Morris' defense suggests letter faked

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The letter said HomeGold Financial Inc., parent of Carolina Investors, was in strong financial condition.

Former Carolina Investors Inc. President Larry C. Owen said in court that he couldn't recall if he signed Morris' name to the Aug. 20, 2001, letter. The letter said HomeGold's management, responding to years of millions of dollars in losses, was taking steps for the "best and safest solution" for its investors.

"I don't deny it; neither do I admit it, because I don't recall signing it," Owen testified during the fifth day of Morris' securities fraud trial in Greenville. "It's possible I could have."

"He (Morris) traveled a good bit back at that time," Owen said. "If he was out of town, he possibly could have asked me to sign it. I don't recall."

Owen said neither he nor Morris, a former lieutenant governor, state comptroller general and state legislator, wrote the letter. It was written, he said, by HomeGold officials in response to state securities commission concerns that HomeGold's eroding financial position posed a threat to account holders of Carolina Investors, a HomeGold subsidiary.

Defense attorney Joel Collins of Columbia said Saturday that Morris' signature lacks the final 'e' in his first name and it doesn't appear to be his normal handwriting.

Morris, Carolina Investors' former chairman, is facing 22 counts of securities fraud for allegedly misleading investors. He has pleaded not guilty.

The letter is important, defense attorneys said, because it's part of their argument that HomeGold officials kept Morris, 76, in the dark about the company's true financial condition and that he could not have known the company was on the verge of failing when he reassured investors their money was safe.

The letter to Roland S. Corning, deputy securities commissioner, said, "We feel HomeGold's financial condition is as strong as it has been for several years, and we are optimistic about its ability to continue in its steady progress."

Morris did not testify Saturday, but in a recent interview with The Greenville News, he said of the letter, "I didn't write it. But I believed that the company was safe."

HomeGold officials have denied any wrongdoing. About 8,000 account holders and 12,000 people, many elderly and from the Upstate, lost an estimated $278 million when Carolina Investors closed. They can expect to recoup 18 cents for every dollar they invested once the companies' assets are sold and they are liquidated, bankruptcy officials have said.

Owen, 61, was a prosecution witness. He testified Morris knew the company was in bad financial shape for five years before it went bankrupt, and the former chairman attended a meeting in which auditors expressed serious concerns about Carolina Investors' ability to survive.

Morris also did nothing to explain the situation to employees or alleviate investors' fears about the Pickens-based firm's financial health, Owen said. Nor did Morris move to correct any inaccurate representations to state securities officials or when he told the former chairman he was contemplating suicide, Owen testified.

The two men talked often about business matters, including reviews of what was said at board meetings attended by both and media reports of the companies' difficulties, said Owen, who pleaded guilty in July to 22 counts of securities fraud for misleading investors. He is awaiting sentencing.

HomeGold was a finance company that specialized in originating, selling and servicing subprime first- and second-lien residential mortgages. Its business was funded through loans from Carolina Investors, which sold unsecured notes and debentures, according to Securities and Exchange Commission documents.

Morris, who earned $50,000 a year as chairman, has said he was no more than a public relations spokesman for Carolina Investors and had no input in any decision made by the company.

After auditors on March 14, 2002, told company officials they had a "going concern" raising "substantial doubt" about Carolina Investors' financial future and they doubted HomeGold could repay its multiMillion-dollar debt the company, Owen said Morris replied, "That's it, then. How are we going to be able to sell these notes and debentures to the public?"

The company failed a year later. The state grand jury in January indicted Morris, with prosecutors alleging he planned to defraud investors, make untrue statements or omit key facts to investors who bought the company's floating notes or debentures.

Owen testified Saturday that Carolina Investors, founded in 1963 by businessman Dwight Holder, succeeded as a small-town financial company because officials demanded personal service, and they relied on the reputations of people such as Holder and Morris.

"We always made sure that we were able to identify our customers, and able to talk with them, and ask how their family members were doing," Owen said. "We did a lot of things that a lot larger financial institutions had gotten away from doing."

That meant Carolina Investors officials sent cards for birthdays and Christmas, or when family members of customers passed away.

"We just got real close with most of our investors to the point that sometimes they would bring vegetables to the office, or around Christmastime they might bring fruit to the office," Owen said. "It was kind of a family-type atmosphere."