State sues lawyers


State sues lawyers over mass mortgage lawsuit scam

Carolyn Said, Chronicle Staff Writer

San Francisco ChronicleAugust 19, 2011 04:00 AMCopyright San Francisco Chronicle. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Friday, August 19, 2011


Maddie McGarvey / The Chronicle

Attorney General Kamala Harris says the defendants “suggested the banks would have to pay, but the only people who paid were” homeowners; the state will seek restitution.


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Attorney General Kamala Harris says the defendants "sugge...Photos of evidence used in the case against lawyers and s...Attorney General Kamala Harris (left) and Wayne Bell, chi...View Larger Images


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The state Department of Justice is suing several California lawyers and related companies, saying they bilked desperate homeowners nationwide out of millions of dollars in fees to join questionable mass lawsuits against their mortgage lenders, Attorney General Kamala Harris said Thursday.

“Yesterday we broke up what we believe is a fraud ring that is national in scope,” Harris said at a news conference in San Francisco. “This is just the beginning of holding these wrongdoers accountable.”

The scam, as described by Harris, involved multiple law firms and call-center affiliates who marketed lawsuits against mortgage banks to homeowners in California and at least 16 other states who were facing foreclosure.

The defendants sent out at least 2 million mass mailers that masqueraded as official government documents, and then followed up with phone calls, the Justice Department said.

Victims paid retainers from $3,500 to $10,000, believing that the lawsuits would stop pending foreclosures, reduce or even eliminate their principal balance, reduce their interest rate to as low as 2 percent and give them monetary damages, it said.

Once homeowners paid to join the lawsuits, they rarely met or spoke with their lawyers; some lost their homes soon after paying the up-front fees, the DOJ said.

The scam occurred against the backdrop of the foreclosure crisis, in which millions of people have fallen behind on mortgage payments as their home values plummeted, officials said.

“They took advantage of a growing sentiment out there,” Harris said. “A lot of homeowners have been deeply disappointed. They are resentful, they are angry, and they are hurt. (The defendants) suggested the banks would have to pay, but the only people who paid were these homeowners.”

Harris said the state would seek fines, penalties, damages and restitution in potentially the tens of millions of dollars from the defendants.

The “mass joinder” lawsuits marketed by the defendants are a way for multiple plaintiffs with separate but similar cases to join in a single suit. Unlike class action suits where plaintiffs share a single judgment, the plaintiffs in mass joinder suits can receive individual settlements. Such suits are extremely complex.

The defendants are being charged with false advertising, fraudulent business practices, improper fee splitting, and failure to register as telephonic sellers.

The department is not saying whether the actual complaints in the mass joinder lawsuits have legal merits.

“There may be legitimate causes of action there,” Harris said. “The cases may go forward.”

The State Bar has shut down the practices of the attorney defendants. They are: Kramer & Kaslow, Philip Kramer, Mitchell J. Stein & Associates, Mitchell Stein, Christopher Van Son, Mesa Law Group Corp. and Paul Petersen.

“This is a shocking case of how lawyers violated (clients’) trust,” said Bill Habert, president of the State Bar.

The phone at Kramer & Kaslow now plays a recorded message from a State Bar, explaining the enforcement action.

People who believe they were victims of the scam should visit hud.gov. The case is the first action to come out of the attorney general’s mortgage fraud task force, which Harris said is investigating everything from loan origination to modification.

E-mail Carolyn Said at csaid@sfchronicle.com.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/08/18/BUD91KP49T.DTL#ixzz1aY2kHtz8

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