While many of the defendants who are named in government lawsuits that allege modification and foreclosure-rescue schemes are often accused of the same thing — collecting up-front fees for services they never performed — some of the cases can be quite colorful. Without any legal actions, one federal agency has been helped by search engine firms in shutting down over a hundred online modification scams.
Last week, 85 loan modification firms that advertised on Google’s AdWords were shut down by the Office of the Special Inspector General for the Troubled Asset Relief Program. Such firms fall under the jurisdiction of the agency when they charge a fee and falsely promise to provide help obtaining a loan modification under the Home Affordable Modification Program, which is part of TARP. Some of the Web sites claimed to be affiliated with the government.
The announcement indicated that Google has suspended advertising relationships with 500 of its customers associated with the 85 firms. The search engine giant was provided with a list of Web sites accused of fraudulent ads through an investigative inquiry. The advertisers were allegedly collecting up-front fees, advising borrowers to stop making payments and telling them to cease contact with their lenders. Some mortgage payments were diverted, while titles to properties were illegally transferred in some cases.
On Monday, SIGTARP announced that another 40 of alleged online scams were shut down. The latest round included advertisers on Bing and Yahoo. Bing operator Microsoft reportedly suspended relationships with 400 Internet advertisers and agencies tied to the 125 identified firms.
Royce Lee Newcomb was sentenced to 70 months in prison on Sept. 29, the U.S. Attorney for the Eastern District of California announced. In addition to allegedly operating a $2.9 million Ponzi scheme, Newcomb is accused of marketing foreclosure rescue services through Paradigm Foreclosure Specialists, collecting between $1,300 and $3,800 from distressed borrowers and filing serial bankruptcy petitions without supporting documentation through associates and friends — sometimes without the knowledge of his clients.
Marien Brown, who was indicted in August for allegedly duping 80 Hawaiian borrowers into using her foreclosure-rescue service and keeping their payments instead of passing them along to the lenders, pled guilty, a Sept. 27 news release from the U.S. Attorney for the Eastern District of Missouri said. Brown, who was also known as Marien White, owned 1st Financial Resource LLC and 1st Federal Resource LLC — which she claimed were operated from an address that was actually a UPS store. Customers lost $265,000 in the scheme. Brown is scheduled for sentencing on Dec. 22.
A guilty plea was extracted from Maria Ponce for felony grand theft tied to a foreclosure rescue scam, Monterey County District Attorney Dean Flippo announced this month. Ponce, of Gonzales, Calif., will have to pay $150,000 in restitution and potentially faces a one-year sentence at her Jan. 5, 2012, sentencing.
Hispanic borrowers began filing complaints in June 2008 over fees of as much as $4,500 paid for Ponce to help them obtain loan modifications or to reverse foreclosures. Ponce and Melissa Garcia allegedly hosted sales meetings promoting their foreclosure rescue services and guaranteeing full refunds if the loans were not modified — though no modifications were ever obtained and no refunds were provided.
Garcia was arrested in June 2008, while Ponce’s home was raided that same month. Ponce was arrested shortly thereafter.
A $489,000 civil money penalty was imposed on the Law Offices of Perry and Associates LLC, Virginia attorney Michael A. Perry and Anthony Dolphus by the Maryland Department of Labor, a Nov. 15 announcement indicated. The state issued a proposed cease-and-desist order and required restitution.
Perry is accused of collecting up-front loan modification fees in violation of Maryland law. Distressed borrowers were lured through “an aggressive media campaign” that included print and radio advertising. While a cease-and-desist order was originally issued in July, the defendants filed for a restraining order against the state claiming an exemption under the Maryland Credit Service Business Act and other provisions of state law.
Michael Kwasnik and his law firm, The Law Firm of Kwasnik, Rodio, Kanowitz & Buckley P.C., have agreed to a $137,656 settlement with the Federal Trade Commission, according to a news release last week. Kwasnik and the firm are banned from advertising, marketing, promoting and selling mortgage assistance relief products or services, or assisting others to do so.
Kwasnik is the final defendant in the FTC’s lawsuit against Hope Now Modifications, which was filed in 2009. The operation and its two principals were charged with falsely claiming to be part of the HOPE NOW Alliance, a non-profit, government-endorsed network.
Last month the FTC announced a settlement with Residential Relief Foundation and Silver Lining Services and owners James Holderness, Bryan Melanson, Michael Valenti and Jillian Melanson. The settlement bans them from participating in mortgage assistance relief and debt relief industries and imposes a judgment of more than $10.5 million, though most of the judgment amount will be suspended due to the defendants’ inability to pay.
Also settling with the FTC were Mitigation America LLC and principal Dennis Strzegowski, who allegedly worked with Residential Relief as part of the scam by deceptively marketing debt relief services. Strzegowski, who also allegedly placed confidential customer information into unsecured dumpsters, faced a $509,306 judgment — though all but $5,000 was suspended due to his inability to pay.
On Oct. 31, Alan David Tikal was convicted in Oakland, Calif., of two felony counts tied to a foreclosure-rescue scam, Alameda County District Attorney Nancy E. O’Malley announced. Tikal, owner of Las Vegas-based KATN Trust, had been in custody since being arrested in Las Vegas during January. He pleaded no contest and was found guilty of filing false documents and accepting advance fees on loan modifications.
Tikal, who will serve 16 months in prison, was ordered to pay restitution to 11 borrowers. He allegedly marketed the program in Arizona, Florida, Minnesota, Nevada and Wisconsin in addition to California. He had asserted that the program was legitimate up until he pled guilty.
Massachusetts Attorney General Martha Coakley issued a press release last month indicating that James Alberino has been banned from acting as a closing attorney or title agent in any real estate transaction in the state. Alberino went on trial in September, and Suffolk Superior Court Judge Janet L. Sanders subsequently ruled that he knowingly and willfully engaged in unfair and deceptive conduct.
The judgment calls for $70,000 in civil penalties and stemmed from a March 2007 complaint filed by Coakley against Alberino, Primary Mortgage Resources Inc., mortgage broker Leo Desire and 17 other defendants who were accused of operating the unfair and deceptive foreclosure rescue scheme. Alberino allegedly closed two sham transactions while concealing the transactions from his clients.
The state had previously obtained a $500,000 judgment against Desire and 10 other defendants, while a final judgment will be sought against the remaining seven defendants who failed to show up for trial.
Illinois Attorney General Lisa Madigan filed suit in Cook County Circuit Court on Sept. 27 against ZeTrust Legal Services, Legal Modification Network LLC and two other defunct companies, Loan Litigators International LLC and Exelpol Management & Consulting Inc. In conjunction with Madigan, Cook County State’s Attorney’s Office filed a similar lawsuit in Cook County Circuit Court against Legal Housing and Debt Advisor LLC and owner Jason Tong.
The lawsuits alleged that the defendants preyed on distressed borrowers and collected up to $375,000 in the process.
Alex Soria, Sonia Rodis, and Hans Johns were arrested and charged with operating a mortgage scam that preyed on elderly and distressed borrowers, Nevada Attorney General Catherine Cortez Masto announced on Oct. 27. Soria and Rodis owned and operated BioGreen Teck LLC. They offered the Zero Mortgage Program, which was supposed to eliminate mortgage obligations while keeping the borrower on title.
The program utilized an “affidavit of fact” and a “deed of full reconveyance,” and victims were supposed to file the forms at the Clark County recorder’s office. But lenders didn’t take the forms seriously and proceeded with foreclosures. Soria continued to use the forms even though he was previously advised by the Clark County District Attorney that the forms had no legal effect. He continued to operate the scam from the same company location through the other two defendants even while he was in jail by using the business name Good Government League.
Community One Law Center and National Law Partners were sued by Indiana Attorney General Greg Zoeller for allegedly promising to help delinquent borrowers stop foreclosures but failing to deliver, an Oct. 27 statement said. The two Florida firms allegedly charged as much as $2,500 in up-front fees but did nothing to help the borrowers. The two companies allegedly shared employees and files.
Zoeller said he is also pursuing Legal Home Loan Solutions, another Florida company that charged more than $2,000 in fees but allegedly did nothing.
Zoeller announced earlier last month that he filed a lawsuit against Florida-based Marucci Law Firm and Illinois-based E.A.C. Financial. He claims the two companies were illegally operating in Indiana when each firm entered into contracts with two local individuals. Marucci collected $2,600, while E.A.C. Financial collected $750 in up-front fees. But both firms failed to render services or provide refunds.
Superior Court Associate Justice Sara Taft-Carter granted a temporary restraining order against East Coast Fidelity LLC and its manager Janice McCarthy, Rhode Island Attorney General Peter F. Kilmartin announced on Oct. 20. The state was alerted to the firm after receiving complaints from borrowers in Kentucky, New York and North Carolina about paying required up-front fees then hearing nothing back.
Jeffrey Hutching was convicted in connection with alleged deceitful practices related to foreclosure consulting. Related losses exceeded $150,000, and more than $500,000 was allegedly taken in all. Hutchings was sentenced to 46 years in prison. He appealed the conviction with the Court of Appeals of California, Fourth District, Division One, but his appeal was denied.
In August, California Attorney General Kamala D. Harris filed a lawsuit in the Superior Court of the State of California, County of Los Angeles against more than a dozen defendants that included law firms and lawyers. Harris claimed that the defendants collected millions of dollars by filing mass joinder lawsuits, which name hundreds of defendants, in order to stop foreclosures.
In connection with the crackdown, the offices of Mitchell J. Stein & Associates LLP were raided. In response, the Woodland Hills, Calif.-based firm says it sued Harris alleging she violated the supremacy clause of the U.S. Constitution. The company, which says it has not been sued by Harris, claims she is acting on behalf of Bank of America Corp. — which is defending itself in Stein’s lawsuit, In Re: Countrywide/Bank of America Los Angeles Foreclosure Litigation.
“After the federal action against Bank of America in April 2011, Bank of America has been actively engaged in lobbying state officials alleging unlawful conduct by the firm,” Stein says on its Web site.