Shawn Portmann: Loan Wolf

How one of the nation's top mortgage brokers allegedly brought down a Pierce County bank.

In 2006, Cheryl Hardtke was getting a divorce and desperate for a new place to live. She thought she found one when a friend told her he was selling his house in Lake Tapps, near Puyallup. Her friend even knew of a banker who could handle her mortgage application, an old high-school buddy named Shawn Portmann, who now headed the home-lending division of Tacoma-based Pierce Commercial Bank.There was just one problem, Hardtke told Portmann in his Puyallup office. Having recently stopped work as a dental assistant because of a back condition, she wasn't making any money. There was no way she could possibly qualify for a loan.Portmann told her not to worry. "We'll take care of it," he said.According to Hardtke, he did so by creating for her a phantom $4,000-a-month job. On her loan application, Portmann wrote that she worked for a car-upholstery company run by the high-school pal who'd introduced them.The 53-year-old Hardtke claims she didn't realize the fabrication when she signed the loan documents. Reeling from the divorce and strung out on pain medication, she says, "I wasn't in my right mind." Later, facing foreclosure, she filed a complaint about Portmann with the state attorney general, accusing him of falsifying documents.Hard-charging, high-living, and imperious, with a Hummer parked outside and a team of in-house underwriters at his disposal, he told Hardtke what he told any borrower, employee, or acquaintance who would listen: "I own the bank."That wasn't exactly true, but truth didn't seem to trip Portmann up. Federal authorities and former bank officials say he frequently made up information out of whole cloth—and then created phony documentation and padded borrowers' bank accounts to back up his lies."There was no limit," says a former Pierce Commercial employee, who spoke at length to Seattle Weekly on condition of anonymity. "If you could make it fraudulent, Shawn would do it."Indeed, some of Portmann's alleged tricks have surprised even veteran watchers of the nation's mortgage meltdown. The former Pierce Commercial co-worker says that Portmann would not only conjure up imaginary jobs, but fake W-2s as well.And if borrowers didn't have enough cash on hand to qualify for a mortgage—well, that was not a problem, either. Portmann, according to authorities, would "season" his clients' bank accounts with his own money, some of which he kept stashed in a home safe for just that purpose."I've never heard of that deception before," says Alan Hess, a professor of finance at the University of Washington.The 38-year-old Portmann is now under investigation by the FBI. The U.S. Attorney's office won't comment on the case in advance of an indictment, which sources expect to be imminent. But in a court document filed in July, the office asserted that more than half of the loans brokered by Portmann during his tenure at the bank were fraudulent—either because the banker falsified a borrower's income, forged supporting documents, submitted an inflated house appraisal, or fibbed in other ways.The "scheme," as the feds call it, was simple. In a business where every new mortgage brings in fees, Portmann would do whatever was necessary to close as many loans as possible. He was extraordinarily successful.From the time he started at Pierce Commercial, in 2004, until he left four years later, Portmann generated more than 5,200 loans. That accounted for nearly half of the $2.2 billion loan business done by his entire division, which by one account employed some 80 loan officers.On average, Portmann was closing roughly 120 loans a month. By way of contrast, an average hard-working mortgage broker might close between 10 and 15 loans a month, according to Brad Williamson, head of the banking division of the state Department of Financial Institutions."I believe he personally was the largest single loan producer in the state," Williamson says.Indeed, from the small burg of Puyallup, best known for its roller coasters and animal exhibits during its annual state fair, Portmann turned himself into a national powerhouse. In fact, the trade publication Mortgage Originator repeatedly ranked him among the top 10 loan brokers in the country.Given the percentage of his loans that were allegedly fraudulent, Portmann may also have set another kind of personal record. David Leen, a prominent Seattle real-estate lawyer, says, "That's a staggering number of defective loans."Ultimately, the bad loans brought down the 13-year-old Pierce Commercial Bank, once a respected community institution that specialized in small-business loans. On November 5, DFI closed the bank, following mortgage-related losses and more than a year of investigations conducted by its own agency as well as the FBI and the Federal Housing Administration. Heritage Bank acquired the failed bank's assets.If Portmann is indicted, he will be one of the first banking officials in the country to face criminal responsibility for the shady loan practices that have brought the financial industry—and the entire national economy—to its knees. But some wonder what took the authorities so long to act. "This was not a secret," says John Henderson, who until recently headed the mortgage division of now-defunct City Bank, of Portmann's tactics.Reached by phone at a Puyallup address, Portmann said he would check with his attorney and call back, but never did, nor did he return subsequent calls.A decade ago, Portmann was a fresh face applying for work at Lynnwood-based City Bank. Standing over six feet, he was an avid basketball player and a recent graduate from Pacific Lutheran University in Tacoma.He didn't have much of a financial background, and his personal life, had Henderson sought to explore more deeply, would have suggested a possible anger problem. A couple of years prior, a woman who identified herself as Portmann's ex-fiancée had applied for a protection order. She claimed he'd knocked her to the floor in a jealous fit and, days later, poured a mocha over her car after following her home. (She later dropped the court petition.)Still, Henderson was impressed with Portmann's drive. The young loan officer started work in City Bank's Puyallup branch. His strong work ethic became ever more evident as Portmann settled into the position. "He would work seven days a week, 12 to 15 hours a day," Henderson recalls. "Additionally, he was very, very bright," commanding a detailed knowledge of all the loans he had in the pipeline.Aggressive and relentless, he pursued builders and real-estate agents to get them to refer business to him. Soon the loans were pouring in—not at the level he'd achieve at Pierce Commercial, but close. "Oftentimes he would do 60, 80, 100 loans" a month, Henderson marvels. City Bank's mortgage chief had never seen those kinds of numbers before. "Shawn was just in a different class," Henderson says.Portmann made sure everybody knew it. He kept in his office a framed copy of Mortgage Originator's rankings, showing him near the top, as he later would be at Pierce Commercial. To some he came off as arrogant, Henderson concedes.A self-declared by-the-books kind of guy, Henderson won't say whether he saw Portmann engage in deceptive practices during his five years at City Bank. Nor will his old boss say whether Portmann left of his own accord or was fired. But Henderson says this: Portmann "had outgrown our appetite for his origination activities. As a result, he pursued opportunities that were more liberal than ours."Those opportunities were at Pierce Commercial Bank.In mid-2004, the bank was averaging between $120 and $150 million in assets—a tenth the size of one of the larger local community banks at the time, Frontier (since acquired by Union Bank)."The bank was looking to expand its revenue," testified Pierce Commercial vice president Loran Todd this past September at a related mortgage-fraud trial. "And there was a group presented to our management, to the board of directors, that would bring along a substantial amount of business with them."It was the height of the real-estate bubble, and Pierce Commercial was counting on Portmann and two others to deliver some of the action. Those two were Sam Tuttle and Craig Meyer, lifelong friends who worked together as mortgage brokers in Puyallup, not far from Portmann.According to Tuttle's LinkedIn profile, he and Portmann were also fellow PLU alumni and basketball enthusiasts. Tuttle played in college, and at one time served as public-relations officer for the Seattle SuperSonics. (Tuttle declined to be interviewed for this story; Meyer did not return repeated phone calls seeking comment.)As Henderson understood it, Portmann and his would-be partners worked out an unusual joint venture with Pierce Commercial to start a mortgage division that was almost a separate shop entirely. It had its own name: PC Home Loans. It would be based in Puyallup, next door to a steak joint called Toscanos Cafe and Wine Bar, rather than near the bank in Tacoma.The three men who ran it were considered "principals" of the operation and reaped a share of the profits over and above what they made on commission for their own loans, according to the former Pierce Commercial employee who spoke with Seattle Weekly. (We'll call him "Doug Sanders.") That didn't mean that Portmann and his buddies "owned" Pierce Commercial, but it did mean that they could call the shots and reap the rewards."There was a very firm line drawn in the sand," Sanders says. "Stay away from us" was PC Home Loans' message to corporate.Corporate seemed to comply. It allowed PC Home Loans to have its own onsite underwriters—people responsible for verifying employment, income, house-appraisal figures, and other information to make sure that borrowers can afford a loan and the bank's investment is not at risk.Banks commonly keep loan officers and underwriters in different locations, theoretically to make sure that those saying yes or no to loans are not unduly influenced by those making money off them. That strict separation eroded in the Great Mortgage Giveaway of the past decade, but still loan officers and underwriters generally didn't sit side by side. PC Home Loans advertised its in-house underwriters as something that made it "unique" and gave it "more control" over the loan process.Portmann in particular had a thing about control. Of the three principals, he was the "alpha" dog, Sanders says. "Shawn had his own personal underwriters for all of his files," he recalls, and situated them on his side of the office. No one beside them and his personal team of loan officers was allowed in.Remembers Sanders: "If you were walking on his side of the building, he'd yell, 'What the fuck are you doing?' "If a loan officer on either side of the building was struggling to get a mortgage approved, Sanders says, Portmann would summon the employee into his office. "Either get the file done or I'll do it for you," he'd threaten.Sanders says Portmann's mood often seemed to be influenced by the drinking he'd done the night before; he would commonly show up hungover. He also continued his enthusiasm for basketball by buying courtside Sonics tickets, sometimes bringing girlfriends with him, Sanders says.Still, his relationships with women continued to be turbulent. Jealous girlfriends, remembers Sanders, sometimes came into the office to berate him. And a marriage to one woman, despite the romantic locale of Hawaii for the ceremony, lasted all of two days, according to court documents."I don't want to talk about it," Portmann said when he returned to work, Sanders recounts.One might have thought that his dealings with borrowers would be rocky as well. Certainly, many felt he was unpleasant.Matt and Dina Rawson got a mortgage through Portmann for a Puyallup condo in 2005. They were in their 20s, expecting a baby, and nervous first-time home buyers. Portmann was offering a mortgage that required lower monthly payments than all the other loan brokers they had been to so far. It was that subprime specialty called the "interest-only" loan, in which borrowers make payments without making one bit of headway on the principal.The Rawsons had questions about how it would work. "He'd brush you off," Dina says."He was very condescending," adds Matt. He recalls dropping off some paperwork to Portmann, who was camped out at the Toscanos bar. Matt broached some concerns he had. "You're thinking too much," Matt says Portmann told him."He's beyond narcissist," volunteers another borrower, a real-estate investor named John Alderson, who received a mortgage through Portmann for an $8 million home in Bonney Lake. Despite the large sum involved, Alderson says Portmann would spare literally only a few minutes to talk to him."We're done, goodbye," Portmann would say.Other borrowers, meanwhile, felt deceived by Portmann. A Pierce County real-estate agent, who spoke on condition of anonymity, says that Portmann would often tell his clients one thing when making a good-faith estimate for a loan. "And then they'd get to closing, and there would be a different interest rate, a different down payment. My clients would be panicking.""He'd tell the clients 'Either deal with it or screw off,' " the agent says, adding that at that late stage in the game, they usually dealt with it.Roughly 20 borrowers filed complaints with the Department of Financial Institutions about Pierce Commercial after Portmann took charge of mortgage lending. One couple working with Portmann reported that someone forged their signatures on documents that required them to pay penalties if they paid off their loan early. Another borrower said Portmann swore at him when he asked for help with his loan.Another claims that Portmann "pushed him into signing a contract under dire duress," according to a summary provided by DFI. The borrower wanted to get out of the loan after he found out that the monthly payments were much higher than stated in the estimate, but said Portmann told him that to do so would cost $10,000.Yet despite such treatment, borrowers, real-estate agents, and builders continued to work with Portmann. Sanders says real-estate professionals had a particular reason to do so: Portmann would shower them with new cars and trips to Vegas so that they would refer home buyers to him.Portmann treated himself well too. "He was known for changing his cars every year," Sanders says. "When the FJ Cruiser came out, he had to be one of the first ones who had one."But professionals and borrowers alike had a more basic reason for using Portmann: He was the guy who could get a mortgage for anyone, anytime. "Absolutely always," says Paul Pohlreich, a Pierce County developer who worked often with Portmann. "I don't know how. There was no other lender who could do that."According to Sanders, it helped that Portmann owned various rental properties and had begun to develop housing. So when a borrower was unemployed, Portmann would sometimes indicate on applications that the person worked for one of the several companies he had formed to manage his properties. And he could use the names of his companies on those fake W-2 forms Sanders says he created.Chris DiCugno was an Auburn middle-school teacher when he decided to hop into the once-booming world of mortgage lending. He started out at a small brokerage firm, but found it slow going. With a newborn at home and a wife cutting back on work, he sought out Portmann, an acquaintance from PLU.DiCugno started at PC Home Loans as a loan officer in 2005. Soon he became the outfit's manager. "Just doing loans, getting as many loans done as possible . . . that was what [was] most important," DiCugno said.Such comments came out at the trial of Mark Ashmore, convicted this past fall of wire fraud in connection with a mortgage scam. DiCugno and Todd, the Pierce Commercial vice president, both testified at the trial, offering revealing information about Portmann's operation.Ashmore was a self-styled real-estate "investor" based in Bellevue. He used straw buyers to buy properties for inflated prices, then flipped the homes at even more inflated prices. These were tricky deals to get funding for. A bank had to accept the inflated prices and the credulity of the straw buyers. One named Suzan Syter, for instance, applied for mortgages at roughly the same time on three homes, all of which she identified as her primary residence, according to testimony.Ashmore found an inside man in DiCugno, who generated the mortgages that funded the scam. DiCugno, who pled guilty last summer and agreed to testify against his co-defendant, testified that the deceit requested of him was part and parcel of the corporate culture around him.For instance, he said it was a "rampant" practice at PC Home Loans to allow borrowers to claim multiple homes as their primary residences. Mortgages for such homes are far easier to get, and carry a lower interest rate, than loans for second houses or investment properties.More startling, DiCugno acknowledged the existence of so-called "shadow files." These secret files contained the real dirt on borrowers, not the fabrications that went onto loan applications.DiCugno also discussed another PC Home Loans term: "seasoning." In standard banking parlance, a "seasoned" account is one that shows adequate funds for a length of time, typically three or six months. The assumption, of course, is that the funds actually belong to the borrowers. But at PC Home Loans, DiCugno said, "people would put large amounts of money" into borrowers' accounts so that they would merely appear solvent.Perhaps not even federal authorities had heard of "shadow files" and "seasoning." DiCugno's attorney, Stewart Riley, seemed to suggest as much at his client's sentencing last month when he said that DiCugno's revelations came "at a time when few people in the U.S."—including the lead FBI investigator in this case—"had any clue as to the magnitude of bank fraud going on in this country."The FBI was intrigued enough to launch a separate investigation of Pierce Commercial. And in so doing, the agency says it learned that Portmann was a major seasoner. According to the July document filed by the U.S. Attorney's office, Portmann's former personal assistant told the FBI that she withdrew $1.4 million over the years from Portmann's personal bank accounts, much of it used to make borrowers appear richer than they were.The assistant told the FBI that she put the cash in a safe at Portmann's home, along with a log of incoming and outgoing funds.Eventually, knowing he was under investigation by the feds, Portmann grew nervous about keeping cash and the log at his home, according to the July court document. He stuffed a backpack with a little more than $100,000 and the log and gave it to a friend for safekeeping. But the friend, packing the goods into a trash bag, turned the lot over to the FBI. In filing its sneak peek at accusations against Portmann, the feds were seeking permission to seize the cash, a request that ultimately was put on hold pending resolution of the investigation.The document also points fingers at the "two other principals" at PC Home Loans, whom it says were in on the fraud.Were others as well? Todd, the Pierce Commercial vice president, testified in the Ashmore trial that all the loans from PC Home Loans went to bank headquarters for final review and approval. It was the Tacoma office that then went on to sell those loans to other lenders like Chase, Wells Fargo, and so on. Yet Todd maintains that the bank didn't become suspicious of the goings-on at its mortgage division until it received a subpoena in July 2007—three years into Portmann's tenure.Neither Todd nor Gary Gahan, Pierce Commercial's former president, could be reached for comment. Both now work for Heritage.While the FBI was pursuing its investigation, financial regulators were also starting to raise questions. In December 2008, Federal Housing Administration officials saw a sharp spike in the number of loans they had insured from Pierce Commercial that were going bad—either because a borrower was late in paying or had defaulted altogether. In fact, the rate was two-and-a-half times worse than at other institutions in the region, explains Mark Ross, an FHA project leader who monitors such data. The rate would eventually become four times worse.The agency launched an investigation of Pierce Commercial, and in July 2009 pulled the bank's authority to issue FHA-insured loans. A separate DFI investigation culminated, at the end of 2009, in a cease-and-desist order to the bank, forbidding it from issuing any mortgages without written approval of the agency and the Reserve Bank.By that time Portmann was gone. With all these investigators looking through its files, the bank had apparently decided it couldn't allow Portmann to continue ruling the roost in quite the same way. As Portmann described it in a subsequent lawsuit against Pierce Commercial and several former officials there, the bank "sought to negotiate new contract terms that were less favorable" for him, and he decided to "take his business elsewhere."He bounced around various mortgage companies before setting up his own Puyallup firm called S&P Lending Group. All the while, rumors about him were escalating, with some of the loan officers who had worked under him now warning borrowers that he was known for fraudulent loans, according to Portmann's lawsuit.Portmann said the accusations were a plot to "steal his business." (He later dropped the suit.)In September 2009, DFI discovered that Portmann didn't have the license required of mortgage brokers, and as a result the agency shut S&P down.PC Home Loans continued for a while without Portmann, with Tuttle and Meyer at the helm. The bank, however, sold the division in 2009 to a Walla Walla mortgage company called NetMore America. That company kept the division for only a year, and PC Home Loans subsequently went out of business. Tuttle and Meyer are now partners in another Puyallup-based company called American Pacific Mortgage.These events left Pierce Commercial without its once-rapacious loan business. Consequently its income dropped by half between September 2008 and the following September, according to FDIC data. Worse, says Brad Williamson of the DFI, the bank faced "substantial liabilities associated with improper mortgage lending."Normally, banks like Pierce Commercial that sell mortgages to other institutions are off the hook when borrowers default. But, Williamson says, Pierce Commercial was forced into buying back some loans—and bulking up reserves in case it was compelled to buy back even more—because of contract stipulations that require such buybacks if borrowers quickly default or fraud is discovered.Ultimately, the bank had too little money to go on.As banks big and small have closed all around it, federal authorities are looking for people to hold responsible. In November, President Obama directed the Justice Department to launch a financial-fraud task force.Local officials seem to be looking for accountability as well. In a Seattle courtroom on December 2, U.S. District Court Judge Richard Jones delivered a tongue-lashing to DiCugno, Portmann's former right-hand man. "You were a contributor to the bursting of the bubble; you were a contributor to the problems we have in this country," the judge told the boyish and tearful defendant before sentencing him to eight months in prison and four months of home detention.Now DiCugno's former boss awaits his fate. No one seems to know exactly what Portmann is doing, except filing lawsuits. He filed two in December over previous real-estate deals; one attempted to resolve a debt he owed for financing a condominium project.His previously hyper-productive loan business, however, has seemed to come to an abrupt halt."This is my fucking ship," he once declared at a Pierce Commercial meeting, according to Sanders. "If you don't like riding on my ship, get the fuck off." He may have never contemplated that he himself would have to abandon that ship. nshapiro@seattleweekly.com

 
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