3 Attorneys Charged For Loan Modification Fraud

Allison Tussey —  August 14, 2009 — 2 Comments

Sean Rutledge, Mitchell Roth and Nabile Anz face separate charges by the California State Bar for their alleged role in loan modification fraud.  The State Bar is investigating nearly 140 more attorneys. Roth resigned with charges pending, Anz faces involuntary inactive status and Rutledge has been formally charged with seven counts of professional misconduct.

The bar obtained the resignation of Mitchell Roth in May, 2009, after shutting down his Sherman Oaks, Riverside and San Diego offices in February, 2009. He had expanded his practice to primarily represent homeowners facing foreclosure who were referred to him by a Los Angeles company doing business as United First.

Suzan Anderson, who oversees the State Bar task force, said the task force was investigating 93 complaints against Roth, who would have faced disbarment had he not resigned. The resignation will take effect after Supreme Court approval. In the meantime, Anderson said the bar continues to receive complaints about Roth.

Attorney General Edmund G. (Jerry) Brown Jr. sued Roth and foreclosure consultant Paul Noe Jr., who ran United First, charging they conned 2,000 homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings. The attorney general charged that Roth filed suits that claimed the borrower’s loan was invalid because their mortgages were sold so many times on Wall Street that their ownership could not be determined. However, Brown charged, Roth did nothing to advance the lawsuits; he did not make required court filings, respond to motions, comply with deadlines or make appearances. He tried to extend the suits for as long as possible in order to collect additional monthly fees.

United First charged each homeowner about $1,800 in upfront fees, plus at least $1,200 per month. Brown is seeking $2 million in civil penalties and a permanent injunction to halt the company’s foreclosure operation.

The bar moved to place Irvine, California lawyer Nabile Anz on involuntary inactive status last month after receiving 39 complaints. Anderson said that in late 2008 Anz set up the Federal Loan Modification Law Center (FLM), operating out of several offices, complete with telemarketers, and signed up 8,300 clients in six months. Over a four-month period, FLM purportedly received 200,000 phone calls from prospective clients. The firm claimed it obtained successful loan modifications for 942 clients and had some 5,400 active clients last April.

But the bar accuses Anz of more than a half-dozen ethical violations. FLM was set up to preclude the involvement of lawyers in determining whether to accept a client and in fact case evaluators were trained to accept virtually every client, according to bar prosecutors. There was no legal analysis of clients’ cases and Anz‘s system of paying case evaluators guaranteed they would lie to potential clients in order to receive their commissions.

In their application to halt Anz‘s activities, bar prosecutors wrote: “It should come as no surprise that the scheme to defraud clients unraveled and that (Anz) abandoned his clients … after he took and kept the fees the clients had paid to FLM, which the clients desperately needed to pay their mortgages.”

Anz has a hearing before the State Bar Court Aug. 18, 2009.

The bar also charged Irvine attorney Sean Rutledge with seven counts of misconduct in handling a loan modification for Michael Robinson, who paid an advance $3,500 fee. Rutledge never took any action to negotiate with Robinson‘s mortgage lender, the bar charges.

As part of his retainer agreement, Rutledge required Robinson to provide bank account information both to him and to Kirkland Holdings Ltd. Rutledge had an “outsourcing services agreement” with KHL, which was to provide “maintenance of legal services,” including maintaining records related to client funds and responding to client inquiries about their money. Some of that information was protected by the attorney-client privilege and should not have been made available to KHL.

According to the bar charges, Rutledge attempted to withdraw funds from Robinson‘s bank account several times; each time, Robinson directed the bank to deny the request and was charged a $30 fee. Robinson eventually fired Rutledge, who agreed to refund his fee only if Robinson signed a release of professional liability. Rutledge did not refund the fee for several months.

The bar is seeking Rutledge‘s disbarment; he has a hearing before the State Bar Court Aug. 11, 2009.

Suzan Anderson, who oversees the State Bar task force, said her office receives between 15 and 40 new complaints each week. As of late July, it was investigating 391 complaints against 140 attorneys, compared to a total of nine investigations relating to loan modifications 2008.

“We’re working hard to get a lot of filings done,” Anderson said. “There are new twists every day. All the attorneys and investigators are experiencing overextended workloads right now.”

Because attorneys can legally accept advance fees, their services are in demand by foreclosure relief companies, who cannot otherwise receive payment until their loan modification work is completed. The State Bar issued an ethics alert in February, offering guidance to lawyers thinking of signing on with a foreclosure consultant. It can be found at calbar.ca.gov/calbar/pdfs/ethics/Ethics-Alert-Foreclosure.pdf.

The alert warns of seven violations in particular that can land a lawyer in hot water, including splitting fees and partnering with non-lawyers, aiding someone in the unauthorized practice of law and accepting fees but doing little or no work. “We’ve got lots and lots and lots of (ethical violations),” Anderson said.

10-person task force, consisting of four lawyers and six investigators, also is working with federal, state and local law enforcement as part of a statewide crackdown on foreclosure fraud. Attorney General Edmund G. (Jerry) Brown Jr. sued four more lawyers, as well as 14 companies and their executives, last month for bilking homeowners seeking mortgage relief. The lawsuits were part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants.

“The loan modification industry is teeming with confidence men and charlatans who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

The attorney general has sued four other California lawyers for their foreclosure activities:

Adrian Pomery is the attorney for US Foreclosure Relief Corp., based in Orange, California. Brown, the Federal Trade Commission and the state of Missouri accuse Pomery and the company of running a scam that promises homeowners reductions in their principal and interest rates as low as 4 percent. During a nine-month period, consumers paid the firm more than $4.4 million, but received no services, according to the lawsuit.

In response to numerous complaints, several government agencies directed the company to stop its illegal practices. Instead, the company changed its business name and continued its operations, using six different business aliases during an eight-month period.

Christopher L. Diener, Irvine, California, principal attorney for Home Relief Services LLC. According to the lawsuit, Home Relief Services and the Diener Law Firm told homeowners they would act as sole agent and negotiators and directed the homeowners to stop contacting their lender. None of the known victims received a loan modification with the company’s assistance. Brown accuses the company and Diener of bilking thousands of homeowners out of thousands of dollars each.

Arthur Aldridge, Westlake Village, the law firm of Shippey & Associates and its principal attorney Karla C. Shippey, Yorba Linda, California. Brown charged that RMR Loss Mitigation Group solicited homeowners through phone calls and in-person visits claiming a 98 percent success rate and a money-back guarantee. None of the known victims received a refund or loan modification with RMR‘s help. The company and the lawyers were sued for bilking more than 500 victims out of nearly $1 million.

Because State Bar investigations of attorneys are confidential, Anderson declined to say whether the task force will file disciplinary charges against any of the lawyers sued by Brown.

Anderson said she does not foresee any decline in the number of complaints. All adjustable rate mortgages in California will come due at end of year “and those people will be faced with the same foreclosure issues,” she predicted. In addition, some clients employ lawyers to file bankruptcy in order to avoid foreclosure, and the bar is receiving complaints that those lawyers are not performing – an ethical violation.

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Allison Tussey

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2 responses to 3 Attorneys Charged For Loan Modification Fraud

  1. Scott Gilbertson January 13, 2010 at 6:03 am

    I was also cheated by FLM. I have all my information and a promise for a refund that I never received.

  2. We were one of the victims of Anz (FLM). They were authorized to draft half of their payment, then receive the remainder when we were approved. They fraudulently took the entire amount, when confronted, they advised us we were approved. That was in Feb 2009. We are still working with our mortgage company to get a loan modification, in Sept 2009. Anz and FLM never did anything to assist us, would not return our money, nor would they even return emails or phone calls on a daily basis. Some of their employees that we dealt with, Yolanda DeAnda, Shelia Rock and Ruth Soloria (she supposedly worked directly for Anz. We would be greatly interested in p;roviding any asisstance and/or evidence so some type action that would give us the opportunity to both make these persons pay criminally for their acts, but also, from a civil perspective, where we can get some type return on theft of our monies ($4,3oo). We stand ready to provide any records needed to support our claims of injustive/fraud. John and JJ

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