by David Dayen
Judges initially viewed Matt and his JEDTI friends as clowns fighting the equivalent of traffic tickets. But inside the system, clerks who worked with mortgage documents on a daily basis knew something was tragically wrong. They were disquieted by the behavior of the foreclosure mill law firms, filing hundreds of cases a week in the sloppiest way imaginable. They thought the courts desperately needed the leadership that follows from integrity. As the crisis raged and the lost notes and fabricated documents mounted, judges in the Tampa/St. Petersburg area began to listen.
When people around the state discovered what was happening in St. Petersburg, new faces would show up at JEDTI meetings. Once an attorney stood up and said he had to come to Florida’s west coast to see JEDTI for himself. He’d driven four hours from Palm Beach, known locally as “Corruption County,” where he couldn’t get anything done because the judge who handled all the cases wouldn’t listen to foreclosure defenses. In fact, she would sanction attorneys for stepping out of line.
As the attorney from Palm Beach discussed his litigation strategies, Matt immediately recognized him as a much higher-caliber advocate than the JEDTI lunatics, someone with deep experience. The attorney’s name was Thomas Ice.
Tom Ice started as a corporate lawyer, spending twenty years defending companies in accident cases, eventually becoming a partner with the international firm Holland & Knight. But he got burnt out and decided that early 2008 was the perfect moment to put out his own shingle, recession notwithstanding. He opened Ice Legal in Royal Palm Beach, in a strip mall on Okeechobee Road, one of those six-lane Florida boulevards with a continuous loop of car dealerships and chain stores. His wife, Ariane, formerly an executive director at nonprofits, joined the firm as part paralegal, part researcher, and part counselor. Tom would joke that Ariane knew more about the law than any attorney.
Tom originally planned to try consumer bankruptcy cases, as his brother did. But the first client who walked into Ice Legal was a trucker who couldn’t declare bankruptcy because he’d lose his truck, and therefore his entire livelihood. He wanted to mount a foreclosure defense to save his home. As far as Tom Ice knew, there wasn’t any such thing as a foreclosure defense; if you didn’t pay, that was it. He sent the trucker on his way, apologizing that there was simply no way to help. He thinks about that guy a lot.
The next person also wanted to fight a foreclosure, as did the next, and the next. Since primary mortgages couldn’t be modified in bankruptcy and practically every homeowner in Florida was deeply underwater, most clients would have no chance to make payments in a Chapter 13 workout. Tom realized that he’d better research foreclosures. He read English case law, like the 1677 Statute of Frauds, and dove into the various requirements for bank repossessions. Early on, Ariane kept alerting Tom to outlandish add-on charges from mortgage servicers for things like property inspection. Tom would ask for documentation to prove the charges, and the creditors would immediately drop the claims, saving his clients $5,000 to $10,000 by making a phone call. That made the Ices recognize they couldn’t trust bank figures.
Ice Legal rapidly changed focus from bankruptcy to foreclosure defense. The main judge in the Palm Beach County foreclosure division at that time, Jeffrey Colbath, personally asked Tom to take cases, saying that homeowners needed lawyers. The evidence Tom encountered looked suspicious: bad signatures, vice presidents signing for multiple banks, the whole bit. He and Ariane got sucked down the same rabbit hole as so many other lawyers, victims, and activists, scouring the public records, amazed by the systemic misconduct of the nation’s largest financial institutions. So when Tom first went into court on a foreclosure case, despite no experience in this area, he felt enormously confident that the judge would nail the other side. But it was the exact opposite. The judges were where Tom had been a few months earlier: if the homeowner didn’t pay, there was no defense.
Tom observed cases across the state and decided that the best way to fight was to litigate. He started with the process service defense. When a defendant is served with a summons, the process server must include four separate items on the document: their initials, their ID number, date, and time. Ariane was doing document intake, and the information was consistently missing. Tom at first balked at the idea, saying, “I don’t see a court getting excited about this.”
Ariane said, “Come on! Tell me why you can’t raise that!”
Upon further research, Tom learned that defendants weren’t getting served the papers. The point of the notations was to prove whether process servers did their job. Foreclosure mill law firms often owned the process servers, and therefore had an interest in failing to inform defendants about their court cases—it meant uncontested foreclosures and pure profit. Investors in mortgage-backed securities paid for process service, and they had no way of knowing whether the charges were legitimate.
Ariane talked Tom into filing one case, Vidal v. SunTrust Bank. Palm Beach County judge Diana Lewis, who initially heard it, indignantly grabbed the copy of the process server’s papers and wrote the notations in herself, saying, “There, does that satisfy you? Now stop all this quibbling!” But where Judge Lewis saw quibbling, Tom and Ariane saw a legal process that should never be defied for convenience’s sake. Vidal v. SunTrust Bank ended up going all the way to appellate court, and Ice Legal won.
Tom discovered that some process servers “cleaned up” the documents by testifying they couldn’t locate the defendants. Dozens of affidavits outlined the same scenario, where the server would talk to a neighbor who hadn’t seen the defendant in months. It was always fictitious. Others would have managers forge signatures for the process servers, whether they went out and served papers or not. Ice Legal obtained an affidavit from Liz Mills, a process server whose name appeared on hundreds of papers in Lee County. She swore that she had never visited Lee County in her life. Ice Legal prosecuted many of these cases, finally prompting the companies to bother to serve papers correctly.
There were other defenses. The standard mortgage contract included paragraph 22, which required that the borrower get written notice of default and guidance on how to cure it before filing for foreclosure. This was the delinquency letter defense April Charney had been using since 1992, but even in 2008, servicers failed to provide all the required elements on the letter. The Ices, along with lawyers across the state, made numerous paragraph 22 defenses.
Plaintiff’s attorneys attacked Tom for his motions, which they said clogged the courts and delayed the inevitable. But simply by doing some real lawyering, Tom succeeded in breaking the stranglehold that bank attorneys had over the foreclosure process. Ice Legal spent most of 2008 and 2009 in discovery, filing motions to compel depositions. They wanted to talk to the employees who signed assignments of mortgage and other documents, to see if they could live up to their claims. Tom and his colleagues traveled across the state to locate judges who would order depositions. Ice Legal lawyers were prepared to go wherever necessary to depose employees, even after the judges would ask, “You really want to fly to Michigan for this case?” Tom and Ariane hired a couple of paralegals whose entire job consisted of answering emails about the four hundred or so deposition requests the firm had open. Everyone spent long nights at the office. And gradually it paid off.
The first deposition was with Erica Johnson-Seck, a “vice president of foreclosure and bankruptcy” with OneWest Bank, formerly the subprime lender IndyMac. Tom had a client named Israel Machado; IndyMac, his servicer, sued him for foreclosure, and Johnson-Seck’s signature appeared on the assignment of mortgage (as a vice president for MERS), the affidavit of amounts due and owing, and a response to a defense motion. Johnson-Seck turned up in a case thrown out by Brooklyn judge Arthur Schack because she had both assigned a mortgage to Deutsche Bank and executed an affidavit on behalf of Deutsche Bank. This was a similar instance, with Johnson-Seck appearing as multiple officers in the same case. But nobody, to Tom’s knowledge, had deposed her.
Johnson-Seck lived in Texas but travel
ed to Palm Beach for the meeting, on July 9, 2009. She stated that she had authority to sign for MERS, despite not being employed by them. In fact, Johnson-Seck could sign for MERS, OneWest, IndyMac, the FDIC as conservator for IndyMac, Deutsche Bank, Bank of New York, and U.S. Bank. “And that’s all I can think of off the top of my head,” she added. Tom Ice asked Johnson-Seck how many foreclosure-related documents she signed every week. She estimated 750.
“How long do you spend executing each document?” Tom asked.
“I have changed my signature considerably,” Johnson-Seck said proudly. “It’s just an E now. So not more than thirty seconds.”
These were sworn affidavits, where Johnson-Seck attested to reviewing business processes at the servicer and all relevant information on the document, material facts that would lead to someone losing their home. She gave each case thirty seconds.
“Is it true that you don’t read each document before you sign it?” Tom Ice continued.
“That’s true,” Johnson-Seck replied. She didn’t know who inputted the figures on the documents, or how the records were generated. She relied on an on-site specialist from Lender Processing Services to run a quality control check on a 10 percent sample. And she admitted to not signing in the presence of a notary, undermining the purpose of notarization.
Johnson-Seck’s casual admissions shocked Tom. But Johnson-Seck was just a foot soldier, assured by her superior that blindly signing documents was part of her job. Tom didn’t blame her, just thanked her for giving up the scheme. More important, Johnson-Seck revealed the underlying crime in the Israel Machado case: the plaintiff, IndyMac, never held the promissory note or the mortgage and was trying to foreclose without standing on behalf of a trustee. IndyMac fraudulently tried to assign the mortgage to themselves after the foreclosure case was filed, to cover up the standing problem. Tom immediately filed a motion to dismiss the case. Florida Default Law Group, IndyMac’s lawyer, countered by striking Johnson-Seck’s affidavits, attempting to bury the evidence of fraud. But the judge sided with Ice Legal in the case, throwing out the foreclosure and ordering that FDLG pay Ice’s $30,000 legal bill. Despite this success, in many cases judges pushed the paper through, willfully blinding themselves to the misconduct. Those foreclosures trudged along, and Tom and Ariane prepared appeals while working their other cases.
One day in early November 2009, Tom ran across a letter to the Florida Supreme Court from Lisa Epstein. Like many lawyers, he had been following the task force on foreclosure processes—one of the task force members, in fact, was April Charney. Lisa’s letter knocked Tom’s socks off. She presented herself as a nurse and a working mom, but Tom figured she had to have some legal training; she could really write. He and Ariane thought Lisa might be able to help them with filing appeals. They contacted Lisa and asked if she could come in. Lisa was shopping at a produce stand when she got the call, and she quickly agreed to meet. She brought Michael along.
Tom and Ariane were not only shocked that Lisa and Michael weren’t lawyers but also that they held full-time jobs despite all the work they were doing and all the knowledge they had acquired. “When do you get your work done?” Ariane asked them, and Lisa and Michael just shrugged. Sleep being optional helped.
Tom showed them a couple of early depositions, including the one featuring Erica Johnson-Seck. Michael and Lisa knew this behavior was going on but never saw an employee cop to it in testimony. It made the fraud too real. “You should let me put this on my site; people have to see this,” Michael said. Tom had toyed with publishing the depositions, but Ice Legal’s site didn’t have any readers. They already revealed the contents of the deposition in a public motion, so Tom didn’t see how it would violate any privileges.
Tom talked about some other cases, too, including one involving Florida Default Law Group over some suspicious-looking affidavits for reasonable attorney’s fees. The signer’s name was Lisa Cullaro, and the notary was Erin Cullaro. At least that was the case on this particular affidavit; sometimes Lisa Cullaro would be the notary. Erin’s notarizations had a variety of different signatures, from her full name to just an E and everything in between. Ariane put all the signatures on one long piece of paper to make the comparisons easier; even the short versions didn’t seem to come from the same person, and Lisa Cullaro’s signatures looked off as well. Ice Legal recently requested a deposition with the Cullaros.
“They’re on my documents, too! Do you know Erin works for the attorney general’s office?” Lisa said.
“What?” Ariane replied.
Lisa showed them the links. Even Erin’s previous employment with Florida Default Law Group was suspect: these were supposed to be independent assessments of attorney’s fees, not assessments from ex-employees. But working for the attorney general’s office took it to a whole other level, completely changing the Ices’ thinking on the deposition. Tom wanted to know if Erin was working on anything at the Economic Crimes division involving foreclosures. Ariane wondered if Cullaro revealed to her employers that she was moonlighting as a notary. A public records request could uncover those documents if they existed. Also, they wanted her official travel records. If she went out of state on any of the occasions when she purportedly notarized documents for Florida Default Law Group, that would be serious evidence of forgery.
Michael focused more on how much the Cullaros were paid per affidavit. “Two, three bucks a signature, thousands a week? Plus an assistant AG gig? That’s a lot of cash flow.”
A few days after the meeting Tom Ice sent the transcript of Johnson-Seck’s deposition over to Michael, and on November 15 Michael posted it at 4closureFraud with the headline “Full Deposition of the Infamous Erica Johnson-Seck.” He added Ice Legal’s pleading for sanctions in the case, for filing documents “in complete disregard of the truth.”
Across the state, Matt Weidner read the deposition and had the same incredulous reaction. Prior to that point, Matt’s blog mostly contained short commentaries and outbursts with titles like “Mortgage Modification, Santa Claus and Other Fairy Tales” and “The Stock Market Is a Ponzi Scheme.” He’d posted a couple of court decisions before, but never a deposition. Matt had access to transcripts like this, through contacts around the state and April Charney’s listserv. Instead of just ranting, he could use the blog to make them available. Matt believed in full transparency, that anything occurring in a courtroom should be public. And if the disclosure put pressure on the outlaw banks, all the better. Matt republished the Erica Johnson-Seck deposition on his site. And in January he wrote one of his patented tirades, based on a conversation with Tom Ice about the deposition. “Jesus, they’re like robots,” Matt told Tom, referring to the signers. In the blog post, Matt put it all together:
In the vast majority of cases where these documents are produced, the person signing the documents does not have the legal basis to swear to the facts placed on the paper they are signing. We know from depositions taken of these “robo signers” that they don’t even read the documents placed in front of them and the notaries and witnesses that are supposed to watch them sign are not present.
Some lawyers didn’t like the term “robo-signing”—it softened the crime, made it sound like an automated labor-saving device instead of an improper process—but it caught on.
Meanwhile, Florida Default Law Group played the same games with the Cullaro case that they did with the Erica Johnson-Seck matter. First FDLG denied requests for communications between the Cullaros and the law firm, terming them “privileged and confidential.” Then they filed an objection to making the Cullaros available for questioning, which they called a “fishing expedition.” Ariane sent an email to her counterpart at FDLG, asking if they were operating as the Cullaros’ lawyer; they replied that they were. But the Cullaros were supposed to be independent experts. When Tom pointed out how inappropriate that was, FDLG replied that “upon further investigation, our firm does not represent the Cullaros,” and then they withdrew all Cullaro affidavits, arguing th
at depositions would now be unnecessary.
The Ices subpoenaed Lisa and Erin Cullaro as fact witnesses to misconduct involving FDLG. The Cullaros hired their own attorney—John Cullaro of the Cullaro Law Firm, their brother. Ice Legal scheduled hearings to force Erin and Lisa to testify, while issuing public records requests for any communications with the attorney general’s office around Erin’s FDLG employment. The fish was trying to wriggle off the hook, but Tom and Ariane were patiently reeling it in. And of course, they kept Michael and Lisa, their newest colleagues, apprised of the developments.
Over in North Carolina, Max Gardner stood outside a courtroom, in heated conversation with the vice president for a big mortgage company. “Do you understand what’s going to happen?” the vice president thundered. “You’re going to destroy the country. And if you don’t stop, we’ll just go to Congress and get the laws changed!”
Max thought about it. “You know, we have some changes we’d like to make, too!”
10
THE SPECIALIST
December 2009
As the economy sputtered back to life, winter brought a few more snowbirds back to Palm Beach than the previous year, but nothing like before the recession. Still, on her trips around the city, Lisa Epstein had to dodge the sudden lane changes of elderly drivers desperate for a good lunch table at the nearest deli. Away from the busiest avenues, Lisa would usually find herself back on the alphabet streets in Lake Worth, among the abandoned homes. A couple of years earlier, families trimmed the Christmas tree in those living rooms. Kids opened presents and hugged their loved ones. Now they were who knows where, the memories left out in the yard with the rotting furniture.