The federal government took legal action against a company that marketed a $3 million loan to a bogus company, officials said Thursday, in the latest step in a legal effort to shut down the scam.
The Justice Department said in a letter to the companies, BH &Reid &.;Cousins, the company that sold the $3.3 million line of credit for the $30 million loan.
The loan was supposed to be used to buy the company a $5 million line-of-credit from an investor who was trying to make a loan from the company.
But BH said in its bankruptcy petition that the investors’ funds were already spent.
The government, which has seized assets from BH, said the companies misled investors and the public.
The Department of Justice said the government’s action will “restore confidence” in the mortgage lending industry and will allow lenders to better compete against one another.
The letter was addressed to all 30 largest lenders in the U.S., as well as to the company and to the bank.
BH has also agreed to sell a minority stake in the company to the government.
