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Troubled O.C. Firm Puts Self Up for Sale

Lending: Preferred Credit's problems include having to pay back overcharged customers and the resignation of its president.

September 19, 1997|E. SCOTT RECKARD | TIMES STAFF WRITER

IRVINE — Preferred Credit Corp. has quietly put itself up for sale after scandals that aborted an initial stock sale, forced out its No. 2 executive and led to rebates to 17,700 overcharged customers.

Sources said Thursday that Preferred has hired Minneapolis investment firm Piper Jaffray Inc. to find out if all or part of the Irvine company can be sold.

Preferred is looking for buyers for a sales network that marketed debt-consolidation loans nationally to homeowners with solid credit but little or no home equity. Last spring, the network included 12 retail offices in seven states.

A source also said there might be a market for loans still on Preferred's books. The company, which handled $500 million worth of loans last year and is on a $1-billion loan track this year, sells them in bundles to investors.

Piper Jaffray, one of the underwriters for an attempted Preferred stock offering last summer, also is exploring whether the whole company can now be sold.

The company has been buffeted by disclosures that it overcharged 17,700 homeowners on mortgages and that its top officers failed to reveal their previous run-ins with regulators. It's unclear now whether any buyers would want to deal with Preferred.

"That's the kind of thing we're trying to find out," one source said.

Preferred Chief Executive Todd Rodriguez, 30, who founded the company in 1989, declined comment on efforts to sell it. Piper Jaffray officials said they could not discuss Preferred.

Also Thursday, Orange County Superior Court Judge Raymond J. Ikola approved a recommendation by state-installed monitor Peter A. Davidson that the Price Waterhouse accounting firm be allowed to conduct extensive new audits to ensure overcharged borrowers are properly repaid.

Through a spokeswoman, Rodriguez said he agreed that outside accountants should oversee his staff as repayments are made.

The borrowers were owed a total of about $1.5 million by Preferred. Regulators said the borrowers were charged interest on loan proceeds that Preferred had not yet forwarded to them. Most of the overcharged funds already have been repaid.

Preferred said the problems were inadvertent, blaming a processing system that couldn't keep up with the company's fast growth.

When Preferred filed to sell the public $100 million in stock last June, it didn't disclose that California real estate regulators had suspended the licenses of Rodriguez and then-President Walter Villaume after charging mishandled trust funds and unlicensed employees. The suspensions were stayed for two years.

Two days after Preferred's filing, the Department of Corporations sued the company over the overcharges to borrowers.

A day after that, Preferred withdrew its initial public offering. It later settled the state lawsuit.

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