The Maryland Insurance Administration announced yesterday that it will pay $500,000 -- its largest payout ever -- to 171 consumers who lost deposit money when Regency Homes filed for bankruptcy protection in July 1998.
The money will come from proceeds of a surety bond that Regency filed with the administration just months before it filed Chapter 7. However, the amount being released represents a little less than half of the $1.02 million that the administration could verify Regency had on deposit.
Frank V. Mazza, the former chief executive officer of Regency who personally guaranteed funds to lenders, filed for Chapter 7 personal bankruptcy protection in U.S. Bankruptcy Court on Thursday.
According to his attorney, Larry Coppel, Mazza listed liabilities of $45 million and assets of $765,000. However, Coppel said the majority of his client's liability had been reduced through the Regency bankruptcy proceedings, and the exact amount of his final liability -- estimated at "several million dollars" -- has yet to be determined.
"It is far beyond what Mr. Mazza could afford to pay," Coppel said. "If not for his guarantee of Regency debt, he would not have had to file for bankruptcy."
Depositors who filed valid claims with the administration will be paid early next month, in amounts ranging from $98 to more than $20,000.
According to an administration official, the overall Regency payout dwarfs the next largest disbursement made by the insurance administration -- $75,000 in the 1980s.
"Unfortunately, these buyers lost hundreds and even thousands of dollars. However, without the surety bond, it is unlikely that buyers would have been able to recover any of their money," Maryland Insurance Commissioner Steven B. Larsen said in a statement.
When it filed for bankruptcy protection, Regency, which was the largest private homebuilder in the state, left 220 buyers with homes in various stages of construction in 26 communities, from Baltimore to the Washington suburbs to Richmond, Va. The distribution of funds affects only those who had placed deposits on a home in Maryland.
Zvi Guttman, the court-appointed trustee for the Regency bankruptcy, said yesterday that money is being sought to satisfy many of the 1,800 unsecured creditors. He said his office sent 900 letters to collect $5 million that had been paid to individuals or companies the year before Regency filed for bankruptcy protection.
"The theory is that one creditor got paid in full, and the other creditors got paid nothing. The money ought to be brought back into the estate and distributed evenly," Guttman said.
Pub Date: 10/20/99