So this is how things end. Quietly. Without much notice or fanfare. Without press releases or snappy quotes about Cristal-sipping executives.
First Magnus - the mortgage machine built on houses of cards - has settled its billion-dollar lawsuit for much much much less than that. It happened in January when we were focused on our shootings.
Terms of the agreement are confidential, but First Magnus founders Thomas Sullivan Sr.; his son, Tommy; and G.S. Jaggi, are said to be happy to have the suit behind them. So, too, are the other First Magnus stars (rising, shooting or fallen depending on your view) like Karl Young, Gary Malis and Dominick Marchetti. Former employees can expect checks soon (more on that later).
"The defendants were very pleased with the settlement," said Michael McGrath, attorney for the Sullivans. "It should have been resolved by an invoice rather than a lawsuit."
Is this a surprise?
It shouldn't be. When fast-talking Texas attorney Jamie Welton filed a billion-dollar lawsuit two years ago against the First Magnus crew, he announced it with a press release. The suit was filed on behalf of litigation trustee Larry Lattig with the supposed goal of claiming assets to help pay thousands of former First Magnus employees left without final paychecks when the mortgage bank collapsed in August 2007.
Welton was always quick with a verbal jab. The night he filed the suit, he said First Magnus execs "were paying themselves like the Phoenix Suns" until the very end.
He once emailed me photos of jobless First Magnus employees, their faces long and forlorn, with a missive that said he was doing this suit for them.
As far as the case went, he consistently lost. Again and again, Judge James M. Marlar had the complaint rewritten. He also tossed the allegations of fraud and insider corruption, whittling the case down to bare bones.
Now that the deal has been inked, Welton - who was not there in person for the settlement negotiations in Phoenix - is silent. He bailed on an interview.
First Magnus was once the rising star of the housing crisis. In just 10 years it became one of the largest mortgage lenders in the country and a major employer in Tucson, pumping out junk loans in Arizona and beyond. It never did much subprime lending, but it was heavy in Alt-A loans, which were supposedly better because borrowers had higher credit scores. But Alt-A borrowers didn't have to verify their stated incomes or put much money down. Subprime. Alt-A. Semantics.
"All the loans were crappy then," said Ray Desmond, founder and president of Nova Home Loans.
McGrath, the attorney for the Sullivans, said a suit wasn't surprising, but the real harm came from Welton's gift for hyperbole, which buried StoneWater Mortgage, the ill-fated lender First Magnus executives started just 10 months after The Collapse.
"The defamatory comments made in the complaint, which then showed up in the press and have filtered through the blogosphere and on the Internet, I think that's where the real harm and injury was done," McGrath said.
But First Magnus' reputation was already shot. And StoneWater felt like a slap in the face. That's what happens when you stiff your employees on their last paychecks. When you fly your top performers to Maui for a party less than two weeks before shutting down. When you send out reassuring emails to staffers days before laying them off.
That's why Judge Marlar can toss out all of Welton's allegations and then some, but people still will wonder when the company's executives knew things were going bad.
"That's the million-dollar question," said Desmond, who was approached about a possible Nova-StoneWater merger. "To say they didn't see it coming, somebody in their organization did, and they probably just turned their back to it."
After all, Desmond said, Nova saw it coming.
One good thing about this settlement is that it has finally freed up $7 million to be paid toward the wage claims of former First Magnus employees. Morris C. Aaron, the trustee handling the distributions, said former employees can expect checks to be dated by May 15. He even thinks they will one day receive all of their owed wages.
Did the lawsuit help make these payments happen?
"Why don't we just focus on the fact that my trust is making a $7 million distribution," he said.
Why not? It's the perfect ending to a lawsuit that started with a press release.
Contact columnist Josh Brodesky at firstname.lastname@example.org or 573-4242.