Chain of Title
Page 32
That spring, though, David J. Stern gave up. The firm informed chief judges throughout Florida that they could no longer manage lawsuits and would withdraw from a hundred thousand cases statewide. They gave the courts four weeks’ notice. A month later, Ben-Ezra & Katz, another foreclosure mill, shut its doors. This left foreclosures in limbo; Lynn’s condo, a Stern case, would sit without docket action for a year. Stern ended up suing eight banks for breach of contract, and when Michael posted about that, a tipster who owned an employment agency revealed that Stern never paid him fees due for placing paralegals at the firm. Stern, ultimately, was the deadbeat.
The judicial system lost lucrative filing fees after the Stern implosion. Money began to dry up for the supersized rocket docket’s retired judges; Governor Rick Scott granted the judiciary a loan to get through the fiscal year. In Palm Beach County, courts set up case management conferences for Stern lawsuits, hoping to find new counsel. Like any judicial proceeding, they were supposed to be open to the public. But Lisa and Michael were barred from entering because it was “too crowded.”
Biases spilled into the regular case file. A friend of Lisa’s told her defense attorneys were threatened with monetary sanctions for raising “frivolous” defenses about fabricated evidence. Chip Parker got a Florida bar complaint simply for making negative comments about the rocket docket to CNN. Matt Weidner was also investigated for talking to reporters; a judge pulled out the articles in court and admonished him. Bailiffs removed lawyer Mark Stopa from a courtroom after a judge ruled before hearing his argument. Broward County chief judge Victor Tobin showed his allegiances by quitting to work for the Marshall C. Watson foreclosure mill. Once the rocket docket went into overdrive, 140,000 foreclosure cases got cleared in nine months.
Of all the counties Larry Schwartztol and Rachel Goodman of the ACLU studied since coming to study Florida courts, Lee County, around Fort Myers, was the worst. Focused intensely on clearing cases, the county disposed up to two hundred a day. In an extreme example, Lee County judge James Thompson specifically exempted banks from filing verifications that foreclosure documents were valid, defying state supreme court orders. When caught, Thompson changed his order, but then allowed affidavits that didn’t comply with the verification standard.
Schwartztol and Goodman sat in on cases and took testimony from defense attorneys. They hired their own court reporters and stationed them in Lee County courts. And they found a homeowner, Georgi Merrigan of Cape Coral, willing to sue the county. After Georgi’s husband suffered a debilitating auto accident, she had to leave her job to become his caretaker. Because of the lost income they fell behind on their mortgage, and the ACLU argued they couldn’t get a fair foreclosure trial from the Lee County rocket docket. They filed an emergency motion to intervene with the district court of appeals, supplemented with a five-hundred-page appendix of public records and court transcripts. The ACLU charged that whatever was happening in Lee County wasn’t a court anymore. The appeals court didn’t see it that way, denying the ACLU’s request in a one-line order. With an adverse ruling, Schwartztol and Goodman saw no choice but to pull out of Florida. Their only solace was that rocket docket funding would soon run out.
That spring, Carol Asbury sold Lisa and Michael on a new idea. WDJA, a local radio station, allowed anyone to broadcast on their airwaves for $300 a week. The show would also stream over the Internet. Carol offered to bankroll it; she called it Citizen Warriors Radio. Lisa and Michael checked out the studio, just off I-95 in Delray Beach. They’d seen a lot of foreclosed, vacant houses in disrepair over the years. This place looked worse. Their car kicked up dust on the unpaved driveway as they pulled in. They had to dodge broken glass to reach the door. The one-story bungalow wobbled as they approached it, with overgrowth from a nearby thicket of foliage surrounding one side. Headshots from former guests dotted one wall of the studio, and judging from the hairstyles, the station stopped collecting pictures in the 1970s. The production engineer, Byron Eggers, always wore a pirate-themed bandanna. He would talk proudly about how hard he partied the night before. Not surprisingly, Byron was also in foreclosure.
For some reason, Lisa and Michael agreed to come back every week.
Citizen Warriors Radio taped Saturday mornings at eight o’clock. Lisa would book guests, either friends like Nye Lavalle or foreclosure defense attorneys. They discussed the latest news and court decisions, promoted rallies and street actions, took calls—whatever could fill the hour. There was an outline, but Carol never followed it.
A couple of weeks into the radio show, Michael got a call while driving to a barbecue with Lisa and some friends. It was Kim Miller at the Palm Beach Post. “I’m calling for a comment about the indictment.”
“Which banker got indicted?”
“No, I mean Carol Asbury.”
“What?”
Federal authorities indicted Carol and two dozen others in a scheme to defraud mortgage lenders. The group recruited straw buyers from poor sections of Miami-Dade County who used phony income statements to purchase luxury homes in an upscale real estate development called Versailles. The conspirators set up the sales as a double closing: one set of closing documents with the real price went to the seller, and another set, with an inflated price, went to the lender. The difference in prices represented the profits, which got laundered through multiple bank accounts. The scheme wrecked the community, as half the homes in Versailles fell into foreclosure and squatters moved into abandoned properties. According to the indictment, Carol’s real estate brokerage and title company, which predated her foreclosure defense work, prepared the double closing documents.
Michael told Kim Miller he didn’t know anything about it, and rushed off the phone. He called Carol—“What the fuck is going on?”—but got no answer. Michael was panicked, not just because Carol represented his main source of income but also because his reputation would take a hit through association with a mortgage fraudster. It would give fuel to his critics.
At the barbecue, Michael couldn’t relax. He thought about all those hints of surveillance on his phone line. “We always think somebody’s coming after us and now it’s happening,” Lisa told him. So Michael called up Kim Miller. He gave her this comment: “I find it very disturbing that the government must use all their resources to attack the people that are exposing the fraud and corruption. Where are the indictments on all the known felonies committed by the banks, foreclosure mills and doc shops?”
The Palm Beach Post ran the story with Michael’s quote. As predicted, critics had a field day. Foreclosure fraud blogger Steve Dibert gleefully recounted the news, adding that the Florida bar publicly reprimanded Carol in 2008 for failing to inform law enforcement about a fake escrow letter drafted by one of her employees. Carol listed 4closureFraud as her personal law firm website with the bar, and Dibert intimated that soliciting donations, which Michael occasionally did to cover costs of events like the Rally in Tally, violated state law. Dibert didn’t accuse Michael of being part of the scheme: “He’s just trying to save his job and his credibility, both of which it appears just went out the window.”
Carol finally told Michael the truth, or at least a version of it. During the housing bubble, both Carol’s mother and her husband fell ill. So she entrusted the office to underlings while tending to family matters. Carol claimed her employees put together the phony double closings, not her. The FBI raided the office, and Carol cooperated while understanding that there would be no immunity. Carol told Michael the feds were making an example of her because she defended homeowners. But Michael believed the foreclosure defense work could have been a public relations ploy, to cast her as a victim of retaliation for challenging foreclosure fraud. He felt foolish for initially defending her, even as he considered her crimes insignificant compared to the banks’.
Carol pleaded guilty in October. She reiterated the story she told Michael to the American Bar Association Journal, framing her aid to homeowners as a way to make amends. “If the wor
st happens, I’ve still done the best I can,” she said. The judge gave her two and a half years in prison.
One Friday in late May, at the Economic Crimes division offices in Fort Lauderdale, June Clarkson was poring through a pile of Lender Processing Services documents, as she had been doing all month long. LPS was one of the only cases June and her partner Theresa Edwards were allowed to keep. After the new regime took over in Tallahassee, they split up the foreclosure fraud investigations, farming them out to five different offices, to prosecutors unfamiliar with what June and Theresa had been tracking for over a year. June and Theresa weren’t even allowed to provide transition notes.
One case quickly reached conclusion. Attorney general Pam Bondi settled with foreclosure mill Marshall C. Watson for just $2 million, along with promises to foreclose properly in the future. Bondi did not require Watson to admit that they engaged in anything illegal, even though the background facts in the case included such illegal practices as document forgery, false affidavits and notarizations, and process service to imaginary defendants. Watson effectively paid a small percentage of their foreclosure-based profits as hush money. June thought Bondi settled cheap.
It wasn’t the first hint of whitewashing from Bondi, who publicly endorsed a fifty-state settlement without monetary penalties. She argued that forcing banks to lower loan balances for underwater homeowners would create “moral hazard,” as homeowners would stop paying their mortgage to get a principal reduction. Homeowner deception weighed more heavily on her mind than deception by the banks.
June and Theresa got a commendation for “triggering a nationwide review” of foreclosure practices, and their presentation to county clerks was used as evidence in a New York case. But when it came to prosecuting wrongdoing, June and Theresa couldn’t sneeze without asking Tallahassee. Whenever June found something notable in the LPS files, she’d have to walk down to her supervisor, Bob Julian, and show it to him. That Friday, every time June entered the room, Julian’s face sank. He finally just shut the door. Theresa Edwards stopped by June’s desk at three-thirty that afternoon. “Bob wants us both to come into his office.”
Julian, who had known Theresa since law school, sat the two prosecutors down. “You’re both done at the end of today. You can either quit or be terminated.”
“Why are we being let go?” Theresa asked.
“It came from the top. Tallahassee didn’t give me a reason.”
June and Theresa hurriedly wrote resignation letters and turned in their security cards. They had to go back over the weekend for their personal items.
Within weeks of June and Theresa leaving, Joe Jacquot, a former deputy attorney general, became senior vice president of government affairs at LPS. Mary Leontakianakos, director of the Economic Crimes division under former AG Bill McCollum, went to work for Marshall C. Watson, the same foreclosure mill to which Bondi gave the sweetheart deal. Erin Cullaro, who moonlighted as a robo-signer while working for the attorney general, was also let go, more than a year after Lisa informed the office of her activities. But she landed with foreclosure mill Shapiro & Fishman. In Florida, there were rewards for those who played ball, and consequences for those who didn’t.
The story didn’t get out for a couple of months. Lisa knew something was wrong when emails to June and Theresa started to bounce back. When she heard the news, she felt sick. June and Theresa were the first prosecutors in America to actually investigate foreclosure fraud. They courageously trusted Lisa’s wild theories, which were eventually proven true. It looked like the industry was busy tying up loose ends, making plans for its eventual impunity.
Bondi said nothing for a week after the story broke. Then her spokesperson issued a statement smearing June and Theresa’s poor judgment and lack of professionalism. But Andrew Spark, a former lawyer in the Tampa Economic Crimes unit, released a letter that backed up everyone’s suspicions. “As Clarkson and Edwards found out, and as I have found out in 7½ years of having one effort after another squelched, bold action is rare,” Spark wrote, describing an Economic Crimes office that too often ceded ground to bullying corporate lawyers and wealthy contributors. It only grew worse, Spark said, under Pam Bondi.
Lisa requested a formal review of the firings by the state inspector general. Public interest group Progress Florida echoed that demand. As the scandal grew, June and Theresa granted several media interviews, including on Citizen Warriors Radio with Lisa and Michael. After days of pressure, Bondi agreed to have the inspector general for the state’s chief financial officer conduct an investigation.
Deutsche Bank did refile for foreclosure against Lynn Szymoniak, naming her son Mark Elliot as a co-defendant, though he was still taking poetry classes in New York City and hadn’t lived regularly in Palm Beach Gardens for seven years. A lawsuit on his record could hurt his credit and job prospects. It was a petty tactic to harass the family into silence. The case dragged on, three years after the initial filing.
Lynn knew 60 Minutes was the last card she could play to force criminal investigations. She could write Fraud Digest articles and appear at happy hours until the end of time and wouldn’t get the audience she had on CBS. But Jacksonville didn’t budge. The U.S. attorney’s office in South Carolina gave her conflicting signals. One day they’d say they were definitely filing criminal charges over the assignments. Then they’d say no, suing Chase for violations of the SCRA would play better with a jury. Then they’d change their minds again and focus on the mills. The indecision seemed to be a pretext for never moving forward.
Lynn wondered if 60 Minutes could kick-start an IRS investigation. If mortgages were never conveyed to the trusts, with nonperforming loans stuck into them after the fact, they violated REMIC tax laws, which should trigger a 100 percent penalty. Reuters actually reported on this a few weeks after Lynn’s story aired, with the IRS acknowledging an “active review” of REMIC practices in mortgage-backed securities. But Lynn heard from Naked Capitalism blogger Yves Smith that the fix was in. A senior IRS officer initially seemed interested but then dropped the issue when the White House sent word that they would not use tax laws as a tool of policy. When Yves broached REMICs at a meeting with top Treasury officials, they quickly changed the subject. The threat of trillions in tax penalties to induce a resolution was off the agenda. Georgetown professor Adam Levitin described failing to prosecute the REMIC issue as a “backdoor bailout of the financial system.” Lynn decided not to call the IRS.
Instead of issuing press releases announcing indictments, or photos of top executives led away in handcuffs, Jacksonville only asked Lynn for more documents. Get me two hundred examples of this law firm signing mortgage assignments after they filed their foreclosure case, or thirty Linda Greens in this region of the country. Lynn spent hours on these projects, feeling like she couldn’t say no. At one point the assistant U.S. attorney requested a set of files that Lynn knew would take fourteen hours to assemble. She emailed her friend Henry “Tommy” Clark, the old insurance fraud specialist who partnered with the FBI, telling him about it. Tommy called her within a few minutes, and didn’t even say hello. “Don’t waste your time,” he said. Lynn was stunned.
Tommy was in the same position as she was—an outsider the office would employ for grunt work, like looking through ten thousand emails, searching for a smoking gun. Tommy worked with his Jacksonville friends for a long time, and saw them as honorable people willing to follow the evidence wherever it led. But he also recognized the pressure imposed on that office from above. So when he said, “I’m not working on it anymore, I’ve got a whole lot of other cases where I can file,” to Lynn that meant everything. A friend was telling a friend to stand down. It was all over.
As the months went on, Lynn got bits and pieces of the story, always in the roundabout manner Tommy or her other friends used when discussing active investigations. The Justice Department stonewalled the case, refusing requests for additional resources and micromanaging the grand jury probe. She heard one emblematic stor
y, where DoJ sent a young lawyer to south Florida to sit in on an FBI deposition with Cheryl Samons, from the now-defunct Stern law firm. The lawyer obstructed the investigation, filling time with dubious, irrelevant questions and stopping the agent from properly deposing the witness.
People threatened to quit, waved critical pieces of evidence in front of their superior’s face, thundered that letting this fade would violate the cause of justice. But it didn’t matter. Maybe the office would find a patsy, a sacrificial lamb, and plant everything on them. But it wouldn’t be anything close to what Lynn expected in those frantic days thirty months earlier when she stayed up for seventy-two hours straight and made all those discoveries. Those documents in her front room now symbolized a pile of disappointments.
20
THE FINAL WHITEWASH
September 17, 2011
The heat finally subsided in south Florida, cooling the Intracoastal’s waters and shaking the palm tree fronds as the winds returned. That summer Michael moved into Lynn’s downtown condo, from one foreclosure to another. He insisted on paying the homeowner’s association fee out of the cash he held back for the mortgage in Port St. Lucie. With the 4closureFraud sponsorship in limbo, it was practically all Michael had left. During child support hearings with Jennifer, her lawyer alleged that Michael must have hidden assets. After all, he was a celebrity, featured in newspapers and magazines. He even had his own radio show. “We pay $300 a week for that radio show!” Michael shouted at the hearing. The lawyer couldn’t understand that; radio stations paid the hosts, not the other way around.