People who sank their savings into Metropolitan Mortgage & Securities before the Spokane-based financial conglomerate slid into scandal...

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People who sank their savings into Metropolitan Mortgage & Securities before the Spokane-based financial conglomerate slid into scandal and bankruptcy 18 months ago might eventually retrieve up to a third of their money — if they can wait until late next year.


But for dozens of Met investors, the case was over long ago.


By selling their claims to specialized buyers of bankruptcy debt, those investors traded the uncertainty of a future settlement for the sure thing of a quick payout — at a substantial discount.


Last September, when Mark Poeschl of Seattle sold his $17,500 claim to New York investment firm Argo Partners, no one knew how much investors in Met and sister company Summit Securities might get back.


“I basically had written the whole thing off,” said Poeschl, 45, who had invested part of his IRA in Met’s debt securities. “As far as I could tell, the whole thing was a pyramid scheme.”


He got about 10 or 12 cents on the dollar, Poeschl recalls, which seemed “better than a sharp stick in the eye.”


Since then, however, the prospects for Met and Summit investors recovering a sizable chunk of their money have brightened considerably.



The Met/Summit collapse


Metropolitan Mortgage & Securities: More than 10,000 investors hold $357.2 million in debt securities; thousands more hold $102 million in preferred stock.


Summit Securities: 6,600 investors hold $112.8 million in debt securities; thousands more hold $29 million in preferred stock.


Recovery for debt holders: Currently estimated to be between 19 and 34 cents on the dollar for Met investors, 11 to 29 cents on the dollar for Summit investors.


Recovery for preferred stockholders: None.


Source: Met/Summit 2nd amended reorganization plan


The two intertwined companies were both controlled by Spokane businessman C. Paul Sandifur Jr. A court-appointed examiner found them to be riddled with overvalued real estate, sloppy bookkeeping and suspicious transactions whose sole purpose seemed to be generating paper profits.


Since the bankruptcy filing, new managers have been selling off Met and Summit’s extensive real-estate portfolios and other assets.


The latest reorganization plan estimates Met investors may get as much as $68.8 million, or 19 cents on the dollar. Summit’s creditors could recover $17.6 million, or 11 cents on the dollar.


In addition, the plan guesses that Met and Summit could gain an additional $85.6 million from the pending sale of their insurance subsidiaries, lawsuits against their former accountants and other sources.


That would boost the return to creditors to 34 cents on the dollar for Met, and 29 cents on the dollar for Summit.



Argo most active buyer



Argo, by far the most active buyer of Met/Summit bankruptcy claims, currently is offering Met creditors 13 cents on the dollar for their claims. A year ago, when prospects for a sizable recovery looked bleaker, Argo was offering a nickel.


Argo owns claims with a face value of more than $3.1 million, making it one of the largest single creditors in the case, according to a Seattle Times review of filings in the case.


Argo, founded in 1992, is one of a dozen or so firms that scour the nation’s bankruptcy courts, looking to trade cash today for the prospect of a larger recovery down the road.


At least three other firms — Seaport Group and Midtown Claims, both of New York, and San Diego-based Debt Acquisition Co. of America — collectively have bought more than $845,000 in Met/Summit claims.


Matthew Gold, Argo senior vice president, said firms like his typically buy large claims from suppliers and other commercial creditors. In the Met/Summit case, they are dealing with thousands of relatively small claims held by individuals.


Even if the plan’s more optimistic projections come to pass, creditors won’t see all the money immediately. Assuming the reorganization plan is approved by Aug. 15, the first checks wouldn’t be cut until November.


Most of the money wouldn’t be paid out until late 2006.


“You might get 19 cents eventually, but is that better than getting 13 cents today?” Gold asked. “Bankruptcy can take years, and this one is not close to over.”


To answer Gold’s question, Met/Summit creditors must ask several of their own: How bad do I need cash now? Am I prepared to wait more than a year for my full payout? And, in a case with many elderly creditors (several of whom already died), how’s my health?


Poeschl, for one, has no regrets.


“For me, I got [the payout] all in one go, it was simple and I didn’t have to worry about it anymore,” he said. When told the current estimated recovery for Met creditors was 19 cents, Poeschl’s response was “More power to ’em.”


But not everyone is so happy. Dorothy Bean, a 68-year-old Shoreline resident, said that when she first started getting offer letters from claims-buying firms last year, she consulted a lawyer who told her she was unlikely to recoup anything through the bankruptcy process. She sold her $11,800 claim to Argo for 8 cents on the dollar, she recalls.


“Would I do it again? No,” she said recently. To anyone thinking of selling their claim, she said, “I’d just tell them to hang onto it until the final.”


Peter Rohfleisch of St. Ignatius, Mont., has collected a file full of offer letters. One of the most recent, from Midtown Claim, offers 15 cents on the dollar for his Met claim. But Rohfleisch, at 62 an avid fisherman, isn’t taking the bait.


“When I get these offers, I figure these guys know more than I do, and if they’re offering 15 percent, you have to assume they’re expecting to get more eventually,” he said. “If I don’t take their offer, maybe the ‘more’ will go to me instead of them.”


Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com