Taking on one of its severest critics, a Timonium mortgage company that has been accused of aiding property flipping in Baltimore has sued a national civic group, charging it with defamation, causing a loss of business and retribution for its refusal to pay the group $200,000 to counsel borrowers.
American Skycorp Inc. is seeking more than $10 million in compensatory and punitive damages in a suit filed Wednesday in U.S. District Court against The Association of Community Organizations for Reform Now (ACORN).
For months, ACORN staffers have been interviewing American Skycorp borrowers and having some of them testify at public forums. ACORN has accused the company of collecting high fees on government-backed mortgages that it makes to unqualified borrowers who buy substandard houses, often at inflated values. Some buyers lose their houses in foreclosure.
Mitchell Klein, an ACORN organizer named in the suit, denied wrongdoing and said the group was trying to protect homebuyers' interests.
Calling American Skycorp "a bully," Norma Washington, who leads the ACORN board in Baltimore, said, "We're going to fight this every inch of the way."
Frank C. Bonaventure Jr., an American Skycorp lawyer, said the company isn't trying to silence ACORN. "This is not retaliation," he said. "It's reaction" aimed at getting the organization to obey the law.
American Skycorp is under scrutiny on several fronts as a result of a high default rate, particularly on loans made in 1998, its first year of business.
The Federal Housing Administration has moved to bar the company's main office in Timonium from issuing FHA mortgages, a step that American Skycorp has so far thwarted in U.S. District Court.
Sources say the FBI and state investigators are looking into the company's activities. Top officials of American Skycorp said the state attorney general's office has asked the company for information on loans as part of a consumer-protection investigation of property flipping in the city. They said they knew nothing of a federal investigation. American Skycorp officials acknowledge a high default rate on FHA loans issued in 1998 but say they have toughened their lending standards and taken steps to ensure that borrowers are prepared for homeownership and to counsel those who get into trouble.
The suit says Klein called off a protest at the home of John Hall, the company's chief operating officer, in January after Hall promised to meet with the group.
Negotiations reached an impasse, the suit says, after Klein demanded that the company fire loan officers and pay ACORN $40,000 a year for five years to do loan counseling. The suit says Klein threatened to put American Skycorp out of business.
ACORN published and distributed a "false and defamatory" paper critical of the company and staged a demonstration at its headquarters May 19 that developed into a melee, the suit says.
As the result of ACORN's actions, American Skycorp "has suffered damages in the form of lost sales and harm to its goodwill and reputation," the suit alleges.
Klein denied yesterday that he had sought $200,000 from American Skycorp or demanded the firing of a loan officer. "I said he needed to clean up his act," Klein said.