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Lawsuit says state charged home seller to deflect blame

New Hampshire Sunday News

August 12. 2012 12:19AM

A Manchester businessman who says the attorney general and a former banking commissioner wrongly prosecuted him to stem criticism of the state's handling of an unrelated financial scandal has filed a civil lawsuit against them in Hillsborough County Superior Court.

Jeffrey Frost, who has been vindicated in court on the misdemeanor charges related to the seller-financing of two properties, is now running as a Republican for the state Legislature.

Frost, a retired airline pilot whose businesses involve real estate acquisition, management and restoration, resigned as chairman of the board for the American Red Cross in Manchester because of his arrest, according to the lawsuit. Frost said he hopes no one else will have to endure what he went through because of damage to his reputation and emotional stress, not to mention the $180,000 it cost to defend himself.

'It was a train wreck, and I was in front of the train,' Frost said. 'It's so obvious this was prosecutorial abuse.'

Deputy Attorney General Ann Rice said the state had no comment on the lawsuit, but added its position will be detailed in court filings at a later date.

The state claimed in March 2010 that Frost's companies were acting as unlicensed mortgage bankers, and he was therefore an unlicensed loan originator.

Frost was originally charged with failing to allow the state Banking Department to examine records, violating a banking commissioner order, and two counts of unlicensed mortgage banking. The misdemeanor charges were later dismissed by a district court judge, and a superior court judge stayed administrative proceedings against him, a decision that was upheld by the state Supreme Court.

'After almost two years, those administrative and criminal proceedings have now terminated, favorably, and confirmed what was or should have been evident all along: that (Frost and his companies) by engaging in isolated instances of seller-financed real estate sales, had done nothing remotely illegal, much less criminal,' the lawsuit states. It was filed on Frost's behalf by Donald Smith of Devine, Millimet and Branch in Manchester.

Frost is a partner in two businesses, Frost Family LLC and Chretien/Tillinghast LLC, both involved with real estate.

He believes Attorney General Michael Delaney and former Banking Commissioner Peter Hildreth violated his civil rights and pursued malicious prosecution against him.

Frost said they were trying to improve their images amid criticism they failed to investigate Financial Resources Mortgage of Meredith, which closed in late 2009 when U.S. Sen. Kelly Ayotte was still attorney general. It was the state's largest Ponzi scheme.

In December 2010, Hildreth, who had faced forced removal over the FRM debacle, was allowed to retire early instead.

Attempts to reach Hildreth were unsuccessful.

The lawsuit also names the state of New Hampshire, the state Banking Department and several state employees of both departments.

The lawsuit claims the state retroactively applied a new law, lied in court, conducted an illegal search and overlooked the reasons why Robert Recio filed a complaint against Frost in the first place.

Recio, who still claims he was victimized by Frost, isn't a defendant in Frost's lawsuit, but he is mentioned in detail as one of the buyers who received a seller-financed mortgage for a $475,000 lakefront home in Alexandria. Recio, who said Friday he plans to sue Frost, filed the original fraud complaint against Frost that launched the criminal investigation.

According to the lawsuit, Chretien/Tillinghast initiated foreclosure against Recio for non-payment. Recio, an attorney who had been disciplined in Connecticut, filed for bankruptcy, according to the suit.

After Chretien/Tillinghast told the bankruptcy court that Recio made misrepresentations saying he had never filed for bankruptcy before when he had filed five times previously, Recio then filed his complaint against Frost with the Attorney General Office's consumer protection bureau, the lawsuit states.

'At this point, a simple Google search would have revealed that Mr. Recio had been the subject of prior attorney-discipline grievances and was suspended from the practice of law,' the lawsuit states.

But the state went ahead with prosecution 'instead of exploring the motivation for Mr. Recio's complaint....'

Recio said he is still financially devastated after paying a $50,000 deposit on the house, money he obtained from an accident settlement.

Recio conceded he had problems with his law license in Connecticut because of the accident, but said his circumstances shouldn't determine whether Frost committed crimes. Recio hopes to get a New Hampshire law license in the future.

'I hope I will be called as witness,' Recio said of Frost's lawsuit. 'I think Mr. Frost . . . got away with something he clearly should not have.'

Recio said it was Frost who enticed him to buy a home that he would never be able to refinance to obtain a conventional mortgage as planned because there wouldn't be any equity at such an overly inflated price.

'He unjustly enriched himself at my expense,' Recio said.

But Frost insists it was Recio who set up the agreement in the first place.

Frost is seeking money damages from the individuals and state agencies he believes harmed him.

And if elected to the House, Frost plans to try to help people and businesses that have been harmed by malicious prosecution.

'I will try to make it as fair as possible, so little guys like me can't be abused again,' Frost said. 'We should be nurturing businesses, not prosecuting them for not crossing their T's and dotting their I's,' Frost said.

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Nancy West may be reached at

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