California attorney general Kamala Harris and the state's Department of Justice have taken legal action against several attorneys and law firms who used a fraudulent scheme to steal millions of dollars from distressed homeowners.
According to the lawsuit filed last week by Harris, the defendants worked together to prey on vulnerable homeowners who were facing foreclosure by having them sign up for “mass joinder” lawsuits against their mortgage lender.
Defendants deceptively led homeowners to believe that by taking part in this foreclosure rescue scheme, they would stop pending foreclosures, reduce their loan balances or interest rates, obtain money damages, and even receive title to their homes free and clear of their existing mortgage, the lawsuit said. Defendants charged homeowners retainer fees of up to $10,000 to join as plaintiffs in the mass joinder lawsuits against their lender or loan servicer.
The defendants allegedly used deceptive advertising and telemarketing schemes to recruit consumers to join these lawsuits. Some mailers were designed to appear as official settlement notices or government documents informing homeowners that they were potential plaintiffs in a "national litigation settlement" against their lender. However, no settlements ever existed, and in many cases, no lawsuit had even been filed.
According to Harris, the defendants sent out about two million pieces of mail to victims in at least 17 states. The defendants' revenue from this scam is estimated to be millions of dollars, the lawsuit said.
“The defendants in this case fraudulently promised to win prompt mortgage relief for millions of vulnerable homeowners across the country,” Harris said. “Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress.”
Consumers who paid to join the mass joinder lawsuits were frequently unable to know whether they had been added to the lawsuit or even establish contact with any of the law firms. Some consumers lost their homes shortly after paying the retainer fees demanded by defendants.
The Department of Justice seized the practices of Attorneys Processing Center, Data Management, Mitigation Professionals, Gary DiGirolamo, Bill Stephenson, Glen Reneau, Pate Marier & Associates Inc., James Pate, Ryan Marier, Home Retention Division, Michael Tapia, Lewis Marketing Corp., Clarence Butt and Thomas Phanco preventing them from continuing their operations. Overall, there were 16 bank accounts seized from this investigation.
The State Bar seized the practices and attorney accounts of the law offices of Kramer & Kaslow, Mitchell Stein & Associates, Christopher Van Son, Mesa Law Group Corp. and Paul Petersen on Aug. 15.
There were allegedly five violations that the defendants did not comply to including false advertising, unfair, fraudulent and unlawful business practices, unlawful running and capping, improper fee splitting and failing to register with the Department of Justice as a telephonic seller.
“The number of lawyers who have tried to take advantage of distressed homeowners in these tough economic times is nothing short of shocking,” said William Hebert, president of the State Bar. “By taking over the practices of four attorneys accused of fraudulent marketing practices, the State Bar can put a stop to their deplorable conduct as part of our ongoing effort to protect the public.”
