U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20042 / March 15, 2007

Securities and Exchange Commission v. C. Paul Sandifur, Jr., et al., United States District Court for the Western District of Washington, Civil Action No. CV-05-1631 JCC.

The Securities and Exchange Commission ("Commission") today announced that it has reached settlements in pending litigation against two former executives of Metropolitan Mortgage & Securities Co., Inc. ("Metropolitan"), former Controller Robert A. Ness, Jr., and former Vice President Thomas R. Masters, and a former Metropolitan business associate, Dan W. Sandy, relating to an alleged financial reporting fraud at the company. Final judgments by consent were entered for each defendant by the Honorable John C. Coughenour in the case SEC v. C. Paul Sandifur, Jr., et al., Case No. CV-05-1631 JCC, in the United States District Court for the Western District of Washington.

Metropolitan was a long-standing Spokane, Washington finance and real estate company that collapsed in 2004. Metropolitan filed for bankruptcy in February 2004, devastating nearly 10,000 investors throughout the Pacific Northwest who had invested approximately $450 million in debt securities and preferred stock offered by the company. As alleged in the Commission's amended complaint, Metropolitan's management falsified the company's 2002 financial results by reporting profits from circular real estate sales where Metropolitan purported to sell property to buyers who, in fact, received all or nearly all of the money to pay for the purchases from Metropolitan or its affiliates. In addition to Masters and Ness, the Commission sued former Metropolitan Chief Executive Officer C. Paul Sandifur, Jr., and former executive officer Thomas G. Turner for their participation in the fraud.

In the largest of these deals, Metropolitan reported a $10 million gain by completely financing the purchase of property by defendant Trillium Corporation, a private company based in Bellingham, Washington. In addition to charges against the Metropolitan officers and executives, the Commission brought fraud charges against Trillium, its President and CEO David Syre, and settled defendant Dan Sandy, who was a Metropolitan business associate and Trillium creditor.

The details of the settlements for the defendants, who consented to the settlements without admitting or denying the allegations against them, are as follows:

Robert A. Ness, Jr., Controller - Permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder), permanently enjoined from violating Section 13(b)(5) of the Exchange Act and Rules 13a-14, 13b2-1 and 13b2-2, and permanently enjoined from aiding and abetting violations of the books and records and periodic reporting provisions (Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder); and barred from serving as an officer or director of any public company for a period of five years;

Thomas R. Masters, Vice President, Property Development - Ordered to pay disgorgement, penalties and interest of $61,508.77, and permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder), permanently enjoined from violating Section 13(b)(5) of the Exchange Act and Rule 13b2-1, and permanently enjoined from aiding and abetting violations of the books and records and periodic reporting provisions (Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder); and

Dan W. Sandy, a former Metropolitan business associate - Ordered to pay a penalty of $50,000; and permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 10(b) of the Exchange Act and Rule 10b-5 thereunder) and from aiding and abetting violations of the books and records and periodic reporting provisions (Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder).

In addition to the relief described above, Ness consented to the entry of an order in a separate Commission administrative proceeding suspending him from appearing or practicing as an accountant before the Commission for five years.

The trial against the remaining four defendants named in the Commission's suit is set for October 2007.