SPOKANE, Wash. — C. Paul Sandifur, Jr., who in the 1990s built Metropolitan Mortgage & Securities Co. into a $1 billion enterprise, has resigned as president and chief executive of the troubled financial conglomerate.
In a news release, the company also appeared to raise the possibility of filing for bankruptcy protection as a fraud and accounting scandal continued to grow.
Sandifur, the controlling stockholder and son of the company’s founder, resigned as board chairman, president and chief executive Tuesday.
He will remain on the board, the company said.
“Metropolitan is entering a crucial stage, and I offered my resignation in an effort to try to put the distractions and controversies of the past year behind us,” Sandifur said. “I remain proud of the long history of our company.”
Retired Metropolitan executive Irv Marcus was appointed acting chairman, president and CEO, effective immediately, while a search is begun for a new president.
Marcus has served on the company’s board of directors since 1974 and retired as a senior vice president in 1995.
The company, which has more than 300 employees, said it was talking with attorneys and financial advisers about plans to “reorganize and restructure its financial affairs,” the closest it has come to acknowledging it may seek Chapter 11 bankruptcy protection.
Sandifur will remain on Metropolitan’s board. He owns controlling interest in Metropolitan and its Idaho-based sister company, Summit Securities Inc.
Metropolitan on Tuesday said it has asked to have its stock delisted from the Pacific Exchange in San Francisco, a move that could see the company return to state regulatory oversight. Trading on its notes ended at the exchange Jan. 12.
Also, former Washington State University President Sam Smith resigned from the company’s board effective Jan. 23. He did not provide a reason for his action.
Last week, Ernst & Young LLP resigned as independent auditor of the company after concluding there were “material misstatements in the company’s financial statements.”
Metropolitan said Ernst & Young also withdrew its reports for fiscal 2001 and 2002 and the first three quarters of fiscal 2003, and stepped down as independent auditor of Summit Securities and another affiliated company, Western United Holding Co.
Summit President Tom Turner was fired last week. The company did not provide a reason.
Those actions came shortly after investors filed two lawsuits against the company, alleging Metropolitan and its affiliates fraudulently marketed risky investments to customers while concealing the risks. The lawsuits came after the company failed to pay interest and dividends to investors for the first time in its 50-year history.
Many of those customers were elderly people living in the Pacific Northwest who were inappropriately led into risky investments, the lawsuits contend. One lawsuit alleges the company basically operated a pyramid or Ponzi scheme, using money from new investors to pay off earlier ones.
The Securities and Exchange Commission is looking into Metropolitan’s loan portfolio, among other matters.