Long before he was sentenced on Monday to 10 years in federal prison, Shawn L. Portmann was known to state regulators.
“Around 2006, I’d go to meetings with people in the industry, and they said, ‘You’ve got to look into this guy,’” said Deb Bortner, director of consumer services for the state Department of Financial Institutions.
Bortner and agency Director Scott Jarvis recently recounted their experience, as state officials, with Portmann and his crumbled empire.
When she heard the accusations of these industry insiders, Bortner asked, “Do you have any documents that prove the allegations?”
They did not.
It wasn’t until 2009 that the state sent an investigator to review Portmann’s activities.
According to a plea agreement reached last September, Portmann and the now-defunct Pierce Commercial Bank agreed to a partnership in 2004. And where the bank had been reporting mortgage loans of between $1.1 million and $3.9 million before Portmann appeared, by 2007 PC Bank Home Loans was originating an annual $496 million in mortgage loans.
As it turned out, much of that volume was based on fraud.
When he finally looked at the details, the state investigator found inflated appraisals, fraudulent rental-lease agreements, misrepresented financial statements and misrepresented employment information.
“It was a flag to everyone,” said Bortner. “At that point, he got on our radar.”
After Portmann left PC Bank Home Loans in 2008 — fired not for fraud but for berating a subordinate — regulators continued to follow his progress at other mortgage companies.
“We did a data-drop to the FBI about in August 2009,” Bortner said.
“The criminal aspect is not what we do,” said Jarvis. “The protocol was to send the information on.”
“We went in as part of our examination authority,” said Bortner.
She defends the time it took to confront Portmann.
“If you charge someone too early, with a minimal amount of information, he wasn’t going to get the amount of time he deserved,” she said.
Portmann, Bortner said, “was done in the industry once we could get him with something we could prove.”
“Due process takes time,” said Jarvis.
Even though people in the mortgage industry had their suspicions, Portmann prospered.
“The larger the producer, the more some people want to close their eyes, in any industry,” Bortner said. “He was a big producer.”
“The Mariners want a hitter who can bat .330,” said Jarvis. “Some guy comes in and hits .520 in spring training. Portmann came up with a franchise. It’s the obligation of management to sift through it. The president of the bank should have paid more attention. With the opportunity for great reward comes great responsibility.”
“This is the biggest mortgage fraud case prosecuted against an individual in the country, that I’m aware of,” Bortner said. “Everyone in the industry knows of Shawn Portmann. I think that people will recognize that if you commit fraud the size of Shawn Portmann, you’ll go to jail.”
Speaking to U.S. District Judge Benjamin Settle on Monday, Portmann’s attorney offered to mitigate his client’s behavior by saying Portmann was so busy at the height of his success that “he didn’t have time to direct what would happen in any one loan.”
He also said Portmann was “one of many” who contributed to the financial swamp.
Judge Settle himself spread the blame in saying that “the country, the politicians, the citizens all lost their way.”
And now Shawn Portmann readies himself for prison.
“This is a message case,” said Jarvis. “You want people in the industry to know there are consequences for certain activities. If you get a sentence of more than a decade, that’s a message – and the message is: There’s a cost of doing business when you do it this way.”
“You’re going to lose your liberty,” said Bortner.C.R. Roberts: 253-597-8535 firstname.lastname@example.org