MANATEE — The saga of Brasota Mortgage Company Inc.’s $137 million collapse could end this weekend with a bang — that of an auctioneer’s gavel.
A bankruptcy trustee hopes to sell off the failed Bradenton mortgage brokerage’s remaining assets Saturday, and thus conclude the five-year debacle that state regulators have called a classic Ponzi scheme.
“I’d really like to close this estate out, and the only way to do it is to sell these properties,” Gerard A. McHale Jr. said Thursday.
McHale is overseeing the court-ordered liquidation of Brasota, which recruited investors to buy residential and commercial real-estate mortgages issued by the company.
Company founder and owner William J. Morrison promised investors significantly high returns, in some cases as much as 14 percent. But Morrison’s death from liver cancer in October 2004 revealed that he was using money from new investors to pay off earlier ones, leaving Brasota $50 million in arrears.
The company abruptly closed and went into receivership in early 2005; it later filed for bankruptcy and was ordered into liquidation.
While several law enforcement agencies investigated the company’s demise, no criminal charges were ever filed. But the Florida Office of Financial Regulation called Brasota a Ponzi scheme and took action against five employees:
n Carolyn Burroughs: Mortgage broker license revoked and prohibited from working in financial sector for 15 years.
n Robert E. Coey: Mortgage broker license revoked, 50-year financial sector ban and $5,000 in restitution.
n Alfred J. “Jamie” Colavito: Mortgage broker license revoked, 15-year financial sector ban and $2,500 fine.
n Mosalene Hottman: 15-year financial sector ban and $8,000 in restitution.
n Malcolm Edwards: Mortgage broker license revoked, 15-year financial sector ban and $10,000 fine.
The scheme lasted more than a decade and involved nearly 1,800 victims, some of whom lost their life savings, one of McHale’s attorneys said.
“Oddly enough, this was a pretty healthy Ponzi scheme: It prematurely ended because this guy (Morrison) died,” Michael Markham said. “On the bright side, at least he had some assets available.”
McHale has been gradually selling those assets and has recovered $84.7 million for jilted investors, a recovery rate of 63 percent. “For a Ponzi scheme, that’s pretty much amazing,” said Angelina Lim, another attorney representing McHale.
McHale hopes to raise a few million more Saturday by auctioning the remaining 35 properties in Brasota’s portfolio, a decision he said was prompted by their failure to sell on the open market.
Those properties include the company’s headquarters at 830 43rd St. W.; several mobile homes, single-family houses, condominium units and vacant parcels in Manatee and Hillsborough counties; and a week at a Key West time-share resort.
The auction starts at 10 a.m. at the Manatee Convention Center, 1 Haben Blvd., Palmetto. Details are available at www.brasotaauction.com.
Duane Marsteller, transportation/growth and development reporter, can be reached at 941-745-7080, ext. 2630.