Alliance but never exercised them.
- Robert Julavits
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Paper Firm Pressed to Sell Finance Business
PORTLAND, Maine - Lens Investment Management, an activist investment firm, is pushing Temple Inland Inc., a Texas paper and building products company, to spin off its financial services business.As of March 31, Temple Inland received 70.1% of its revenue from paper and building products and 29.9% from banking and financial services.
Lens, which has been a shareholder in Temple the last four years, said in a statement Tuesday that Temple Inland's "nonsynergistic" businesses make it difficult for investors to value the company accurately. Institutional Shareholder Services and Proxy Monitor consultants that represent large institutional investors are also rallying investors to vote for a spinoff.
Temple Inland's stock had gained 4.5% in the last five years as of March 31. But the Standard & Poor's 500 has gained an average of 26.7% a year, the S&P Paper & Forest Products index, 7.2%, and the S&P Savings & Loan index 17.4%.
- Tania Padgett
Axa Offers $3.7B for Rest of U.K. Insurer
LONDON - Seeking to exploit Sun Life and Provincial Holdings PLC's stock slump, the French financial services company Axa SA has offered $3.74 billion for the 43.7% of Sun Life it does not own.Axa would pay about $7.75 in cash for each share of the insurer, the United Kingdom's fifth largest. That would be 54% more than Sun Life's closing price on March 23, the day before the companies announced they were in talks.
- Bloomberg News