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                                                                                                       COLUMBIA       •   SOUTH CAROLINA




         SUNDAY BUSINESS                                                                               APRIL 6, 2003 • SECTION F




  S.C.
Economy
 Watch
                                               HomeGold’s luster fades
     THIS WEEK

       WHAT S.C.
                                                after millions in losses
       LAWYERS                                                                                                                                                                                                                                                                                         $280 million in debt
         EARN                                                                                                                                                                                                                                                                                          and key assets gone,
   Lawyers rank among the                                                                                                                                                                                                                                                                                company looks to
 highest-paid professionals in
   South Carolina, but their
                                                                                                                                                                                                                                                                                                        survive bankruptcy
    pay was lower than the
   national average in 2001.                                                                                                                                                                                                                                                                                By R. KEVIN DIETRICH
                                                                                                                                                                                                                                                                                                             and CHRIS ROBERTS
               Number            Avg.                                                                                                                                                                                                                                                                                Staff Writers
 State        lawyers*          salary
                                                                                                                                                                                                                                                                                                           HomeGold Financial Inc.
 1. Calif.          58.3 $104,900                                                                                                                                                                                                                                                                      thrived on people who couldn’t pay
 2. D.C.            22.6 $102,780                                                                                                                                                                                                                                                                      their bills.
                                                                                                                                                                                                                                                                                                           Today, it can’t pay its bills.
 3. Utah             3.2 $102,340                                                                                                                                                                                                                                                                          The Columbia company, one of
 Others in the middle                                                                                                                                                                                                                                                                                  the nation’s 15 largest “sub-prime”
                                                                                                                                                                                                                                                                                                       lenders, filed for bankruptcy pro-
 17. S.C.            5.1     $86,670                                                                                                                                                                                                                                                                   tection last week.
 22. N.C.            8.5     $84,650                                                                                                                                                                                                                                                                       Since the 1990s, bankruptcy has
                                                                                                                                                                                                                                                                                                       claimed nearly three-fifths of the
 26. Georgia 12.0            $82,380                                                                                                                                                                                                                                                                   publicly traded companies that
 Bottom three                                                                                                                                                                                                                                                                                          made high-interest loans to home-
                                                                                                                                                                                                                                                                                                       owners with marginal credit ratings.
 49. S.D.            0.7     $59,240                                                                                                                                                                                                                                                                       Most of those companies saw
 50. N.D.            0.6     $58,840                                                                                                                                                                                                                                                                   their profits pinched by rising fore-
                                                                                                                                                                                                                                                                                                       closure rates and lower interest
 51. Wyo.            0.7     $57,710                                                                                                                                                                                                                                                                   rates.
 U.S. avg.          490 $69,030                                                                                                                                                                                                                                                                            “This has happened with a lot of
                                                                                                                                                                                                                                                                                                       subprime lenders,” Columbia bank-
 * Thousands of lawyers                                                                                                                                                                                                                                                                                ruptcy attorney Gene Trotter said.
 SOURCE: U.S. Bureau of Labor Statistics                                                                                                                                                                                                                                                               “A lot of them end up in liquidation
                                                                                                                                                                                                                                                                                                       if they can’t come up with a viable
                                                                                                                                                                                                                                                                                                       plan” to reorganize their debt.
    Roughly 330 students who sur-                                                                                                                                                                                                                                                                          But HomeGold’s story is dif-
vived three years of chasing paper                                                                                                                                                                                                                                                                     ferent. Its demise could hurt thou-
will graduate next month from                                                                                                                                                                                                                                                                          sands of S.C. residents who in-
USC’s law school.                                                                                                                                                                                                                                                                                      vested millions through one of the
    If they’re like last year’s col-                                                                                                                                                                      CHRISTOPHER ALUKA BERRY/SPECIAL TO THE STATE
                                                                                                                                                                                                                                                                                                       company’s subsidiaries.
lection of newly minted lawyers,             Columbia-based HomeGold Financial Inc. filed for bankruptcy protection, the latest of many subprime lenders to do so.                                                                                                                                         And HomeGold’s story is com-
they’ll start work at an average an-                                                                                                                                                                                                                                                                   plicated by its recent whirlwind of
nual salary of $52,000, according                                                                                                                                                                                                                                                                      management. In an effort to survive,
to law dean John E. Montgomery’s
message to prospective students
                                            Carolina Investors held                                                                    HOW HOMEGOLD TURNED
                                                                                                                                             TO DUST
                                                                                                                                                                                                                                                                                                       HomeGold ceded control to a chief
                                                                                                                                                                                                                                                                                                       executive officer who was paid mil-
                                                                                                                                                                                                                                                                                                       lions of dollars while the company
on the Web.
    That’s nearly double the annual
salary of the average S.C. resident
with a full-time job — regardless of
                                           community’s life savings                                                          Its stock price plunged…
                                                                                                                              $20                                                                         …as profits became losses…
                                                                                                                                                                                                                                                                                                       continued to lose tens of millions.
                                                                                                                                                                                                                                                                                                           Then, HomeGold loaned its CEO
                                                                                                                                                                                                                                                                                                       the money that he used to buy the
                                                                                                                              $18                                                                                             Year                            Net profit/loss                          company’s major assets and leave.
the job type or level of experience.            By JOE GUY COLLIER                   they were my friends.”
                                                                                                                                                                                                                              1995                                 $657,000                                Between 2000 and 2002, six
    And their income will keep ris-                     Staff Writer                    About 8,000 investors, many of        $16                                                                                             1996                              $10,095,000                            chief financial officers, two chief
ing. The average lawyer in South                                                     them from Pickens, Anderson and
                                                                                                                              $14                                                                                             1997                              $11,253,000                            lawyers and the company’s outside
Carolina earned $86,670 during             PICKENS — Mellie Whitlock, a 90-          Greenville counties, have more
                                                                                                                                                                                                                              1998                             -$57,745,000                            accounting firm came and went.
2001, according to the U.S. Bureau         year-old Pickens County retiree,          than $275 million in accounts with       $12                                                                                             1999                               $1,815,000                                Today, HomeGold is reeling
of Labor Statistics survey. (If            has lost faith in Carolina Investors      Carolina Investors.
                                                                                                                              $10                                                                                             2000                             -$29,812,000                            from:
you’re keeping up with pay by the          Inc. She fears she may have lost             The company sold investment
                                                                                                                                                                                                                              2001                             -$73,599,000                            ■þInstability through financial
hour, as lawyers love to do, it’s          her money, too.                           certificates that promised annual         $8                                                                                             2002*                            -$41,966,000                            losses and a tumbling stock price.
$41.67 per hour.)                              Whitlock, a former shop owner         returns of 6 percent to 8 percent.                                                                                                       •Through 11 months
    Only chief executive officers          who still ballroom dances once a             Several investors said they            $6                                                                                                                                                                          The company has lost at least
and a variety of medical-related oc-       week, purchased more than                 knew the money wasn’t insured                                                                                                                                                             0.6                     $200 million since 1998, when its
                                                                                                                               $4                                                                                                                                             0.07
cupations have higher average              $500,000 worth of notes and bonds         but the company’s close commu-                                                                                                                                                           cents
                                                                                                                                                                                                                                                                               cent                    financial slide began, according to
salaries in South Carolina.                from the company.                         nity ties made them feel safe.            $2                                                                                                                                                                      its filings with the federal Securi-
    If those graduates stay in the             But Carolina Investors closed            Carolina Investors’ main                                                                                                                                                                                       ties and Exchange Commission.
                                                                                                                               $0                                                                                                                                                                      Three-fourths of the losses came af-
state and pass the bar exam (a three-      its offices two weeks ago. Its par-       branch was located in a stately
                                                                                                                                                                                                                                                                                            4/4/03
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day test given in July and February),      ent firm, HomeGold Financial Inc.,        brick building in downtown Pick-                                                                                                                                                                                  ter 2000, when Ronald J. Sheppard
they will join more than 5,000             has filed for Chapter 11 bank-            ens. The company threw summer                                                                                                                                                                                     took over as chief executive officer.
lawyers in the state. (There’s also an     ruptcy protection.                        barbecues at the nearby Easley                                                                                                                                                                                        HomeGold’s stock is virtually
additional 500 or so judges and mag-           Whitlock said she’s not sure          Armory. Last Christmas, it sent in-                                                                                                                                                                               worthless. At its 1996 peak, one
                                           what to think. Carolina Investors,
                                                                                                                             …but the new boss prospered.                                                                                                                                              share cost $20. On Friday, $20
istrates in South Carolina, although                                                 vestors Winn Dixie gift certificates.
not all magistrates are lawyers.)          which started in Pickens County,             Pickens residents now are re-        $208,731: What John M. Sterling earned in 1999,                                                                                                                           would have bought 3,333 shares.
    It adds up to one lawyer for every     has been a part of the community          ferring to Carolina Investors as                  his last full year as CEO.                                                                                                                                          HomeGold’s March 31 bank-
385 full-time workers in South Car-        for 40 years.                             their Enron, referring to the scan-                                                                                                                                                                               ruptcy filing listed more than $280
                                                                                                                             $1,358,758: What Ronald J. Sheppard earned in 2001,
olina. Nationally, there’s one lawyer          “I know the people in there per-
for every 300 working Americans.           sonally,” Whitlock said. “I thought                                                           his first full year as CEO.
                                                                                      SEE INVESTORS PAGE F3                  SOURCE: Securities and Exchange Commission filings                                                                    STEVEN A. LONG/THE STATE                              SEE HOMEGOLD PAGE F3
    Washington, D.C., has the
biggest concentration of lawyers
by far, about one per 14 full-time
workers. New York was tops
among states, at one lawyer per
158 workers. Indiana was last,
with one lawyer per 622 workers.
                                                  Small town sheds few tears over Kmart’s closing
    As is the case in many occupa-                                                          By CLARE RAMSEY                      While there are regrets over
tions, South Carolina’s lawyers              WA L T E R B O R O                                  Staff Writer                the loss of about 80 jobs, though,
earn less than the national aver-                                                                                            the buzz from city leaders and
age. The average lawyer nation-            The seat of Colleton County is            WALTERBORO — Bargain hunters            residents about what may replace
wide earned $91,920 during 2001                  losing its Kmart.                   have picked over much of the mer-       the store has all but drowned out
— or $42.67 an hour.                         BAMBERG
                                                                                     chandise at the Kmart here, but         murmurs about the Big K’s clos-
    The average pay for an S.C.                                   95                 what’s left in the store is for sale    ing.
                                              COUNTY
lawyer ranked 17th nationally. It                                      DORCHESTER    — even the shelves themselves.              Those who are marking
                                                                         COUNTY
was nearly $20,000 a year less than                                                      The Lowcountry store is lock-       Kmart’s passing are doing so in
places it pays the most to be a                      COLLETON                        ing its doors for good next week.       search of bargains, like the $4
lawyer — in California and Wash-                      COUNTY                         It is one of 326 nationwide the be-     shirts and discounted lawn fertil-
ington, D.C.                                                      Walterboro         leaguered retailer is closing in its    izer Louise Dufour, 49, packed up
    Wyoming was home to the low-                                                     efforts to climb out of the red.        to take home to Beaufort earlier
est-paid lawyers, at $57,710 a year.        HAMPTON                                      The chain’s Columbia stores         this week.
North Dakota and South Dakota                COUNTY                                  were spared, but Kmarts in Aiken            “I can’t wait to go home and fig-
were the other two states where                                                      and Spartanburg are also shutting       ure out how much I saved,” she said.
lawyers averaged less than $60,000                                                   down this month. Six other S.C.             To others, the Kmart’s closing
a year.                                                                              stores closed last year in a prior      is a non-event.
                                                      Enlarged
COMING MONDAY in the Columbia                         area                           round of closings.                          “It doesn’t really matter be-
Business Journal: How it’s easy in                               BEAUFORT                In Walterboro, Kmart’s depar-       cause we’ve got Wal-Mart here,”
                                                                  COUNTY
Columbia to find a lawyer.                      95
                                                                                     ture after more than 20 years           long-time resident Laurens Hall                                                                                                                                         CHRISTOPHER ALUKA BERRY/SPECIAL TO THE STATE
                                                                  Beaufort   N       would seem like a big blow to a                                                                                                     Jessica Price and her daughter, Madison, 2, leave the
                     — Chris Roberts                                     THE STATE   town of about 6,000.                        SEE KMART PAGE F4                                                                          Walterboro Kmart after shopping for bargains.



                                                                                                                                                   Groucho's restaurants are

                        Monday                                                                                                                     popping up all over the Midlands
                                                                                                                                                   and as far away as Charleston
                                                                                                                                                   and Charlotte. Read how
                                                                                                                                                   franchising is allowing the small
    C O LU M B I A B U S I N E S S J O U R N A L                                                                                                   company to spread its wings.



                                                            INVESTING F2                         •     CALENDAR F4                                •               ACHIEVEMENTS F4
                                                                 Page F3 FULL                                   CYAN              MAGENTA                       YELLOW                  BLACK


WWW.THESTATE.COM                                                                                 THE STATE, COLUMBIA, SOUTH CAROLINA                                                                             SUNDAY, APRIL 6, 2003        F3

                                                                                               SUNDAY BUSINESS

             How HomeGold landed in bankruptcy court
                                          people access to loans. HomeGold’s                                                board, his pay rose while losses         have lost the equity in their home.”    was to sell its retail mortgage divi-
HOMEGOLD FROM PAGE F1                     parent, Emergent, earned a com-                REVOLVING                          mounted.                                     Williams says he thinks two-        sion, according to SEC filings. That
                                          bined $21 million in 1996 and 1997,                                                   Between January and June             third of the loans HomeGold made        division — which generated most
million in debt, almost all owed to       and its work force grew to more
                                                                                           DOOR                             2001, HomeGold lost $17.3 million.       during the 18 months he was with        of HomeGold’s business — was
its Carolina Investors Inc. subsidiary.   than 1,000 employees nationwide.               HomeGold has had six               On June 6, Sheppard’s base salary        the company were “unscrupulous.’’       worth between $135 million and
■þLawsuits that question how the             State residents, meanwhile,                chief financial officers in         rose to $600,000. The company’s              Webb, who moved from Lex-           $170 million, according to outside
company dealt with its mortgage           continued to put millions of dol-                     three years:                board of directors said he deserved      ington to California after quitting     appraisers hired by the company.
customers.                                lars into Carolina Investors Inc.,                                                it because, among other things, the      HomeGold in 2000, said she feels            In August 2002, the company
                                                                                     Sept. 29, 2000 — Larry Gos-
    Several lawsuits claimed the          because it paid a better return than                                              company’s mortgage volume                bad about what she did there.           said it had a buyer. The deal fell
                                                                                     ness replaces Kevin J. Mast.
company engaged in unfair lending         a bank’s certificate of deposit. Car-                                             nearly tripled in 18 months.                 “There wasn’t one loan that I       apart, however.
practices that preyed on poor peo-        olina Investors sent the profits           Nov. 30, 2000 — Rhonda B.                  By the end of 2001, HomeGold         did where I felt like I really helped       Another buyer emerged —
ple. HomeGold has denied accusa-          back to HomeGold, which used it            Johnson replaces Gosness.              lost $73.4 million.                      anybody,’’ she said.                    Sheppard.
tions in court documents, but in No-      to make more loans.                        She resigns March 26, 2001.                The losses were so deep that El-         Similar claims were made                He created Emmco, a company
vember it agreed to pay $10 million                                                  May 8, 2001 — HomeGold                 liott Davis, the state’s largest ac-     against HomeGold and other              that bought most of HomeGold’s
to settle a lawsuit in North Carolina.        BAD TIMES ARRIVE                       president Forrest E. Ferrell           counting company and Home-               lenders in North Carolina. Home-        mortgage business. He paid
Lawsuits are pending in other states.         In 1998, the troubles began.           takes over until Kevin G. Mar-         Gold’s external auditor, waved a         Gold agreed in November to set-         $135,000 cash down and promised
■þFurther scrutiny at home.               Emergent’s stock price plunged 96          tin takes the job. He resigns          red flag called “ongoing concern.”       tle a series of lawsuits for $10 mil-   half of Emmco’s profits, up to $170
    The company is the target of          percent and the company lost $58           Aug. 29, 2002.                         Elliott Davis in April 2002 said it      lion without admitting that it did      million, SEC filings show.
two lawsuits by S.C. residents who        million.                                   Aug. 29, 2002 — Karen A.               had “substantial doubt” whether          anything wrong.                             At the same time, HomeGold
put millions into Carolina Investors          The key problem was falling in-        Miller is named chief financial        HomeGold could stay alive, ac-               Also last year, HomeGold paid       gave Sheppard a five-year, $8.4
Inc., the HomeGold subsidiary that        terest rates, which cut into earn-         officer, a job she still holds.        cording to SEC filings.                  $5,000 to settle 10 complaints that     million loan to buy HomeGold’s
was a key source of its capital.          ings. Meanwhile, the company’s                                                        Company officials disputed El-       it called residents on Kentucky’s       $3.4 million office in Lexington.
    The state attorney general’s of-      loan volume dropped 40 percent                                                    liott Davis’ findings. After the two     “do not call” list for telemarketers.       The sale, which closed Dec. 31,
fice said it will look at the business    between 1997 and 1998.                    Gold and a very prosperous future.”     quarreled over several issues — in-      The company didn’t admit to guilt,      didn’t leave much left for Home-
practices of both HomeGold and                Emergent fired 28 percent of its          It was prosperous — for Shep-       cluding HomeGold’s survival              said Brian Wright of the Kentucky       Gold and the 100-plus workers
Carolina Investors, whose lawyer          work force, quit the auto loan busi-      pard.                                   chances — Elliott Davis withdrew         attorney general’s office, but it       who remained.
said it will file for bankruptcy pro-     ness and changed its name to                  In exchange for his company,        its services.                            agreed to pay $25,000 per violation         HomeGold kept five retail
tection this week.                        HomeGold Financial Inc.                   HomeGold gave Sheppard:                                                          from then on.                           mortgage branches, a small whole-
    Most of the key players — in-             HomeGold seemed to stabilize          ■þ40 percent of HomeGold’s com-            LENDING PRACTICES                                                             sale loan division, and plans to in-
cluding Sheppard, HomeGold’s              in 1999, turning a $1.8 million profit.   mon stock. His 6.1 million shares           During this time, some of the              THE END GAME                      vest in a payday lending company
current management and Carolina               But the company remained in           were worth $7.2 million on Feb. 29,     company’s business practices were            As HomeGold continued to he-        called FlexCheck.
Investors Chairman Earle Morris           deep financial straits, with loan         2000, the day the merger was com-       landing HomeGold in court.               morrhage money during 2002,                 HomeGold also kept Carolina
Jr. — declined interview requests         volume falling that year to one-fifth     pleted. He also received options to         Several former employees in-         money kept coming into its Car-         Investors.
by The State last week. The story         of its 1997 levels.                       buy another 825,000 shares of stock.    terviewed for this story said Home-      olina Investors subsidiary. With the        On March 24, Carolina In-
of HomeGold’s fall can be told                As the profits shrank, Home-          ■þThe job of chief executive offi-      Gold didn’t keep its customers’          stock market falling and banks of-      vestors didn’t open its office in
through the company’s SEC filings,        Gold found it harder to pay what          cer at an annual pay of $250,000        best interests in mind. They said        fering insured deposits at 4 per-       Pickens County. A day later, Car-
press releases and interviews with        it owed Carolina Investors.               plus 2 percent of profits.              HomeGold’s practices included:           cent or less, Carolina Investors ad-    olina Investors chairman Earle
former employees and managers.                “If HomeGold’s performance            ■þControl of the board of directors.    ■þCharging high fees to cus-             vertised returns of 8 percent.          Morris Jr., a former state comp-
                                          could be improved, it would mean          He picked four of seven board           tomers.                                      One company official said he        troller general, stood outside the
     HOW IT STARTED                       more money would get back to              members.                                    “We would try for as much in         was worried HomeGold didn’t have        office and told several hundred
    HomeGold’s beginnings are             Carolina Investors,’’ said Jan            ■þLoans of $5.7 million. Sheppard       origination fees as we could get,’’      the money to pay back investors.        people: “Nobody’s lost anything.”
with Emergent Group Inc., a               Sirota, a former member of the            owed $1.7 million to his company        said Shanna Webb, a former loan              Chief financial officer Kevin           Four business days later,
Greenville company in the trans-          company’s board of directors.             and wanted to borrow $4 million         officer who said she left Home-          Martin resigned in late August          HomeGold filed for bankruptcy.
portation business.                                                                 more. To close the deal, HomeGold       Gold after 7½ months because of          2002, after a little more than a year       At the top of its creditor list is
    New management took over                 CHANGE AT THE TOP                      lent the money at 7.5 percent —         her concerns about the company.          on the job. In a letter to board        Carolina Investors, which is
and moved into the loan business              HomeGold turned to Ronald J.          backed by the stock it gave to          “We’d throw a big number out             members, he said HomeGold’s             owned $275 million and said it ex-
in 1991 by purchasing Carolina In-        Sheppard, who controlled a Lex-           Sheppard.                               there and see if they’d bite.’’          poor financial condition meant it       pects to file for bankruptcy pro-
vestors Inc.                              ington-based company called               ■þA way to pay off the loan.                Jim Williams, another former         shouldn’t take any more money           tection this week. Since the bank-
    Started in Pickens County in          HomeSense Financial Corp.                 HomeGold created a new stock cat-       HomeGold loan officer, said com-         from Carolina Investors.                ruptcy, HomeGold and its
1963, Carolina Investors made loans           Both companies were in simi-          egory for Sheppard. The 11 million      pany officials ordered anyone with           Martin, who now works for an-       subsidiary have been criticized by
using money from bonds and notes          lar lines of work but Sheppard’s          shares of preferred stock provided      less than stellar credit — lower         other Columbia-area mortgage com-       S.C. lawmakers and are the target
it sold to South Carolina investors.      privately held company was doing          no voting power, but they guaran-       than an “A’’ rating — to be              pany, declined to comment further.      of two Upstate lawsuits filed by
    By 1994 Emergent had sold or          well, earning $5.5 million from           teed Sheppard $880,000 in annual        charged as much as possible.                 Robert Philpott, who was then       angry investors.
closed all its non-financial busi-        1995 to 1999.                             dividends through 2004, when the            “If the customer was a ‘B’ or        a board member, called Martin’s             Customers of Carolina Investors
nesses. A year later, it opened the           HomeGold officials believed the       dividends would rise to $1.1 million.   lower, they were probably getting        letter “a friendly opinion, and it      will be unsecured creditors in the
HomeGold loan subsidiary spe-             company could recover by teaming              John M. Sterling Jr., one of        overcharged $3,000-$4,000 on a           was taken into consideration.”          bankruptcy filings. That gives them
cializing in “non-prime” mortgages        with Sheppard, said Sirota, a Florida     HomeGold’s founders and a board         $100,000 loan,’’ he said.                    He said HomeGold’s officers         “very little leverage in cases like
— home equity loans to people             investment banker who helped en-          member until last month, said           ■þTargeting the less-educated.           thought the losses could be turned      this,” said Steven Mann, a USC fi-
with marginal credit ratings. The         gineer the merger and remained on         there was nothing out of the ordi-          “We wanted the dumbest cus-          around, so it kept using revenues       nance professor.
target market was property own-           the company’s board until 2001.           nary in the 2000 deal that brought      tomers we could find,” Webb said.        from Carolina Investors.                    “These folks, at best, will get a
ers who had bad credit and needed             “HomeGold was looking for a           Sheppard into the company or the            She said some people who                 “We thought there was hope,’’       fraction of their investment back.”
money for credit card debts, col-         white knight, and they thought it         subsequent sale of HomeGold’s           turned to the company for debt           said Philpott, who resigned from
lege loans or house repairs. It used      was Ronnie Sheppard,’’ he said.           core assets to Sheppard in 2002.        consolidation loans often ended up       the board earlier this year.                  Contact Dietrich at
telemarketers and direct mailings             HomeGold, with $188 million in            “I don’t think there was any-       worse off than when they started.            The company concluded an-            kdietrich@thestate.com or at
to find customers.                        total assets, had plenty of workers       thing unusual with either deal,’’ he        People looking for a loan to         other way to turn the tide of red ink           (803) 771-8339.
    The company made money by             and large credit lines available.         said, declining further comment.        consolidate a few thousand dollars
charging higher-than-usual inter-         HomeSense, with $53 million in as-                                                of debt often were talked into re-
est rates, which people with mar-         sets, was selling nearly as many
                                                                                          LOSSES DEEPEN                     financing their homes, she said.
ginal credit histories must pay. The      loans and figured to sell more if it          Despite the jump-start, Home-           “After we were done with them,
risk is that those borrowers are          added HomeGold’s resources.In the         Gold lost $30 million in 2000.          they had a much higher interest rate
more likely to default.                   Jan. 31, 2000, press release an-              Sheppard was paid $629,541 that     on their mortgage and maybe only
    HomeGold’s business grew dra-         nouncing the merger, Sheppard             year — triple what Sterling received    a couple hundred dollars in their
matically as federal lending re-          said: “Our joint efforts can con-         in 1999, when he cut his pay in half.   pockets as a result of the refinanc-
strictions were eased, giving more        tribute to the rebuilding of Home-            With Sheppard running the           ing,’’ she said. “And they would


                    HOMEGOLD AND CAROLINA INVESTORS: KEY EVENTS
 1991: Greenville-based Emer-             its small-business loan division.         Dec. 31, 2000: HomeGold                 mortgage unit. The company
 gent Group Inc. goes into the            Dec. 31, 1998: Stock closes               closes year with $29.8 million loss     doesn’t say Sheppard is the pro-
 loan business after buying com-          at 50 cents a share, down 96              but says it expects to turn oper-       posed buyer.
 panies that include Carolina In-         percent during the year.                  ating profit in second half of 2001.
 vestors Inc., a small mortgage                                                                                             Dec. 31, 2002: Sheppard’s
                                          Jan. 31, 2000: HomeGold says              Dec. 31, 2001: HomeGold                 company completes purchase.
 company opened in 1963.                                                            closes year with $73.6 million
                                          it will buy HomseSense Finan-                                                     He quits HomeGold’s board.
 1995: The company made                   cial Corp., a privately held com-         loss.
 $250 million in loans, quadru-                                                                                             Feb. 25: Three months after say-
                                          pany based in Lexington owned             April 2002: Accounting firm El-
 pling its business in three years.       mostly by Ronald J. Sheppard.             liott Davis says it’s not sure          ing it would “vigorously contest”
 March 1996: Its stock hits all-                                                    HomeGold can remain a “going            a North Carolina class-action law-
                                          February 2000: Nasdaq drops                                                       suit that claimed it and other lend-
 time high of $20 a share.                HomeGold stock to over-the-               concern.” HomeGold hires an-
                                                                                    other external auditor after Elliott    ing companies used unfair tactics,
 January 1998: Earle M. Morris            counter status, saying the deal
                                                                                    “declines to stand as auditors.”        HomeGold agrees to pay $10 mil-
 retires as state comptroller,            created a “change of control” in
 named Carolina Investors chair-          the company.                              May 2002: HomeGold says it’s            lion to settle the suit.
 man.                                     May 9, 2000: With merger                  considering a sale of its retail        March 31: HomeGold Financial
 Summer 1998: Emergent                    complete, HomeGold moves to               mortgage unit, which provides           and its main subsidiary seek
 changes its name to HomeGold             Lexington and quits the whole-            the bulk of its revenue.                bankruptcy protection, saying it
 Financial Inc. and lays off hun-         sale lending business to focus            Sept. 3, 2002: HomeGold                 can’t make payments to its Car-
 dreds of workers when it sells           on home mortgages.                        says it has a bid for its retail        olina Investors Inc. subsidiary.



      Recovering money                                                              INVESTORS                               in hopes they still have value.
                                                                                                                                “All we’ve got is a piece of pa-
                                                                                                                            per,” she said.
     expected to be tough                                                           FROM PAGE F1

                                                                                    dal-ridden Houston firm. They place
                                                                                    much of the fault on HomeGold, a
                                                                                                                                Whitlock has stacks of Carolina
                                                                                                                            Investors certificates. More than
                                                                                                                            35 years ago, she started making
         By KEN KNELLY                    what the outcome will be. Only            Columbia-based mortgage firm that       investments with a few hundred
             Staff Writer                 God knows. We’re going to take            bought Carolina Investors in 1991.      dollars. Her investments grew with
                                          every step.”                                  W.T. Garren,                        time and interest.
    Those trying to help Carolina             HomeGold continues to collect         a lifelong Pick-                            Whitlock said a top executive
Investors’ account holders get their      money from borrowers, Gaddy               ens County resi-                        at Carolina Investors called her last
money back have their work cut            said, so there is a flow of funds.        dent, said the sit-                     weekend to tell her some of the
out for them.                             How much will become clear as             uation is worse                         certificates would be honored. The
    The Pickens County company            the court and bankruptcy cases            than Enron be-                          executive also told her account
is owed an estimated $275 million         move forward.                             cause the impact                        holders soon would receive a let-
by its parent, HomeGold Financial             Meanwhile, authorities are in-        is concentrated                         ter of explanation, she said.
of Columbia, which is seeking fed-        vestigating the Carolina Investors        so heavily in one                           “Nothing, nothing,” Whitlock
eral bankruptcy protection.               transactions along with parent            area. The county,                       said as she checked her mail Fri-
                                                                                                            Garren
    Carolina Investors is expected        HomeGold. Compliance with civil           with its mix of in-                     day. “He told me I’d get something
to follow suit this week, an attor-       securities statutes and criminal          dustrial plants                         by the middle of the week.”
ney for the company said.                 codes may be under review.                and farms, has 110,000 residents.           Officials with Carolina In-
    While the company’s creditors             Officials declined to outline             Garren, 74, invested almost         vestors could not be reached for
line up for payment, more than            specifics.                                $50,000, his entire life savings, in    comment.
8,000 investors worry their money             “Nothing is ruled out,” said          Carolina Investors. A retired tex-          Whitlock was planning to use
is lost. Most live in the Upstate         Trey Walker, a spokesman for the          tile worker who lives in Easley,        the interest from the investments
where Carolina Investors is based.        S.C. attorney general’s office.           Garren was going to use the             to pay for her care if she needed
    Sue Gaddy, a Greenville attor-            The accounts were marketed to         money if he needed to move to a         to move to a retirement home.
ney, has filed one of two lawsuits        South Carolina residents, as Car-         retirement home.                            Whitlock said she has other in-
against the companies on behalf           olina Investors was regulated un-             “I don’t know what I’m going        vestments. Some retirees were
of investors. It seeks class-action       der state securities laws rather          to do,” Garren said. “If I could get    counting on Carolina Investors as
status, the return of funds plus          than federal ones.                        half of my money back, I would be       their only source of retirement in-
other damages.                                Companies can choose state            tickled to death.”                      come, she said.
    Will investors get back every         regulation under certain circum-              Delores Donehue, a 72-year-old          Carolina Investors should pay off
penny?                                    stances. Advantages can include           Greenville retiree, is skeptical        those account holders first, she said.
    “That’s very doubtful,” said          fewer filings and less stringent          she’ll get back much of her money.          “Leave me last,” Whitlock said.
Gaddy, who invested $10,000 with          oversight.                                Donehue, also a former textile          “I want my money but I would wait
the company.                                                                        worker, invested about $42,000.         to be last.”
    “I would not be undertaking                  Contact Knelly at                      Donehue and others are holding
this case if I didn’t have confidence          kknelly@thestate.com                 on to the eagle-emblazoned certifi-        Reach Collier at (803) 771-
(in some return). No one knows                  or at (803) 771-8427.               cates issued by Carolina Investors       8307 or jcollier@thestate.com.

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