Hirsch isn't licensed to raise investment funds or sell securities in Arizona, according to the Arizona Corporation Commission. His company, Radical Bunny, came into possession of about $200 million from investors, according to bankruptcy court filings.

Radical Bunny investors — many of them gas station and convenience store owners from India — mortgaged their homes and raided their kids' college accounts, even their retirement funds, to contribute about one-fifth of Mortgages Ltd.'s total capital, or roughly $200 million.

Hirsch did not return phone calls for this or other stories. He took out a $4 million home-equity loan from a local bank on his Paradise Valley home in November 2007 — about the same time Coles was growing desperate for cash. The home is for sale now.

Pastor Stacy Lee at his church, Covenant Christian Center, in Peoria.
Pastor Stacy Lee at his church, Covenant Christian Center, in Peoria.
For years, Mortgages Ltd. investors received monthly checks with pay stubs like this one. (Click here for more details.) The interest payments halted in June, and now investors just hope to recoup their capital.
For years, Mortgages Ltd. investors received monthly checks with pay stubs like this one. (Click here for more details.) The interest payments halted in June, and now investors just hope to recoup their capital.

Whether Hirsch knew Mortgages Ltd. was going to collapse — or whether he genuinely thought Radical Bunny was making a wise investment — remains unknown.

One forensic expert and a number of investors wonder whether Coles was using the money from Hirsch's investors to make interest payments to other investors. Such tactics are often referred to as a Ponzi scheme.

Dr. Paul Wazzan, an economist who specializes in analyzing business records, was hired by Rightpath as an expert witness. He found "serious irregularities" in the handful of Mortgages Ltd. accounts he audited.

"I have also determined that there are important inconsistencies in the allocations of interest and dollar amounts to the Radical Bunny investors," Wazzan wrote in a court opinion.

"Based on the significant irregularities, there is a high likelihood that the remaining loans may also contain further significant irregularities. Further, a full dollar-for-dollar accounting will be necessary to definitively explain the irregularities, the reasons, and the resulting financial consequence," he added.

But former Mortgages Ltd. president Mike Denning says that Coles was not running any kind of Ponzi scheme or fraud.

"[A Ponzi scheme] is just simply not true," Denning says. "I know there's an awful lot of confusion in the Valley about that. There have been firms, like USA Capitol, that were doing that [Ponzi schemes]. That was never done at Mortgages Ltd. in my time there."

Denning says investors have deeds of trust on Arizona real estate, and that even though the values may have decreased, all the investors will be paid something when the properties are sold.

"The thing about all of this that really disturbs me is the feeding frenzy going on. From the borrowers' perspective, here's a company that was cash-strapped, the guy commits suicide — maybe not for business reasons — and then debtors decide, 'Maybe I shouldn't pay my loan,'" Denning says.

Scott Coles' older brother Perry agrees.

"There's not a lot of correct information being put out — a lot of speculation," he says. "He was an upstanding, honest person. I think market conditions created something he couldn't work with. I don't think anyone's going to find any Ponzi scheme. I think everything was done above board."


Sitting at the Ritz-Carlton in July — about a month before he settled with Mortgages Ltd. — attorney Chris Reeder says it seems obvious that Mortgages Ltd. was lying to investors.

"How were the investors getting these monthly checks when we weren't required to make any payments yet? Where did their checks come from? We look forward to getting all those answers," he says.

"They've had a campaign of disinformation. We've issued over 130 subpoenas, and we intend to get to the bottom of this. The drama continues even after Mr. Coles' passing."

Reeder is with the Los Angeles firm Sheppard, Mullin, Richter & Hampton. He is in town for one of many Mortgages Ltd. bankruptcy proceedings, some of which were attended by a crowd of more than 100 investors, builders, and about 20 attorneys.

Reeder claims that Mortgages Ltd. tried to employ the same "loan-sharking" tactics it used on Covenant Christian with his client, Rightpath Limited Development — but on a much bigger scale.

"This deal is the same deal [as Covenant Christian Center]. It's just bigger numbers. Scott was into those little loans. For years he would go beat up on these little guys. Now we know that his practice was to shake down with excessive fees, by wrongfully claiming that he'll declare a borrower in default," Reeder says.

"Every time anyone called him out on it, he settled with them. We feel it's a strong racketeering case. Their liability to our guys alone is $200 million," he adds.

Like a handful of other borrowers from 2007, Reeder's clients weren't given the entire amount of money they borrowed and paid fees for. Mortgages Ltd. promised Rightpath $190 million, but Reeder says the company failed to fund the first installments totaling $120 million.

At least three other builders of large commercial projects say their loans were not entirely funded either — despite Mortgages Ltd.'s public claims, even recently, that the loans were funded.

Developer Rick Burton, one of three principals who own Rightpath, says that in 2007 Mortgages Ltd. went so far as to write a letter to Bank of America, guaranteeing the company had $190 million to loan to Rightpath.

Reeder says that on top of Coles' lying about having the money, he then tried to make money off exorbitant fees. In January 2008, Mortgages Ltd. tried to charge Rightpath a $3 million "fee" for a simple transaction that usually costs about $1,000, Reeder says.

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13 comments
Sure Thing
Sure Thing

The people above are just more of Scott's type of phony thousandaires who live in Scottsdale. "Charity?" Sure, it's real easy when you are giving away other people's money and taking credit for it.I had the unfortunate chance to meet and deal with Scott 11 years ago on a $1M loan deal where he was asking me for money to invest with him to buy one of his "bad" loans. Scott personally explained to me his scheme of essentially "loan-sharking" the borrowers by jacking up expenses and legal fees the moment a loan came up or late and that we were all but guaranteed 15-20% returns on our money. I ran the other way.

Karma is a bitch; he was a scumbag and, like Obama and his cronies, you lie down with dogs you wake up with fleas. Anyone who claims that they knew the man and uses words like "honest" and "upstanding" to describe him is the same scum that he was.

Sure Thing
Sure Thing

The people above are just more of Scott's type of phony thousandaires who live in Scottsdale. "Charity?" Sure, it's real easy when you are giving away other people's money and taking credit for it.I had the unfortunate chance to meet and deal with Scott 11 years ago on a $1M loan deal where he was asking me for money to invest with him to buy one of his "bad" loans. Scott personally explained to me his scheme of essentially "loan-sharking" the borrowers by jacking up expenses and legal fees the moment a loan came up or late and that we were all but guaranteed 15-20% returns on our money. I ran the other way.

Karma is a bitch; he was a scumbag and, like Obama and his cronies, you lie down with dogs you wake up with fleas. Anyone who claims that they knew the man and uses words like "honest" and "upstanding" to describe him is the same scum that he was.

Heartbroken
Heartbroken

Scott would never have pulled out of the deal for no reason. Anyone who knows him knows that about him. He was an honest businessman. He was a good, beautiful person, who gave a lot to the community, and you were right in saying he committed suicide because he cared so much about his investors he could not live with himself to fail them in this way. We all took a risk investing in the way we did, and losing it all is a part of that risk. Scott did what he could to try to keep things afloat, but no one could accomplish that in this market - look at all the other companies, much larger, that are failing and need to be bailed out by the Fed.

As for Ashley Coles, she was just riding on the coat-tail of a good man. There is nothing noble or good about her. She is a gold-digger who cared only about herself. The only reason she joined Childhelp and Boys and Girls Club was because she found out Scott's ex was involved in these and she wanted to outdo her. But her commitment to these faded away soon after her marriage. The gloves came right off as soon as she felt she had Scott nailed. Now that he has passed and left what he had to his children (and despite that he did leave her with a lot), she is fighting to take all the money away from Scott's children. That is not a good person. All who know her should condemn her because she has the audacity to do such a horrible thing, not to mention that she was a main cause of his death.

K. Chamberlain
K. Chamberlain

I am really disappointed in regards to the article written by John Dickerson on September 18, 2008 about Scott Coles.I knew Scott and I know his wife Ashley and I consider them to be two of the most considerate, respectful and kind people I have ever met. They are kind to anyone and everyone they meet and they have been extremely generous in their contributions back to our Valley's charities.How often do you, John, spend large portions of your income with local or national charities? And, if income is not an option do you donate your time? Mortgages Ltd gave out high risk loans to clients that could not get loans through typical banking establishments. Therefore Mortgages Ltd.charged higher interest rates for those borrowers because they were considered high risk and not necessarily reliable. This is the exact reason we all have credit reports. Increased interest rates for high risk borrowers are incredibly common when people buy cars, buy houses (now) or sign up for credit cards...etc.I would like to know why the conventional lender pulled out of Pastor Stacy Lee's loan agreement at the last minute. I'm sorry but don't play naive, something was wrong and that quite possibly had something to do with why Scott raised his interest rate. Plus, you have to remember Scott is no longer with us to tell us his side of the story. I have seen many prestigious companies file for bankruptcy in the last 6-7 months- Scott is not an anomaly. We passed a $700 billion dollar bail out plan just so that we don�t loose our banks- which would include our personal savings, retirement�etc.John Dickerson, Seth Goldberg, Susan White and the person that refused to give their name though I�m not sure why since she obviously wanted to express her hatred for Scott but then required that her identity be kept "Anonymous." (She needs to grow a spine- that's pathetic).I would like to know if the clients that said such hurtful things about Scott in your articles were invested with him during the economic boom in Arizona. If they were, I guarantee that they were not complaining then! In addition do they give back time or money to the community like Scott and Ashley did?John, your July 31st article was much less biased though it still included some ridiculous comments like Mike Denning's comment about Scott stating that "He kind of turned into a wanna-be rock star there for a while" which caused me to laugh out loud because it was so far from the truth. Mike was the former president of Mortgages Ltd (do you think he may be a bit angry with his current financial situation now that the company is Bankrupt?!)I am not sure what has happened since your first article on July 31, 2008 because your most recent article in my opinion was obviously meant to damage his reputation even worse. I sensed a bit of anger in that article- was that because you believed every awful thing you were told about Scott by bitter ex-employees or investors, or is it simply because if the article "bleeds it leads?"Scott took his own life which I honestly believe he did because he could not face all of his friends and business partners that had invested a good portion of their life savings with him. Scott has a wife and three children who no longer have a husband/father, and not one person in your articles even mentioned how devastating that is because, in my opinion, they are too self absorbed to have an ounce of remorse for his family and their loss. I personally believe that Scott Coles was a legitimate business owner and like many of us he did not see the economy taking such a fast and drastic down turn and he quickly found himself in a position he simply could not envision himself recovering from. He did live a lavish lifestyle; however you reported that he was constantly having parties at his estate but what you failed to mention is that any parties that we not small, involving close friends, were in his guest house and guests had to pay admission. If I remember correctly the Super Bowl party at his estate last year was around $1,000 a ticket.Lastly I would like to condemn anyone who gave their life savings to Mortgages Limited and is crying about it now- everyone knows that you never put all of your eggs in one basket. Always diversify! Buy a home you can afford (roughly 3 times your annual income) and diversify your savings. And when it all goes to Hell�blame yourself for overextending.

Why
Why

Let the man rest in peace. If God can forgive him then we should to. What's done is done move on this is starting to get old now.

Mr broke
Mr broke

Another story about Coles but Hirsch keeps Coles Ideas alive by wanting to allow a 75 million $ dip loan on centerpoint. Putting 1/2 the 200 million radical bunny money at risk by putting ML in 2nd position on the deed. Centerpoint will be worth half of what they think. The state needs to put RB into receivership and get someone that doesn't keep Coles ideas going.

JW
JW

I take great pride in stating that Pastor Stacy is a GREAT man and never once stole any of the churche's money! Obviously the person who commented in #2 has no clue!! 1st of all Pastor Stacy does not beg for money because he knows that God will provide for the church and the people in it! The people in the church who gave money, gave because they either felt led to, wanted too, or because that is what the bible tells us to do. The family at CCCI is close knit and even though people come and go through the years - we are faithful and know that what God started in the building we now have church in, will be completed and we will grow and expand beyond any of our imaginations.

Before you comment on a Pastor you dont know, please make sure you have all the facts straight. We give because WE WANT too! Pastor Stacy and his wife are incredible people with a great blessing on their lives, and I plan to be around and ministering with them for as long as I possibly can!

God Bless!

JW

TOM
TOM

sCOTT TOOK THE EASY WAY OUT AND TOOK HUNDERED OF REGULAR WORKING CLASS PEOPLE WITH HIM. HIS ACTIONS CAUSED MY CO TO close down. I am out of a job with two kids and a mortage to pay much like everyone else I worked with. I cant tell you how much I hat this man I and the rest of the people who were hert by this will move on and rebuild our lives with our wonderful families. That is the good news the other good news is when we all look back and realize we have pulled up our boot straps and fixed out lives he will still be dead and the world is a better place because of it.

Reed
Reed

Ask Pastor Stacy Lee about the thousands of dollars church parishioners gave to pay for the completion of the church but yet the church is not complete? Where did the money go�.? Not only was Scott Coles a theft Pastor Stacy Lee is the worse theft of them all stealing from his own church. Yes he will give you a good song and dance and led in into another direction but will not give you a straight answer. There are many people from his own church he has defrauded just like Scott Coles. He did lose parishioners because of the court case he lost parishioners because he did not pay back the thousands of dollars people �loaned� to him not gave. He does not like to give people their money back he has a good track record for this just look at the many law suites against him for not paying back.

seth Goldberg
seth Goldberg

Total crook and the New Times should win an award for their reporting..Fraud is fraud he was a dishonest scumbag who took advantage of many people. I now many people who would not do business with him and are hardly surprised..hopefully the Radical Bunny folks go to jail and the investors get something out of this.

Coach Heemel
Coach Heemel

One week after the company assured investors that all was well, Mortgages Ltd. vice president Phillip Sollomi, Jr. wrote a letter on November 15, 2007, to a wealthy borrower, pleading to borrow $2 million so the company could fund another borrower's loan.

Coach Heemel
Coach Heemel

One week after the company assured investors that all was well, Mortgages Ltd. vice president Phillip Sollomi, Jr. wrote a letter on November 15, 2007, to a wealthy borrower, pleading to borrow $2 million so the company could fund another borrower's loan.

 
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