Welter of lawsuits attempts to resolve alleged Delco mortgage scam

Money went to George Barnard's property on First Avenue in Avalon, David Fili Jr. said. Fili and Barnard dispute one another's accounts.
Money went to George Barnard's property on First Avenue in Avalon, David Fili Jr. said. Fili and Barnard dispute one another's accounts.
Posted: October 24, 2013

David Fili Jr. and George Barnard enjoyed the lives of successful businessmen driving expensive vehicles, investing in beachfront property, and attending Flyers games.

The partnership between the two Delaware County men started in 2004. Eight years later, the relationship unraveled after clients alleged more than $10 million had gone missing, strapping dozens of New Jersey and Pennsylvania homeowners with two mortgages on the same properties, according to court records filed in both states.

Their company, Capital Financial Mortgage Corp., which had offices in Somerdale, Camden County, and Folsom, Delaware County, refinanced for homeowners and resold the loans to warehouse lenders.

Fili and Barnard each dispute the other's account, with attorneys for both filing court documents alleging blame. The legal battle is likely to drag on for years. Lawyers who have sued Capital Financial allege a Ponzi scheme. According to civil lawsuits, the $10 million meant to pay off more than 45 refinanced mortgages was diverted through Capital Financial from February 2012 through March 2013. There is no full accounting of the missing funds, but court records document lavish spending.

Fili, 43, of Haverford, now works for a credit-check company. Barnard, 43, of Newtown Square, works for Tackle Depot in Malvern, Chester County.

Neither man, in brief phone conversations with Inquirer reporters, would discuss the matter in detail. Barnard said, "My life is ruined because of what someone did." Fili said, "I'm trying to make everything right."

On March 15, Fili gave a sworn statement at the Media office of his attorney, Mark Much, saying he had to "come clean" after customers had called for explanations.

Cherry Hill lawyer Robert Saldutti, who represents Customers Bank, a warehouse lender that sued Capital Financial in June, requested Fili give a sworn statement.

Customers Bank's suit alleges there were about 20 fraudulent loans among 200 the company purchased from Capital Financial.

When the business started, Fili, a licensed mortgage broker in New Jersey and Pennsylvania, said he was president. Barnard had experience with title companies and was vice president, Fili said.

Fili ran the company's daily operations, and over the years, Barnard spent less time at the company and more time with investments, Fili said in his statement.

In 2011, Barnard sold his half of the company to Fili for $750,000 10 months before the money for the loans disappeared. Fili was to pay Barnard monthly for his share, beginning in January 2012, court records show.

Barnard told an Inquirer reporter he did nothing wrong. He alleges in court records that his signature had been forged on financial documents after he left the business.

Fili said in his sworn statement that for several years money for new mortgages was used to refinance other loans that did not close on time.

"I had two options," Fili said in his statement. "I was either going to commit suicide and not come back, or I was telling what happened."

In June, after numerous homeowners complained, the Pennsylvania Department of Banking and Securities revoked Fili's mortgage license, concluding he caused Capital Financial to become insolvent by engaging in "negligent, dishonest, fraudulent, illegal, unfair and/or unethical business practices."

The company has since become insolvent and no longer exists.

More than 45 homeowners have more than two mortgages on the same properties. Numerous homeowners sued, as did the banks that bought the mortgages, naming Fili, Barnard, their wives, Capital Financial Mortgage Corp., business associates, and affiliated companies.

Several of the homeowners told The Inquirer that the ordeal has wrought havoc on their personal finances. Frederick Graziani of Philadelphia, a financial analyst for Lockheed Martin, said there are two liens on his home in the Mayfair section of Philadelphia.

James Cole, 34, an electrician in Cheltenham, said he has been threatened by a bank with foreclosure.

Fili said in his statement that he took a salary, plus bonuses that he listed on his 2011 tax return of at least $200,000. He also said $700,000 was used to buy a $900,000 house in the Florida Keys the two men purchased as an investment. There were also mortgage payments on the homes where Fili and Barnard live with their families in Delaware County, and education funds for their children, he said.

Some money went to Barnard's beachfront investment property in Avalon that had a balloon mortgage, Fili said. Capital Financial made payments that were at times between $20,000 and $24,000 a month, Fili said. The property is for sale for $5.4 million.

Barnard's Philadelphia attorney, H. Adam Shapiro, said Fili controlled Capital Financial accounts. He called Fili's March statement "one-sided" and, at times, inaccurate.

"I've seen nothing to lead me to believe that he [Barnard] intentionally misappropriated funds," Shapiro said in an interview.

According to the lawsuit filed Sept. 23 on behalf of at least six homeowners in New Jersey, Capital Financial would "embezzle" money as part of a "Ponzi scheme."

Lawyers in the civil lawsuits said they had contacted criminal investigative agencies in New Jersey and Pennsylvania. Federal and state officials said they could not discuss whether they had initiated an investigation.

During his statement, Fili was asked whether he told Barnard that what they were doing was fraudulent, and he responded, "He [Barnard] knows it was fraudulent and I know it was fraudulent."

"I saw it getting so out of control where I said, I can't - there's no way I can do this anymore," Fili told the lawyers.

In addition to Customers Bank, Stonegate Mortgage Corp. in Mount Laurel sued Capital Financial alleging it lost money for more than 20 loans it purchased.

"We are absolutely focused on protecting these homeowners who are victims of fraud committed by Capital Financial," said Whit Clay, a spokesperson for Stonegate.

In his statement, Fili said that in 2006 loans did not close on time because of money shortages.

"This is where it all started going wrong," Fili said.

By 2009, Fili said, things had gotten worse, but he hoped new business would replenish the missing money. In 2012, according to court records, the company could not catch up.

Fili said customers started calling for explanations. He described being miserable going home, "didn't want to talk to my wife, didn't want to talk to my kids."

At the office, he said the calls continued and he decided to tell the banks what happened as he was heading to a meeting in Atlantic City in March.

"I kept saying to myself, I can't do this anymore. I can't do it."


bboyer@phillynews.com

856-779-3838 @BBBoyer

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