Connecticut seeks arrest of Mortgage Lenders executive

NEW YORK (Reuters) - Connecticut said on Monday it is seeking the arrest of former Mortgage Lenders Network USA Inc. President Mitchell Heffernan for failing to pay employees as the subprime lender sank into bankruptcy.

Any charges would be the first against a former top executive of a large U.S. subprime lender since delinquencies and defaults began rising in recent months.

The Connecticut Department of Labor applied for an arrest warrant charging Heffernan with failing to pay about $3 million to 61 employees of Middletown-based Mortgage Lenders, department spokeswoman Nancy Steffens said.

Most of the amounts owed relate to sales commissions, ranging from $5,000 to $300,000 per person, she said.

"The company declared bankruptcy, which requires us to go through a criminal court to get former employees their money," Steffens said. "Our real purpose is to get people money owed to them. If we can work out a settlement without criminal charges, that's great."

Calls and e-mails to Mortgage Lenders from Reuters were not immediately returned. Heffernan could also not immediately be reached. Mark Miele, an inspector in the office of state attorney Timothy Liston, who works in Middletown, declined to comment.

Mortgage Lenders had employed 1,800 people nationwide, including 950 in Connecticut, before filing for Chapter 11 protection from creditors on February 5.

The company had been the 15th-largest U.S. lender to people with poor credit histories. It expects to liquidate this year.

More than two dozen subprime lenders have quit the industry in the last year, and at least four large lenders have sought bankruptcy protection.

Another subprime lender, Irvine, California's New Century Financial Corp., faces an investigation by federal prosecutors in its home state over its accounting as well as trading in its stock.

New Century had been the largest independent subprime lender before shutting down its loan operations this month.

For more about the subprime mortgage crisis, see