OneTrust says Newrez's suit muddied its reputation, recruiting power

OneTrust Home Loans, a d.b.a. of CalCon Mutual Mortgage LLC, is fighting back against Newrez's claims that its CEO was the mastermind behind an elaborate ruse to raid employees from the Pennsylvania-based company and steal trade secrets.

In a 36-page counter complaint, OneTrust unties allegations pegged against it and executive James Hecht, including a refutation that its CEO planned the firing and later rehiring of senior Newrez executives, and a denial that he had any deep insights into pipeline information of employees at his prior place of work.

Instead, OneTrust's complaint points the finger at Newrez's President Baron Silverstein for "making the decisions to terminate the employment of retail lending senior leadership members."

The San-Diego based shop claims Newrez itself has been "unfairly competing with OneTrust through the pursuit of this litigation in bad faith and for improper, anti-competitive purposes." 

The goal of Newrez's litigation, OneTrust claims, is not to secure a favorable judgment, "but to harm OneTrust's standing and reputation in the industry and vindictively lash out against its former employees." 

Some of the harm has allegedly already been done, as OneTrust has run into problems recruiting new employees since February, with "several prospective employees [declining] employment with OneTrust based on [statements made by Newrez] and at least one OneTrust employee [leaving] OneTrust based on these statements," the company said.

Newrez declined to comment, noting the "facts and law will speak for themselves in court." 

"We are committed to protecting our company's interests, values, and reputation, and we will vigorously pursue all legal remedies available to us," a spokesperson wrote Monday.

OneTrust's filing delves into what was unfolding inside of Newrez prior to Hecht's departure in February, painting the image of a frenzied, uncertain workplace.

Specifically, the complaint mentions Newrez had a "love and hate relationship with retail lending" and attempted to sell its channel twice, once in the fall of 2023 and another time in early 2024, with Hecht allegedly finding a top-10 mortgage company ready to purchase the business.

Both times the deals fell through because Michael Nierenberg, CEO of Rithm Capital, parent company of Newrez, allegedly changed his mind.

After the first attempt to sell fell through, executives including Hecht were instructed to trim Newrez's retail operational costs by $20 million by Jan. 8 "to return equity to Mr. Neirenberg," the filing said.

Hecht came up with a "straw plan…to retain [divisional vice presidents] and transition certain [regional vice presidents] to other roles (but with no termination to regional vice presidents) along with cuts in commissions and branch overrides," the suit claims.

On Jan. 8, Newrez's Silverstein informed Hecht the winds had once more changed and the retail division would ultimately be sold to the original buyer identified in 2023, but the next day plans went in another direction — again. Newrez's retail channel would not be sold and Hecht was instructed to come up with another way to trim costs.

Hecht provided an updated plan by Jan. 12, which purportedly did not recommend the termination of any divisional or regional vice president, but advised for cuts in their compensation, the elimination of sales and support staff positions and a reduction in comp for branch managers and loan originators. 

The news of compensation cuts did not land well with executives. As a result, Silverstein decided to lay off a number of Newrez executives who later transitioned to OneTrust because "the negative reaction by the divisional and regional leadership to the cost cutting measures was so strong." This move would later be pinned to Hecht.

The turmoil and uncertainty inside Newrez's retail channel, pushed Hecht, whose employment contract was at this point solely at the discretion of Neirenberg, to reconsider a proposal made two years prior by John Erksine, OneTrust's founder, to take the helm of his company.

The filing alleges Hecht was not bound by a non-compete when he made the decision to leave Newrez Feb.1.

In announcing his departure, Newrez's president allegedly voiced his understanding pointing to the "erratic behavior by Nierenberg toward the retail lending business" and that the vast majority of Hecht's compensation was at the discretion of Rithm's CEO, who allegedly wanted to terminate Hecht to begin with.

"Silverstein also revealed to Mr. Hecht that he had thought of calling the buyer identified for retail lending in November and give him 'unofficial' permission to raid Newrez retail as he understood how bad it was going to be in retail following implementation of the cost cutting measures," the complaint said.

OneTrust is accusing Newrez of propagating false and personal attacks against Hecht and OneTrust, tortiously interfering with OneTrust's lawful and privileged employee recruitment efforts and stifling competition for workers by "lowing or preventing the departure of Newrez employees who seek better job opportunities with OneTrust."

The mortgage shop is asking a federal Pennsylvania court to prohibit Newrez from using this litigation as a means to obtain an unfair competitive advantage and is asking for compensatory and punitive damages in an amount just and fair. 

A telephone pretrial conference is scheduled for June 6, documents show.