In an amended complaint, the Consumer Financial Protection Bureau (CFPB) alleges the owner of
small Chicago mortgage company has fraudulently transferred more than $2 million dollars from company accounts into his own.
In July, the CFPB sued Townstone Financial Inc. and owner Barry Sturner for alleged violations of the Equal Credit Opportunity Act (ECOA) and redlining. The company is charged with making statements during weekly radio shows and podcasts and other marketing ventures that allegedly illegally discouraged prospective African-American applicants from applying to the company for mortgage loans.
Also see Townstone owner shocked by CFPB action
In the amended complaint filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, the bureau alleges Townstone transferred more than $2.4 million to Sturner in December 2018 and January 2019. It said Townstone was insolvent after the transfer, having less than $100,00 worth of liquid assets.
The bureau complaint said Townstone did not receive reasonably equivalent value from Sturner for the $2.4 million. Sturner’s attorneys said they are puzzled by the bureau’s amended complaint and reiterated their opinion that the enforcement action is an overreach.
Townstone and Sturner are accused of engaging in the transfer with “actual intent to hinder, delay or defraud the bureau.”
“When Townstone and Sturner engaged in the transfer, Townstone believed, or reasonably should have believed, that it would incur a debt to the bureau beyond Townstone’s ability to pay,” the bureau said in the amended complaint.
After Townstone and Sturner engaged in the transfer, Sturner paid Townstone’s bills using, at least in part, the money Sturner received in the transfer, the CFPB said.
In addition to filing a motion to dismiss the suit, earlier this year friends of the company also launched a website through which they are appealing to others to help finance Townstone’s defense.
“There is very little, if any, new wrongdoing alleged in the complaint and every bit of alleged wrongdoing has been known to the bureau for many months prior to the filing of the original complaint,” a statement provided to The Title Report from Sean Burke, one of Sturner’s attorneys, read.
“Townstone is puzzled at the amendment because it failed to address the fundamental and fatal flaws of the original complaint, including that the bureau’s action violates the First Amendment of the Constitution and seeks to expand the scope of ECOA well past its statutory reach,” Burke continued. Because these flaws remain, Townstone intends to refile its motion to dismiss and expects it to be granted.”
“In early 2021, Townstone intends to file an updated version of its motion to dismiss that attacks each of the counts in the amended complaint as being contrary to the United States Constitution and the statutory framework of ECOA,” Burke said. “Because the legal foundations of the bureau’s claim remain unchanged, Townstone believes it will be successful in defeating this governmental overreach.”