Met Mortgage ex-exec guilty in fraud trial

A federal jury convicted a former Metropolitan Mortgage & Securities executive of three felonies Friday stemming from a shady real-estate deal that helped hasten the Spokane company's collapse.

Thomas Turner, 56, is scheduled to be sentenced Oct. 12 before U.S. District Judge John Coughenour.

Turner, former president of Metropolitan's sister company Summit Securities, was convicted of two counts of making false and misleading statements to accountants of a publicly traded company and one count of material omissions to accountants.

Turner's is the only criminal prosecution related to the collapse and bankruptcy of Metropolitan, but Joseph Capone, a prosecutor with the U.S. Department of Justice's fraud section, said Friday that the FBI investigation of Metropolitan is ongoing.

About 16,000 investors lost more than $450 million in Spokane's largest corporate failure when Metropolitan and Summit sought Chapter 11 bankruptcy protection in February 2004.

Turner testified this week that he warned former Met owner C. Paul Sandifur Jr. and accountants that a proposed 2002 joint venture and real-estate deal with a Bellingham development company was bad.

Prosecutors alleged Turner lied to auditors about the deal to brighten the company's 2002 financial results, enabling Metropolitan to post immediate gains and report to brokers and investors that the company was profitable when it actually was losing money and may have been insolvent.

Turner's lawyers attempted to pin the blame for faulty audits on outside accounting giant Ernst & Young. Ernst & Young partner Jack Behrens testified that Turner lied and withheld crucial information about the $24 million transaction.

Investors, the Washington state Office of the Insurance Commissioner and a special bankruptcy trust set up to recover money for investors have sued Ernst & Young for professional negligence.

A call to the firm's New York office was not answered after normal business hours Friday.

Metropolitan Mortgage & Securities was once a $2.7 billion conglomerate of insurance companies and investment services. Most investors who lost money in its collapse purchased unsecured debenture bonds and have been repaid 6 cents to 9 cents on the dollar.