<br/><br/> National Mortgage News – Guaranteed Rate Hit with $25M Judgment for Data Stolen By Poached LO<br/>

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Origination

Guaranteed Rate Hit with $25M Judgment for Data Stolen By Poached LO

By Brad Finkelstein
March 28, 2016

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A California jury found Benjamin Anderson breached his employment contract and fiduciary duty to Mount Olympus, as well as committed fraud.

A jury awarded Mount Olympus Mortgage Co. more than $25 million in a lawsuit alleging “corporate espionage” by former employee Benjamin Anderson and his new employer, Guaranteed Rate.

Anderson and another former Mount Olympus originator who now works for Guaranteed Rate, Brian Decker, were accused of stealing loan files, borrower information and other proprietary data from the Irvine, Calif.-based lender.

“The purpose of the scheme was to divert hundreds of MOMCo loan customers to Guaranteed. The Individual Defendants misappropriated MOMCo’s confidential and proprietary information and directed MOMCo customers to Guaranteed,” the lawsuit, filed in an Orange County, Calif., superior court, reads.

The complaint alleges the pair acted with the encouragement of Chicago-based Guaranteed Rate.

“Guaranteed and Anderson conspired and devised a scheme to defraud MOMCo and secretly misappropriate MOMCo’s proprietary and confidential information,” the lawsuit reads. “Anderson was the perfect infiltrator: Anderson would continue to masquerade in his role as Mortgage Banker for MOMCo, while simultaneously, unlawfully downloading gigabytes of proprietary and confidential borrower information as well as offer confidential information from MOMCo’s servers, and diverting such information to Guaranteed.”

Anderson and Decker are among nine former Mount Olympus employees accused of participating in the scheme, which allegedly involved more than five gigabytes of Mount Olympus data. The claims against Decker was severed from the original lawsuit against Anderson and Guaranteed Rate and will be tried separately, said Chad Hummel, an attorney for Mount Olympus, in an interview. Claims against the remaining seven former Mount Olympus employees were previously settled confidentially out of court, Hummel added.

California law required the state’s Attorney General as well as consumers be notified regarding a data breach involving over 500 individuals. Hummel said that over 900 files were involved in this case; a letter dated July 30, 2014 notifying customers of the data breach is posted on the Attorney General’s website.

Guaranteed Rate officials declined an interview request. In a written statement, the company denied the lawsuit’s allegations.

“Guaranteed Rate would never encourage Ben Anderson, or any loan officer, to bring over loans in process or download any data,” the statement reads.

“Needless to say, Guaranteed Rate strongly disagrees with the jury’s conclusion, and we are reviewing all available options for an appeal in the case,” it adds.

According to Hummel and court documents, the situation at Mount Olympus came to a head on June 5, 2014. There was a meeting between company management and Anderson, who ranked No. 6 among top originators in 2013 with production of $201 million and 21st in 2012 with production of $180 million, over a decline in his loan origination volume.

After the meeting, Anderson’s desk was empty and his computer hard drive had data missing. At that point the company terminated Anderson’s employment, Hummel said. Mount Olympus was able to recover the missing information and found archived emails showing Anderson had been corresponding with Guaranteed Rate for three months, Hummel said, adding what was “discovered at that point just the tip of the iceberg of the data theft.”

The complaint said Anderson received a new employee package from Guaranteed Rate in April 2014. The jury found that Anderson breached his employment contract and fiduciary duty to Mount Olympus, as well as committed fraud.

The jury also found that Anderson along with Guaranteed Rate violated portions of section 502 of the California Penal Code involving the copying of mortgage loan computer files. Even though the claims against Decker were separated from this case, the jury also found Decker to be accountable.

In its verdict on March 17, the jury awarded Mount Olympus $5.6 million from lost profits and $4.6 million in lost business value jointly coming from Anderson and Guaranteed Rate. The jury also determined Anderson had to disgorge nearly $2 million he earned from commissions on the loans involved in this case, Hummel said. The jury also found Guaranteed Rate earned $657,000 unjustly.

On March 22, the jury awarded Mount Olympus $12.5 million in punitive damages from Guaranteed Rate and $500,000 from Anderson.

Mount Olympus can elect to take either the jury award on lost profits or unjust enrichment, but not both, Hummel said. In the case of Guaranteed Rate, Mount Olympus is taking the lost profits award of $5.6 million, the lost business value of $4.6 million and the punitive damages of $12.5 million, for a total of $22.7 million. Against Anderson, the lender is taking the $1.9 million in unjust enrichment award instead of the $5.6 million in lost profits (for which the jury held both him and Guaranteed Rate jointly liable for), the $4.6M lost business value award that both Anderson and Guaranteed Rate are jointly liable for, as well as the $500,000 punitive damage award — for a combined judgment of $25.1 million.

In addition, the judge presiding over the case may assess attorney’s fees and other damages under California Business and Professions Code Section 17200, which deals with unfair competition.

Anderson and Decker filed a countersuit against Mount Olympus, as did Guaranteed Rate. Guaranteed Rate dropped its suit during the trial. Anderson made wage and defamation claims. The wage claims were dismissed by the judge, Hummel said. The jury decided against Anderson on the defamation claims.

Both Anderson and Decker appear on the 2016 Top Producers list. Anderson did $182 million volume for 2015 and ranked No. 16. Decker ranked No. 32 with volume of $139 million.

Mount Olympus did not have a problem with Anderson leaving for a larger competitor, Hummel said. “Everybody is free to recruit legitimately; everybody is free to move legitimately. But the data relating to customers that is in a mortgage bank’s database is generally the property of the mortgage bank and it is illegal for an employee to take that data without the employer’s and in particular, the customer’s knowledge or consent,” he continued.

Mount Olympus, besides its Irvine office, had an office in Temecula, Calif., which closed on June 5, 2014 because of the situation with Anderson and Decker. The company now does business as Tru Mortgage and it opened a second office located in Beverly Hills, Calif., this past August.

“Now more than ever, the mortgage industry depends on legitimate and fair practices, and maintaining the integrity of private consumer financial data is a responsibility entrusted to every mortgage bank that we cannot and should not take lightly,” said Mount Olympus’ chairman Claude Arnall in a press release.