Make that three shareholder lawsuits against loanDepot executives. The latest was filed in Delaware Chancery Court, alleging that the mortgage firm's investors were misled before its initial public offering (IPO) over two years ago. This is the latest in a series of legal complications for loanDepot after its stock experienced a severe price drop.
Hee Do Park filed the lawsuit against the founder and former CEO of loanDepot.com Inc., Anthony Hsieh, the former chief financial officer, the ex-chief accounting officer, four board members, and the company itself, which is based in Irvine, Calif. Hsieh ended his proxy war with the board over temporarily expanding its membership earlier this year.
Park's lawsuit, extending over 100 pages, alleges that the mortgage company breached a fiduciary duty, committed corporate waste, and unjust enrichment linked to the company's 2021 IPO. Park alleges that Hsieh and other high-ranking officials failed to fulfill their fiduciary obligations and misled the public regarding loanDepot's mortgage lending practices and potential.
Park's lawsuit further suggests that the company executives were negligent in ensuring adequate disclosure controls were in place and did not respond appropriately to signs of mismanagement, causing significant harm to loanDepot.
An earlier class-action lawsuit filed in California federal court, seven months after the company's February 2021 IPO, alleges that loanDepot's registration statement was negligent and artificially inflated the company's stock price.
This was followed by another shareholder lawsuit in Delaware federal court in March 2022, which also accused loanDepot's executives of issuing false statements, similar to the previous claims.
LoanDepot is also facing a lawsuit by its former COO, Tamara Richards, accusing Hsieh of instructing employees to close loans illegally without proper documentation, in an attempt to increase the company's loan volume.
According to Park, Hsieh hired Richards to support the company's growth and then pressured her to relax or ignore loan underwriting guidelines to expedite loan closure. Richards refused and subsequently resigned. Post her resignation, Hsieh reportedly led two projects which resulted in the company closing loans in violation of legal compliance.
Park's allegations include claims that some loanDepot insiders received substantial cash payments prior to the IPO and amassed more than $655 million from the company after it went public. Park further alleges that these practices misled investors and inflated the company's stock price.
LoanDepot's stock price, according to the complaint, fell by 42% after it announced disappointing second-quarter 2021 financial results. Park's lawsuit also accuses loanDepot executives of wasting company assets by repurchasing company stock at artificially inflated prices.
A loanDepot spokesman declined to comment on the pending litigation.
In the meantime, U.S. District Judge Colm F. Connolly has consolidated the shareholder's lawsuit with a similar one filed earlier in Delaware federal court. A temporary pause on litigation was agreed upon until a decision is reached regarding the motion to dismiss in the California federal court case.
