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Election 2002 Mike Shustek, right, chairman and chief executive officer of the Vestin Group, speaks with Democratic attorney general candidate John Hunt at a Thursday fund-raiser. GOP candidate Brian Sandoval has made an issue of contributions by Shustek and his associates to Hunt's campaign. Photo by K.M. Cannon. Mike Shustek Chairman and chief executive officer of the Vestin Group

Monday, September 30, 2002
Copyright © Las Vegas Review-Journal

VESTIN CHAIRMAN: Successes lead lender to politics

Mike Shustek says campaign contributions are just part of efforts to help community

CARSON CITY -- Las Vegas-based commercial real estate lender Mike Shustek says he is a competitive and driven self-made man whose foray into Nevada politics is the result of financial success and more time for community involvement.

Shustek, chairman and chief executive officer of the Vestin Group, said he has no ulterior motive for his support of Democratic attorney general candidate John Hunt, despite assertions to the contrary from Hunt's Republican opponent.

"Some people always want to think the worst," said the Brooklyn, N.Y., native.

Shustek, whose large volume of contributions to Hunt's campaign have been called into question by GOP candidate Brian Sandoval, said he researched Hunt before giving him support. The attorney general's race was picked because other high-profile races, such as the re-election bid of Gov. Kenny Guinn, appeared to be noncompetitive, he said.

Even so, Shustek said he is contributing to 14 Nevada candidates in the 2002 elections, including Clark County Commission candidate Rory Reid, lieutenant governor candidate Erin Kenny, Rep. Shelley Berkley, D-Nev., Clark County sheriff candidate Bill Young and others. Shustek said he has contributed to a couple of U.S. Senate candidates in other states as well.

Shustek said that when he first spoke to Hunt, the candidate told him he would prosecute unscrupulous mortgage lenders, especially those who prey on the elderly. That comment made him a Hunt supporter.

"I don't want to tilt the board one way or the other," Shustek said. "I want it right down the middle. I'm a competitive kind of guy who wants to win, but I want to win ethically."

But the 43-year-old's success in the world of commercial lending hasn't come without some questions and action by Nevada regulators. Officials in Ohio have looked into his advertising claims as well.

He downplays the incidents, saying: "I've never been fined a nickel."

Shustek, the son of a career Navy enlisted man, came to Las Vegas in 1980. In 1993, he received a bachelor's degree in finance with a concentration in real estate from UNLV.

When he started in the real estate business a dozen years ago, he said he had only a few dollars to his name. He began by borrowing money to buy properties sold off from the national savings and loan collapse through the Resolution Trust Corp.

"Then I found out that it was more fun to collect money than to borrow it and pay high interest rates," he said.

Shustek founded Del Mar Mortgage in 1995 and has headed the Vestin Group since April 1999.

Vestin has been a publicly traded company since December 1999. It has lent nearly $2 billion in 16 different states for commercial development. Football legend Joe Namath is the company spokesman, and its largest subsidiary is Vestin Mortgage.

The company specializes in using investor funds to make loans to real estate developers and owners for land acquisitions, development and commercial construction. It raises funds for the loans from private investors who are attracted by higher-than-bank interest rates and the relative security of having real estate as loan collateral.

Shustek says the company's 7,000 clients "have never once lost a penny of interest or principal and the worst return we've ever had is 11 percent."

Shustek would not go into detail on his net worth but said he owns 3.5 million shares of Vestin Group stock plus options for another 1 million shares. That stock was worth $7 a share Friday, making him worth more than $30 million on those assets alone. The 52-week high for the Vestin Group, listed on the NASDAQ Exchange as VSTN, is $9.75. Its 52-week low is $2.87.

In February 1999, another Shustek business, Del Mar Mortgage Inc., was seized by the state Financial Institutions Division. Commissioner L. Scott Walshaw alleged the mortgage brokerage was mismanaged, mingling funds and violating state regulations.

In March 1999, the company was returned to Shustek in a settlement that required him to keep investors better informed about their investments.

"Maybe we were growing a bit too fast, and that concerned the state," Shustek said of the seizure. "The state made sure our books -- our record keeping, not our finances -- were up to date."

In April 2000, state regulators directed Del Mar Mortgage to stop advertising claims that "no one has ever lost a penny" investing with the company.

Shustek said at the time that the complaint was politically motivated because Jeff Guinn, president of Aspen Mortgage and son of Gov. Kenny Guinn, objected to the ads. Jeff Guinn denied that the complaint was politically motivated.

Shustek said to satisfy Nevada regulators, he changed the advertising claim to include the words "to date," so it now says investors have not lost money to date.

In 2001, the state of Ohio questioned Vestin's advertising claims in connection with a seminar used to promote DM Mortgage Investors, an investment vehicle. The concerns were resolved.

Shustek also resigned as a director of a newly forming Nevada bank in 1997 after an anonymous complaint was sent to Walshaw questioning business practices at Del Mar.

Walshaw said his office found no evidence to substantiate claims "of the magnitude" of those made in the anonymous letter. Walshaw said his office did direct Del Mar to change some less important practices. His office told Del Mar to stop promising investors they could cash out within 48 hours.

Shustek said he stepped down from the bank board simply to help the newly forming institution overcome its regulatory hurdles more quickly.

The most recent controversy involves Vestin and Las Vegas developer Howard Bulloch. Bulloch is suing in U.S. District Court seeking more than $10 million in damages from Vestin for alleged fraud.

The lawsuit contends that Vestin and Shustek used unfair tactics to obtain penalty payments for loans and violated state and federal securities laws.

Shustek said the company did charge high fees on what it considered to be a risky loan, but that it acted properly. The court will be the final arbiter in the matter, he said.

A complaint filed with Walshaw's office regarding the same matter was reviewed and found to be lacking.

Shustek said his campaign contributions in Nevada political races began modestly in 1998 with small donations to Guinn in his first successful bid for governor.

On Sept. 18, Pete Ernaut, campaign manager for Sandoval, filed a complaint with Secretary of State Dean Heller over contributions to Hunt from Shustek, Vestin employees and related business associates. In question, according to the complaint, are about $160,000 in contributions.

Ernaut asked whether the employees were being used as a "pass-through" for extra money Shustek might want to get to Hunt to circumvent $10,000 contribution limits on individuals and companies.

Shustek has rejected any suggestion that the donations are improper. He said he owns more than a dozen businesses that each could have, by law, donated $10,000 to Hunt. As a result, he said, there would be no need to engage in election chicanery. Other donors related to Vestin have denied being pressured or compensated by Shustek to contribute to Hunt.

Hunt has rejected the claims as well, sending a letter to Heller on Thursday saying that any call for an investigation should be dropped because there is no evidence to support the claims.

Shustek even held another fund-raiser for Hunt on Thursday. He said it went well, although no total dollar amount was available.

Shustek said he also contributes heavily to a number of charitable causes as well as political candidates, including sponsorship of the Senior Olympics in Nevada, called the Vestin Senior Games.

Shustek said he can't explain the motivations of people who have criticized his activities in the professional or political arenas.

"I have coached Little League even though I didn't have a kid playing," he said. "I give to 50 or 60 charities. I'm giving more time and money to the community."