Many licensed attorneys are caught up in civil and criminal legal actions accusing them of providing faulty foreclosure services or deceiving delinquent borrowers. In most of the cases, it is the government that is filing the litigation.
A preliminary injunction issued on March 19 by a federal court freezes the assets of The Credit Shop LLC, Fidelity Legal Services LLC, Titanium Realty Inc., Precision Law Center Inc. and Precision Law Center LLC. A permanent receiver is being appointed for the California-based businesses, which are owned by Sameer Lakhany.
The Federal Trade Commission, which filed a federal lawsuit against Lakhany and his businesses on March 5, says the defendants “masqueraded as a specialty law firm” that solicited prospects for mass-joinder lawsuits then would force lenders to give concessions or stop foreclosure. Borrowers paid advance fees of between $6,000 and $10,000, but the lawsuits went nowhere.
A second scam had the company claiming to be a non-profit organization that was federally accredited and involved fees of between $795 and $1,595 in return for promises of forensic loan audits that resulted in loan modifications in nine-out-of-10 cases — though that wasn’t the case.
A 15-year sentence was handed down on Jan. 18 to former Chicago attorney Norton Helton, the U.S. Department of Justice for the Northern District of Illinois said. Helton, who was convicted in July 2010 along with co-defendants Charles White and Felicia Ford, was paid above-market legal fees for placating victims at the closing of their home sales.
The scheme was operated through Eyes Have Not Seen, a company that promised to bail out insolvent homeowners and allow them to remain in their properties by selling the homes to investors. But instead of giving the victims the opportunity to buy their homes back at a later time as promised, the defendants used mortgage fraud to suck any remaining available equity from the properties.
Helton also allegedly operated a second foreclosure-avoidance scheme through his own company, Diamond Management of Chicago Inc., using a bankruptcy fraud scheme.
A robo-signing settlement was announced last Thursday between New York’s attorney general and Steven J. Baum P.C., Pillar Processing LLC, Steven J. Baum and Brian Kumiega. The settlement includes $4 million in penalties, costs and fees and an agreement by Baum and Kumiega not to represent lenders or servicers in new foreclosure-related cases for two years.
The Baum law firm, which had been the largest foreclosure firm in the state until it ceased operations in December 2011, gained notoriety over a photo of a company Halloween party that showed employees as homeless borrowers who had lost homes to foreclosure.
California Attorney General Kamala Harris said on March 8 that Gregory Flahive, his ex-wife Cynthia Flahive and Mike Johnson were arrested in connection with a loan modification scam operated through Flahive Law Corp. The three attorneys allegedly collected thousands of dollars in up-front loan modification fees for services that were never performed. Infomercials reportedly touted the leverage of using a law firm.
