While most litigation against foreclosure firms focuses on foreclosure rescue operations that do nothing for their clients, three individuals are guilty of using of fraudulent bankruptcy filings to stop foreclosures. The latest legal actions included activity in five states.
Southern California residents Isaac Yass and Andrew Blechman were sentenced on Jan. 4 in U.S. District Court in Topeka, Kan., according to a news release from the U.S. Department of Justice. Yass was sentenced to 60 months, while Blechman, who also faced a $1 million forfeiture order, was sentenced to 18 months.
The two were convicted in January 2009. They allegedly created Stopco, a fraudulent service that claimed to be able to save delinquent borrowers from foreclosure. They would file fraudulent bankruptcies in the name of nonexistent individuals with businesses that claimed to be part-owners of properties that were in foreclosure, the Justice Department said. The strategy resulted in automatic stays -- stopping further activity in the foreclosure proceedings.
In Delaware, Attorney General Beau Biden announced on Feb. 2 that Jamaar Manlove, Larry Manlove, Rhonda Manlove, Master Builders for Christ and Vision Builders Christian Center were charged in a 21-count indictment that the state is calling "one of the largest mortgage rescue fraud indictments in Delaware history." Jamaar Manlove, a pastor, is married to Rhonda Manlove. Warrants were issued for their arrests.
The defendants allegedly promised borrowers who were on the verge of foreclosure that they could avoid foreclosure through a complex sale-leaseback scheme where they transferred title then took it back after their financial standing improved.
"In reality, this never happens," Delaware said. "Instead, these schemes impose exorbitant hidden fees that take thousands of dollars of equity away from homeowners, and they ultimately lose their homes, unable to obtain financing to repurchase their home."
United Law Group Inc. was sued by Ohio Attorney General Richard Cordray in Franklin County Common Pleas Court, a Feb. 3 news release said. The California-based company solicited borrowers over the phone using "high-pressure sales tactics" -- charging up-front fees of as much as $4,000 -- but didn't deliver on its promises. The state claims United Law debited bank accounts and often ignored customers after it received the final payment.
At least one borrower, who was current on her loan before engaging United Law, lost her home to foreclosure. Ohio noted that the company's attorneys are not licensed to practice law in the state and never filed any court documents or provided legal representation on behalf of their clients.
Guardian Services Group faces similar charges in a lawsuit filed by Ohio's attorney general in Montgomery County Common Pleas Court. The Santa Ana, Calif.-based company is accused of charging borrowers thousands of dollars and refusing to provide refunds even though the services were never provided. Like United Law, Guardian allegedly violated Ohio's Consumer Sales Practices Act.
An $81,894 judgment was obtained in January by Ohio against Michael Brotherton, who operated Financial Emergency Inc. Brotherton allegedly promised debit negotiations and modifications in exchange for an up-front fee of $1,269. But he failed to deliver.
The owners of Bennett & Doherty P.C., Foreclosure Relief Services LLC, Axxium Mortgage Inc. and J&J Realty Acquisition LLC were among five people indicted last month in U.S. District Court for the Eastern District of Pennsylvania. In a scheme operated from 2004 through 2007, the defendants are accused of using mortgage fraud to extract the remaining equity of homes where the borrowers were delinquent or financially distressed.
One of the defendants, Stephen G. Doherty, is accused of filing fraudulent bankruptcies on behalf of the borrowers then dismissing shortly after. A report from the Philadelphia Daily News indicated Doherty plead guilty last week.
The California Bar Association is investigating more than 400 attorneys who are suspected of promising to stop foreclosure but instead ripping delinquent borrowers facing foreclosure, the Associated Press reported. The organization has already obtained resignations from 15 attorneys.
The New Jersey Law Journal reported that William Gahwyler Jr. was found liable for nearly $700,000 plus punitive damages over his alleged participation in a mortgage foreclosure rescue scam. Gahwyler's was found jointly liable as a co-conspirator with his client, Frederick Cleveland, of ripping off Sean and Nicole O'Brien.
Nevada accuses Eric Alpert of illegally seizing foreclosed properties, while Alpert claims a law called adverse possession allows him to seize vacant homes, according to KLAS. He allegedly used homemade notices of adverse possession, seized control of properties and leased them out. He faces up to 147 years in prison.
State of Ohio, ex rel. Attorney General Richard Cordray, 30 East Broad Street, 14th Floor, Columbus, OH 43215 Plaintiff, vs. United Law Group Inc., 2525 Campus Drive, Irvine, California, 92612 Defendant.
Case No. 10 CVH 02 1567, Feb. 1, 2010 (In the Court of Common Pleas of Franklin County, Ohio).
State of Ohio, ex rel. Attorney General Richard Cordray, 30 East Broad Street, 14th Floor, Columbus, OH 43215 Plaintiff, vs. G Services Group LLC d/b/a Guardian Services Group 201 E. Sandpointe Avenue, Ste 300 Santa Ana, CA 92707 Defendant.
Case No. 2010 CV 00805, Feb. 1, 2010 (In the Court of Common Pleas of Montgomery County, Ohio).
State of Ohio, ex rel. Richard Cordray Attorney General of Ohio, Plaintiff, vs. Michael Brotherton, Defendant.
Case No. 2009 CV 0709, (In the Court of Common Pleas of Greene County, Ohio General Division).
O'Brien v. Cleveland.
Case No. 08-1676 (U.S. Bankruptcy Court).