AFC Mortgage, a small Connecticut-based retail lender, and its former employee, David Garofalo, had a deal worked out (allegedly): Garofalo would inject $100,000 into the business and bring over employees from his then employer, Guaranteed Rate Affinity, and in exchange, he would receive access to the mortgage shops' databases and equity in the company.
But the agreement went awry, a suit filed in the state of Connecticut claims.
After making the transition with 15 other employees to AFC, Garofalo allegedly pocketed the company's database and quickly moved with his colleagues to Cardinal Financial to start his own Connecticut branch.
AFC Mortgage is suing the branch manager for breaching a contract and using a company credit card for his own personal needs. The suit was first reported by Law360.
AFC Mortgage did not immediately respond to a request for comment Wednesday.
Cardinal Financial declined to comment, but noted that Garofalo's employment with Cardinal ended on July 17, 2023.
According to the lawsuit, Frank Ciambriello, the president of AFC Mortgage, and Garofalo hashed out a plan in late 2022 to start a joint venture business arrangement, with the ultimate goal of expanding AFC's footprint.
Garofalo agreed to bring 15 employees with him from Guaranteed Rate to join AFC and contribute $1000,000 due January 2023 to help expand the mortgage shop's business, the suit claims. In doing so, Garofalo would receive equity in AFC.
AFC says it agreed to provide $100,000 in capital to the former manager and a company credit card for Garafalo to purchase equipment, software licenses, and for other expenses to expand AFC's business. After Garafalo and his team transitioned Dec. 1, 2022, they allegedly downloaded $1,500 worth of credit reports using AFC's resources before departing Dec. 15, 2022, the suit said.
Despite leaving AFC, Garofalo purportedly continued to use AFC's company credit card "as his personal piggy bank, and made numerous personal expenses using the company's credit card," the Connecticut mortgage company asserts.
The lender says that in total, Garofalo charged a little over $24,000 to AFC's credit card for non-business related items or services. AFC claims the manager has refused to return money for those expenditures.
AFC and its president "have suffered financial and business losses related to Mr. Garofalo's breach of contract," the legal filing said. The mortgage lender is asking in its suit for the court to grant it compensatory damages and punitive damages.
AFC, founded in 1998, currently sponsors six loan officers and is licensed to operate in 17 states, per the Nationwide Mortgage Licensing System.
