Industry News

Executive at failed lender blames creditor for pay dispute

61 MLN employees stiffed out of commission checks

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A subprime mortgage lender withheld commission checks from 61 employees at the behest of one of its biggest creditors, according to an executive who is seeking to avoid arrest and criminal prosecution. The Connecticut Department of Labor has applied for an arrest warrant against Mitchell L. Heffernan, the former president of Connecticut-based Mortgage Lenders Network USA Inc., charging him with failing to pay commissions ranging from $5,000 to $300,000. MLN closed its wholesale lending division Dec. 29 when it could no longer obtain financing to make loans, and filed for Chapter 11 bankruptcy protection Feb. 5. Heffernan, who is seeking an injunction in bankruptcy court to avoid arrest, maintains the decision to withhold the commissions came from Residential Funding Co., a division of GMAC Financial Services, Dow Jones Newswires reported. Residential Funding is the second-biggest creditor in MLN's bankruptcy proceeding. Attorneys for the company called Heffernan's allegations "scandal...