Non-fiction Pt. Two

On March 24, 2003 Carolina Investors closed its doors after nearly 40 years in business.

Representatives of the investment company told nearly 8,000 customers they weren’t sure how Carolina Investors could repay the nearly $280 million customers had invested.

Since that time, Carolina Investors and its parent company, HomeGold Financial, have filed for bankruptcy protection, leaving Carolina Investors’ customers in the dark about whether they will ever see their money again.

In November 2003, the South Carolina statewide grand jury indicted Carolina Investors president and CEO, Larry Owen. So far, Owen is the only person to be criminally charged in the case.


There is a reason cliches become cliches. More often than not, cliches have a track record of being true. In the last nine months, Larry Owen has been clinging to one trite phrase as he builds his defense against securities fraud charges.

“Hindsight is always 20/20,” Owen will say. “In hindsight it looks a lot different now than it did coming through it. You look back and you say, would you do anything different?”

Owen just isn’t sure. He can’t pinpoint a moment in the last eight or nine years where he would’ve taken a different road, knowing what he knew then. Knowing what he knows now is a different story, but that tale is for cups of coffee and long laments over the unfairness of the whole thing.

For now, Owen will have to answer for what he knew every day from the moment Carolina Investors and its parent company HomeGold came together in what he now considers the unholiest of unions.

“They raped our company,” Owen said.

It will be up to a jury to decide whether Owen stood by and let the collapse happen, whether he actively participated in the downfall, or whether he was an unwilling pawn in a game of high stakes businessman’s chess.


Owen was on top of the world in when the 1990s began. He was the president of a successful investment company in a fine area of South Carolina. His family lived all around him. He had a nice home and the prospects of ending his career with one of the most respected companies in the county.

By 1991, Carolina Investors owner Dwight Holder decided to get rid of the company that had made him rich. He had no sons to give it to, but he did have a group of wealthy investors who were willing to buy the then-28 year old company. The investors had recently come into possession of an old railroad corporation and were looking for opportunities. Carolina Investors seemed solid. Its managers were doing well. By 1991, Holder had sold Carolina Investors and Larry Owen had a new boss. Or, more accurately, Owen had a lot more bosses.

Within a few years, those investors–whose company was now known as Emergent–had expanded the reach of Carolina Investors’ lending departments. What was once a strictly Palmetto State operation, now reached across the Georgia border and into the mountains of North Carolina.

By 1994, Emergent had purchased a few more companies and put them under its corporate umbrella. All the lending that was once approved by Carolina Investors agents, and ultimately Larry Owen, was moved to Emergent’s home office.

The man who had once run everything had just been relegated to the role of what some people would someday see as a glorified bagman. He took in investments and handed them over to his corporate bosses. It’s the role he would play for another nine years and the role that would eventually end his career.


The big business world of blitzkrieg expansion didn’t sit right with Larry Owen. Emergent was on its way to becoming HomeGold. Within a couple of years, the corporate bosses would decide to expand north and west. Offices would open in Ohio and Arizona. Owen said he didn’t feel the growth was as controlled as it should’ve been. At the same time, he saw profits.

“I was satisfied with it to an extent because my stock was increasing in value and the business was making money,” Owen said.

Owen said while the business decisions of the corporate bosses were not his to make, he tried to speak up in 1996 about the rapid expansion plans.

“If it got mentioned in the wrong circles, you were accused of not being a team player,” Owen said. “At one point I was accused of not being a team player. It was quite disturbing.”

Still, the company seemed to be making money. In 1997, an initial public offering and a bond issue brought in loads of cash. The mortgage business seemed to be doing well, and in reality, to this day it still is. This is why you’ll still see many private note buyers that purchase private mortgage contracts from entities or businesses that wish to secure a quick payout while selling their contract or deed.

So, Owen kept bringing in the money and handing it to his bosses.


Under South Carolina state securities laws, Carolina Investors had to prepare a prospectus every year. The multi-page document, while heavy on financial language, was supposed to give investors a good idea of the company’s financial state. Owen’s rubber stamp was required on the prospectus every year when he took it to Columbia for regulators’ approval.

By 1998, Owen noted what would become a serious problem. HomeGold’s source for cash, the subprime lending market, had just fallen in the gutter. It didn’t take long for HomeGold to start spilling red ink all over its accounting books. Never before had Carolina Investors’ cash been so important to the continued operation of the business.

It was the first flashing red light that warned of impending disaster.

“That gave me concern,” Owen said, “but at the same time they (HomeGold) were laying people off, cutting expenses and doing things to get back to profitability.”

The problems became public enough to warrant news reports. Carolina Investors’ customers started to get antsy and ask for their deposits. Eventually, though, the problems seemed to pass and Owen continued to take cash at Carolina Investors offices.

Owen was startled, but he says, blinded by HomeGold’s optimism.

“I had doubts occasionally as to whether they could really make it work,” Owen said, “But they always came to our board meetings with some rosy plans.”

Though the dark clouds had cleared after the 1998 scare, HomeGold continued to lose money.

At first, a 1999 merger with the Columbia-based company HomeSense seemed like it would be the saving grace of HomeGold and–by extension–Carolina Investors. HomeSense owner, Ronnie Sheppard, signed on as the new HomeGold CEO. He did not believe in how HomeGold had been doing business. He disliked the wholesale mortgage business and saw a bigger future in in retail mortgage lending.

“Everything that HomeGold had been doing, he just decided he didn’t want to do it anymore,” Owen said.

More than that, Sheppard was about growth. HomeGold offices in other states that had closed were re-opened,

It didn’t work and the Carolina Investors balance sheets Larry Owen reviewed every day started to look worse and worse


HomeGold’s accountants didn’t like what they were seeing. The company’s losses were getting worse. Its debt to Carolina Investors was growing every day.

On March 14, 2002 Owen found himself sitting around a conference table with just about anybody who had a say in the future of HomeGold and Carolina Investors. Inside the walls of the Wyche, Burgess, Freeman, and Parham, P.A. overlooking Greenville’s Reedy River, accountants from Elliot Davis, LLP started talking about the one thing nobody wanted to talk about.

First, Elliot Davis intended to included a “going concern” statement in the companies’ upcoming prospectuses. It would be a signal flare to any savvy investor that the companies had serious problems.

Second, Elliot Davis said the one thing Larry Owen didn’t want to hear.

“They felt like they were going to have to impair the HomeGold debt with Carolina Investors,” Owen recalled. “They just didn’t feel like at that time that HomeGold was going to be able to repay all that money.”

HomeGold hired companies to appraise the company assets and Owen said he was encouraged by those appraisals. Even when news stories broke of HomeGold’s financial problems and Carolina Investors customers again came looking for their money, Owen said he still had faith.

In August and September of 2002, customers withdrew more than $20 million.

“It did scare me,” Owen said, “At the same time, we hung our faith on the value of those appraisals.”


Owen decided to take matters into his own hands.

The prospectus that Carolina Investors was forced to issue had some scary language that could scare away potential investors. What’s more, the language was complicated and difficult to understand for many of the less sophisticated investors. So, Owen wrote a letter of his own and started slipping it in to each prospectus that went out.

It addressed the risk factors outlined in the Carolina Investors prospectus, explaining away some of the scarier financial language. Owen made sure to include that the accountants’ concerns were “certainly not a prediction of failure.”

It continued to explain the moves HomeGold was taking to return to profitability, including word that a “very large bank on the west coast” had offered to purchase part of HomeGold’s assets. Owen explained the money made from that sale would provide more than enough cash than was needed to pay back Carolina Investors customers. Owen wrote that South Carolina regulators were “delighted” by the sale.

Owen closed by saying he believed the sale would close by Thanksgiving.

No one can say how many of those letters went out, or how many people heard the same information verbally from Owen. Regardless, by late November, Carolina Investor’s attorney caught wind of the circulating letter and fired off a quick admonition and ordered Owen to discontinue use of the letter.

The letter from the Wyche law firm reads in part:

“(The letter) may not represent the facts as we understand them to have been in August or at any time since August. We are not aware of the letter from a ‘very large bank’ which is referred to. The use of this letter may constitute serious misconduct under state securities laws.”

Owen said he immediately quit sending out the letter, but it appeared as far as the Wyche law firm was concerned, the damage had been done. By January 10, 2003 the Wyche firm sent another dispatch to Owen’s offices indicating it would no longer serve as legal counsel to Carolina Investors.

Owen said he doesn’t feel like he did anything wrong by including the letter with the prospectus and said after the fact he allowed a state regulator to review the letter.

“He said he didn’t see any problem with it,’ Owen said. “It was intended to make sure that (customers) read both sides of the story and then make up their own mind.”


“The earliest recollection I have of any conversation concerning anything about a bankruptcy occurred on January the 7th,” Owen said.

Owen maintains he never seriously considered the possibility HomeGold and Carolina Investors would go bankrupt until he met with a HomeGold boss in early January. Even then, Owen insists the HomeGold official said the bankruptcy talks were only a precautionary measure.

“I had no idea it was anywhere in the making or that they had ever given it any serious consideration,” Owen said.

Further, Owen said at a February 26, 2003 board meeting, HomeGold’s top officials gave a glowing report. The room was full of optimism. Owen said HomeGold was selling part of the company back to one-time CEO Ronnie Sheppard and planned to build Carolina Investors cash account back up to $5 million. Owen said he was surprised at the level of optimism, but believed it.

The optimism only last another three weeks.

In the coming months, attorneys will argue over what happened in Carolina Investors’ last week in business. Some officials within HomeGold are expected to testify that they ordered Owen to shut down business on Wednesday March 19, 2003, but Owen refused.

“My employees can verify different than that and so can the board of directors,” Owen said.

Owen insists he was not contacted about a possible shutdown until Thursday March 20. He said HomeGold didn’t instruct him to stop doing business until 2:00pm on Friday March 21, 2003.

After years of playing the role of fundraiser for HomeGold, Owen said he now feels like the scapegoat.

“They sucked Carolina Investors dry and they sucked me and my family dry,” Owen said. “I want to see justice done.”

He can’t help but wonder if he could’ve done anything differently. The only thing he is sure of is that he wishes he could go back and take a job he was offered in 2000.

It offered a pay raise and a job for his wife.

“I left a lot of cash on the table when I decided to stay with Carolina Investors,” Owen said. “I stayed out of allegiance to our investors.”

Again, graciously reprinted from The Carolina Channel

Brad Willis

Brad Willis is a writer based in Greenville, South Carolina. Willis spent a decade as an award-winning broadcast journalist. He has worked as a freelance writer, columnist, and professional blogger since 2005. He has also served as a commentator and guest on a wide variety of television, radio, and internet shows.

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