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Active Loan Modification Scam Litigiation

In 2009, the Lawyers’ Committee’s Fair Housing & Fair Lending Project and Legal Mobilization Project led the formation and launch of the Loan Modification Scam Prevention Network (“LMSPN”) to engage the Lawyers’ Committee and partners in the fight against foreclosure rescue scams.  The LMSPN is made up of a broad coalition of governmental agencies, non-profits, and financial institutions and is engaged in a wide variety of activities to combat such scams.  These activities are described on the LMSPN website, www.preventloanscams.org. A central goal of the program is to support federal, state and local government enforcement activities against foreclosure rescue fraud scams.  In addition, as part of this enforcement arm of the program, the Lawyers’ Committee, in conjunction with its pro bono network, has initiated a significant litigation program.  For details on the cases that the Lawyers’ Committee has brought so far, please view the links below.

For information on actions brought by the Federal Trade Comission, click here.  For information on actions brought by state agencies, please see the LMSPN National Prosecutions Against Alleged Scammers List.

Rush v. Save My Home

On March 9, 2011, the Lawyers’ Committee and pro bono counsel Davis Polk & Wardwell LLP filed Rush v. Save My Home, No. 3605/2011 (S. Ct. of NY), on behalf of nine homeowners from the New York metropolitan area against a group of for-profit modification companies.  The filing sought to permanently enjoin the deceptive practices of the several closely related entities that operated in Garden City and also sought compensation and punitive damages.  No Temporary Restraining Order or Preliminary Injunction was sought in this case.  On June 17, 2011, Plaintiffs moved for default judgment against all defendants except Huma Halimi, Amit Singh and Richard Masini (who could not be located for service of the complaint), Brian Mangan (who answered the complaint) and Robert Weinreb (who Plaintiffs stipulated to discontinue the case against on April 13, 2011).  On July 20, 2011, Justice Steven Jaeger granted Plaintiffs’ motion for default judgment.  In rendering the default judgment, the court concluded: “Defendants engaged in a scheme to defraud Plaintiffs by misrepresenting, concealing, or omitting information regarding the services Defendants promised to perform.”  The Court set September 12, 2011 as the date for the Inquest to determine damages.

On August 22, 2011, Justice Jaeger amended the default judgment to formally sever Brian Mangan from the case and to reschedule the Inquest for September 14, 2011.  The Inquest hearing was held on September 14, 2011 before Justice John Galasso of the Supreme Court of Nassau County.  On that day Justice Galasso awarded Plaintiffs treble (and in one case, quadruple) damages based on the defendants’ “flagrant disregard” of the law.  The defendants were also permanently enjoined from operating or conducting mortgage assistance relief services.  On September 27, 2011, Justice Galasso entered judgment against the defaulting defendants in the amount of $68,043.47.  Efforts to collect on the judgment are underway, including the issuance and enforcement of post-judgment subpoenas.

 

Osmanzai v. Save My Home

The Lawyers’ Committee and pro bono counsel Davis Polk & Wardwell filed Osmanzai v. Save My Home, No. 009471/11 (S. Ct. of NY), on June 27, 2011, naming 20 homeowners in the New York metropolitan area as plaintiffs.  The majority of the for-profit loan modification companies sued in this action were the same operations sued in Rush, with the addition of several new individual defendants who owned or worked for these operations, including sales personnel and loan processors.

On June 28, 2011, Justice Thomas Adams signed an ex parte temporary restraining order barring all of the defendants from engaging in a wide range of mortgage assistance relief services pending a hearing on a motion for a preliminary injunction.  He also signed an order freezing the assets of the defendants.  On August 3, 2011, two defendants — Albert Kalastein and Yelena Teleshova — moved to dismiss the complaint against them, asserting that the complaint failed to specifically allege claims as to them due to their purported status as mere employees and independent contractors.  On August 8, 2011, the temporary restraining order was discontinued as to fourdefendants after Plaintiffs entered into a stipulation with those defendants (Navin Menon, Albert Kalastein, Yelena Teleshove and Luigi Dellmonica), whereby those defendants promised not to work for any of the other defendants, and further agreed not to negotiate or accept upfront payments for mortgage modification services.  The restraining order was continued as to the non-responding defendants; and, on August 23, 2011, Justice Adams entered an order granting the request for a Preliminary Injunction and an Order of Attachment against all non-appearing defendants.

Notably, Justice Adams stated in the order that “[e]ven assuming, arguendo, that the defendants suffer a limited financial hardship as a result (of the injunctive relief), the ‘interest of the public in not being defrauded outweighs other considerations.'” (Internal citations omitted.)  On September 23, 2011, the appearing parties met at a court ordered Preliminary Conference to set out a discovery schedule for the case, which schedule was memorialized in a stipulation signed that day.  On September 23, 2011, the parties also agreed to voluntarily dismiss defendant Navin Menon from the case.  On October 18, 2011, Justice Adams denied the motion to dismiss filed by defendants Kalastein and Teleshova.  Discovery and enforcement of that discovery is in process.

 

Mook v. Homesafe

On June 27, 2011, the Lawyers’ Committee and pro bono counsel Davis Polk & Wardwell filed Mook v. Homesafe, No. 009472/11 (S. Ct. of NY), a third lawsuit in Nassau County, NY on behalf of 15 plaintiffs from Arizona, Colorado, Iowa, Kentucky, Texas, Nevada, New Jersey, Ohio, Virginia, and Wisconsin. Most of these plaintiffs found Homesafe online and paid upfront fees ranging from $760 to $3,250.  On that same day, Plaintiffs filed an ex parte order to show cause with a temporary restraining order, seeking a preliminary injunction, an attachment and expedited discovery.  On June 28, 2011, Justice John M. Galasso granted Plaintiffs’ Order to Show Cause, which included (1) an ex parte order of attachment; (2) an order enjoining the defendants from engaging in any mortgage assistance; (3) ex parte discovery, including the ability to depose defendants with five days’ notice; and (4) a $5,000 TRO bond required by law from plaintiffs.  Plaintiffs immediately commenced deposition and other discovery, with Justice Galasso granting several additional orders in the following months compelling certain defendants to produce client files and provide financial records, and to appear for depositions.  Following a hearing on August 15, Justice Galasso issued an order granting a preliminary injunction, which enjoined the defendants from engaging in a myriad of practices related to mortgage assistance relief services.  The order also included the attachment against the property of some of the defendants in the amount of $42,078 plus interest, costs of this action, and Sheriff’s fees and expenses.  Finally, the court’s order permitted plaintiffs to immediately commence discovery as to the location of any property of the defendants and undertake other relateprd discovery actions.  Depositions of parties and non-parties continue and discovery related to financial records also is proceeding.

 

Ocegueda v. Nathanson

The Lawyers’ Committee, the Law Foundation of Silicon Valley, and pro bono counsel Orrick, Herrington & Sutcliffe LLP filed a class action lawsuit, Ocegueda v. Nathanson, No. 111-CV-202525 (Super. Ct. of Cal., Santa Clara County), on  June 8, 2011 on behalf of class of at least 90 California homeowners victimized by a loan modification scheme operated by multiple defendants, including an attorney, his law firm and a sham corporation called RewireMyLoan.com.  The complaint alleges that homeowners paid as much as $4,995 for promised loan modification and loan audit services, backed by a “100% money back guarantee,” but then performed little or none of the promised services.  Because of this alleged loan modification scam, the homeowner victims have lost hundreds of thousands of dollars. Plaintiffs reached a partial settlement with defendants Ken Nathanson, Nathanson Law Center and Sherman and Nathanson in 2012.  On May 30, 2014, Santa Clara Superior Court Judge Peter H. Kirwan entered default judgment in the amount of $950,000 against defendants American Brother  Corporation, Inc., Gallant Group, Ltd., Troy Holland, and TMG Financial Services, Inc. The judge also agreed with the plaintiffs that the case should go forward as a class action, with notice to the class being sent and posted by June 9, 2014.

 

Viera v. Bella Homes LLC

On March 6, 2012, the Lawyers’ Committee, pro bono counsel K&L Gates, LLP, and the Washington Lawyers’ Committee for Civil Rights and Urban Affairs filed this lawsuit in the United State District Court for the Eastern District of Virginia on behalf of a Hispanic couple in Northern Virginia victimized by an alleged “leaseback/rent-to-buy” scam operated by Bella Homes LLC (“Bella”), a Georgia based company. The complaint alleged discrimination on the basis of national origin by Bella and its principals and agents, for targeting Hispanic homeowners in Northern Virginia for their foreclosure rescue scam, in violation of the anti-discrimination provisions of the Fair Housing Act and was one of the first cases filed in federal court that alleged a violation of the Fair Housing Act based on a mortgage rescue scam. The complaint also alleged violations of the Credit Repair Organizations Act, the Virginia Credit Services Business Act, and the Virginia Consumer Protection Act, and asserted several common-law fraud claims.  It was alleged that the plaintiffs were defrauded into signing title of their home over to Bella for $0, then paying “rent” to Bella while Bella did nothing to help them.  Plaintiffs sought to recover clear title to their home, monetary damages, and an injunction against the defendants to prevent them from perpetrating their alleged scam on other homeowners.

The scam allegations in this case contained many hallmarks identified by federal enforcement agencies as typical of predatory mortgage modification and foreclosure rescue scams. In fact, the United States Attorney and the state Attorney General in Colorado had initiated shortly before this suit was filed an enforcement action against Bella for similar scamming operations throughout the country.  In the Colorado case, Bella entered a Stipulated Consent Judgment and Permanent Injunction on March 21, 2012, which enjoined all further operations of Bella and transferred  over $1.2 million to the government to be used to compensate victims of the alleged scam,

In July 2012, Plaintiffs entered into settlement agreements with all Defendants which resolved all claims for monetary damages, repayment of losses and injunctive relief presented in the lawsuit.  On August 2, 2012, a Stipulation of Dismissal with Prejudice was entered in this lawsuit, dismissing all of the Plaintiffs’ claims with prejudice against all of the Defendants.

 

Masheyeva v. Law Offices of David M. Green

On March 5, 2012, the Lawyers’ Committee and pro bono counsel Davis Polk & Wardwell LLP filed their fourth lawsuit in New York against a network of for-profit loan modification companies. The lawsuit, Masheyeva v. Law Offices of David M. Green, No. 2815/12(S. Ct. of NY), was filed on behalf of 18 homeowners from New York and six other states and seeks to recover monetary damages, including the illegal upfront fees paid by plaintiffs, and also seeks injunctive relief to put an end to the deceptive practices of the named defendants. The complaint alleges that the loan modification scam, operated by multiple corporate and individual defendants centered around David M. Green and his Nassau County-based firm, Law Offices of David M. Green, defrauded vulnerable homeowners out of tens of thousands dollars by falsely promising—for substantial upfront fees—to obtain much-needed mortgage modifications on their behalf, but then consistently failing to deliver results. The complaint asserts claims for breach of contract, fraud, legal malpractice, and violations of consumer protection statutes in New York.

 

Squassoni v. Blackwell

On March 20, 2012, the Lawyers’ Committee and pro bono counsel Davis Polk & Wardwell LLP filed their fifth lawsuit in New York which attacks mortgage rescue scam operations.  This lawsuit, Squassoni v. Blackwell, Index No. 3571/12was filed in New York Supreme Court in Nassau County on  behalf of 26 homeowners from New York and eight other states against two pairs of for-profit loan modification companies—the “United Solutions” group comprised of United Legal Solutions, Inc. (a/k/a United Solutions Corporation) and United Solutions Law Firm LLC and the “Consumer First” group comprised of Consumer First Corporation and Consumer First Law Group LLC, which was also sometimes called “Blackwell’s Attorneys.”

Plaintiffs allege that two so-called “law firms” run by Anthony J. Blackwell, an attorney not admitted to practice in the State of New York, falsely advertised “legal services” to vulnerable homeowners seeking help with much-needed mortgage modifications, extracting thousands of dollars in  up-front payments from each homeowner. Once paid, the firms then consistently failed to deliver results and abruptly stopped answering the homeowners’ phone calls and e-mails. The case seeks to recover money damages, including the illegal up-front fees paid by plaintiffs, and injunctive relief to put an end to the deceptive practices of the entities named as defendants and Mr. Blackwell. On March 20, 2012, the court also granted plaintiffs’ emergency application to freeze certain of the defendants’ assets pending a determination of plaintiffs’ motion to attach those assets to secure a future judgment.  The entities whose assets were restrained are Consumer First Law Group LLC, United Solutions Law Firm LLC, and Blackwell’s Attorneys LLC. On May 15, 2012, Justice John M. Galasso entered an order of attachment of the LLCs’ assets in the amount of $157,655.00, plus interest, costs and Sheriff’s fees and expenses, and also continued the temporary restraining order previously issued by the Court on March 20, 2012. On May 15, 2012, Justice Galasso also granted plaintiffs’ motion for a preliminary injunction restraining Anthony Blackwell and all five defendant entities from engaging in a broad range of mortgage loan modification services.

 

Aviles v. Norton Law Group

On August 24, 2012, the Lawyers’ Committee and pro bono counsel Davis Polk & Wardwell LLP filed their sixth lawsuit in Nassau County, New York against a for-profit loan modification company.  This lawsuit, Aviles v. Norton Law Group LLC, No. 10882/2012 (S. Ct. of NY), was filed on behalf of 11 homeowners from New York and seeks to recover monetary damages, including the illegal upfront fees paid by plaintiffs, and also seeks injunctive relief to put an end to the deceptive practices of the named defendants. The complaint alleges that the loan modification scam, operated by Kyle Eric Norton and Kevin O’Rourke, and their Nassau County-based firm, the Law Offices of Kyle Norton, P.C., defrauded vulnerable homeowners by falsely promising—for substantial upfront fees—to obtain much-needed mortgage modifications on their behalf, encouraging homeowners to stop paying their mortgage payments, and then consistently failing to deliver results.  Not having paid their mortgage payments, clients faced a greater risk of foreclosure. The complaint asserts claims for breach of contract, fraud, legal malpractice, and violations of consumer protection statutes in New York. This case is the fourth action filed involving attorney conduct nationwide, and the third case filed in New York which includes causes of action related to legal malpractice.

Cox v. Certified Financial Protection Group

On September 26, 2012, the Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee) and pro bono counsel Latham & Watkins LLP (“Latham”) filed a lawsuit in Riverside County, California against a network of for-profit loan modification companies.  This lawsuit, Cox v. Certified Financial Protection, No. RIC-1214494 (Superior Court, County of Riverside), was filed on behalf of sixteen (16) homeowners from California and five other states.  The complaint alleges that the loan modification scam in this case is operated by multiple corporate and individual defendants, managed by principals Michael Wayman and Dan Brokaw.  The corporate defendants named are Certified Financial Protection Group, LLC, Financial Hope for America, Inc., Safehouse 911, LLC, d/b/a Safehouse Professional Mortgage Restructuring 911, and U.S. Financial Advantage, all of which are California companies.

The suit alleges that Defendants defrauded vulnerable homeowners out of tens of thousands of dollars by falsely promising—for substantial upfront fees and monthly memberships fees—to obtain much-needed mortgage modifications on their behalf, but consistently failing to deliver results. The plaintiffs are seeking monetary damages as well as injunctive relief against the defendants, asserting that without judicial intervention preventing the defendants from engaging in further scams, other homeowners will be at risk of losing thousands of dollars in illegal upfront fees and other financial penalties, and will be at risk of facing foreclosure proceedings.  The complaint also alleges various causes of action including breach of contract, fraud, and violations of California law regarding unfair competition, elder abuse and unfair and deceptive practices against senior citizens and disabled persons.

On October 9, Superior Court Judge Daniel Ottolia granted plaintiffs’ request for a Temporary Restraining Order enjoining defendants from engaging in mortgage assistance relief services and an Order to Show Cause requiring defendants to show cause why a preliminary injunction should not issue.  On November 29, 2012, Judge Ottolia granted a Preliminary Injunction, which continued to enjoin defendants from mortgage assistance relief services.  The Preliminary Injunction also ordered a freeze of defendants’ assets and required defendants to provide an accounting of those assets.

On July 1, 2013, Plaintiffs filed a motion seeking to have Defendant Wayman found in Contempt of Court for his violations to the Preliminary Injunction, and on November 6, 2013, Plaintiffs filed an amended motion identifying additional violations of the Preliminary Injunction.

On January 3, 2014, Plaintiffs entered a settlement agreement with Defendant Wayman and the corporate defendants.  On January 16, Judge Ottolia entered a Stipulated Permanent Injunction enjoining Defendant Wayman from engaging in mortgage assistance relief services and entered a monetary judgment for Plaintiffs.

Plaintiffs continue to pursue their claims against Defendant Brokaw, as well as the Contempt of Court proceedings against Defendant Wayman.

Pleadings and other pertinent case related documents:

Williams v. Premiere Loan Services, Inc.

On October 17, 2012, The Lawyers’ Committee and pro bono counsel Dorsey & Whitney LLP filed, a class action lawsuit in Riverside County, California, against a network of for-profit loan modification companies and associated individuals.  This lawsuit, Williams v. Premiere Loan Services, Inc., Case Number RIC1215573 (Superior Court, County of Riverside), was brought by six named plaintiffs, who live in California and Nevada, on behalf of a class alleged to include over 100 homeowners.  The defendants named in the Complaint are Premiere Loan Services, Inc.; Raed Farraj; Nathaniel Genis; DKNZ Marketing & Media, Inc. d/b/a/ National Bailout Application Assistance; Samer J. Farraj; Ernest Auger; George Faraj; Emerge Financial Advisors, LLC; Thomas Duck; and Larry Foster. The suit alleges that the defendants, who are based in San Bernardino and Riverside Counties in California, defrauded vulnerable homeowners out of tens of thousands of dollars by inducing them to pay thousands of dollars in up-front fees for mortgage loan modification and related legal services that were never provided.  Plaintiffs seek both monetary damages, including recovery of the illegal up-front fees plaintiffs paid, and injunctive relief to put an end to the deceptive practices of the defendants.  The Lawyers’ Committee and Dorsey are representing the plaintiffs free of charge.  The plaintiffs’ claims against the defendants include fraud, breach of contract, elder financial abuse, and failure to translate a contract when negotiated in a language other than English.

This case is the Lawyers’ Committee’s second class action and third lawsuit filed in California and its tenth case filed nationwide related to mortgage modification schemes.

Pleadings and other pertinent case related documents:

 

Culliver v. Alarcon Law Group P.C.

Seventeen homeowners from New York and nine other states filed a lawsuit against a network of loan modification companies based in Long Island, New York, as well as their owner and chief employee, asserting several causes of action arising out of the companies’ loan modification activities including those for breach of contract, fraud, legal malpractice, and violations of consumer protection statutes in New York.

The lawsuit filed in the Supreme Court of Kings County, entitled Culliver et al. v. Alarcon Law Group, P.C. et al., Case Number Index Number: 23038/12 (S. Ct. of NY, Kings County),  alleged that the defendants operated a fraudulent scheme in which they lured homeowners in need of mortgage assistance with false promises of guaranteed mortgage loan modifications often backed by money-back guarantees and then failed to deliver on those promises after collecting thousands of dollars in upfront fees and also monthly membership fees from the homeowners or provide a refund.  The plaintiffs sought monetary and injunctive relief against the defendants for their damages caused by the defendants’ loan modification scams.

On January 16, 2013, Judge Richard Velasquez entered a temporary restraining order preventing the defendants from engaging in mortgage loan modification services.  In March 2013, plaintiffs and defendants executed a Settlement and Mutual Release Agreement, under which plaintiffs recovered approximately one and a half times their out-of-pocket damages and defendants agreed to enter into a permanent injunction.  On May 21, 2013, Judge Velasquez entered the permanent injunction.

On October 28, 2013, the plaintiffs filed an amended complaint asserting claims against Justin Romano.  Thereafter, plaintiffs discontinued their action against the original defendants with prejudice.  Mr. Romano subsequently moved to dismiss the action against him, and Judge Velasquez denied Mr. Romano’s motion on May 29, 2014.  Mr. Romano is required to answer the amended complaint by August 18, 2014.

On August 5, 2014, Mr. Romano was indicted in federal court in Manhattan for charges stemming from his participation in the alleged fraudulent loan modification scheme.  Federal prosecutors had access to the Lawyers’ Committee’s Loan Modification Scam Prevention Network database, which includes numerous complaints regarding loan modification scam operations with which Mr. Romano is alleged to be affiliated.

The Lawyers’ Committee, as well as pro bono counsel McDermott Will & Emery, continue to pursue the plaintiffs’ claims against Mr. Romano

Pleadings and other pertinent case related documents:

 

Bates v. Goodrich, Attorney, Inc.

Fourteen homeowners from 10 states filed a lawsuit against a network of for-profit loan modification companies based in Orange County, California, as well as their owners and chief employees, asserting several causes of action arising out of the companies’ loan modification activities including those for breach of contract, fraud, unfair competition, false advertising, unfair and deceptive practices against disabled persons, and violations of consumer protection statutes in California and New York.

The lawsuit, Bates et al. v. William D. Goodrich, Attorney, Inc., et al., No: 30-2012-00615512-CU-BC-CJC (Superior Court, County of Orange) alleges that the defendants operated a fraudulent scheme in which they lured homeowners in need of mortgage assistance with false promises of guaranteed mortgage loan modifications often backed by money-back guarantees, and then failed to deliver on those promises after collecting thousands of dollars in upfront fees and monthly membership/installment payments from the homeowners or provide a refund.  The plaintiffs are seeking monetary and injunctive relief against the defendants for their damages caused by the defendants’ loan modification scams.

Pleadings and other pertinent case related documents:

 

Sampson v. All American Home Assistance Services, Inc.

Eighteen African American plaintiffs, 17 of whom live in the Atlanta metro region and one who lives in Alabama have brought this lawsuit in the United States District Court for the Northern District of Georgia, Atlanta Division, against a purported loan modification company and other individuals. The suit alleges that the defendants, who operate in the metro Atlanta area, defrauded African American homeowners by inducing them to pay up to thousands of dollars in up-front fees for mortgage loan modification services that were never provided. Plaintiffs seek both monetary damages, including recovery of the illegal up-front fees, and injunctive relief to put an end to the defendants’ deceptive practices. The plaintiffs allege that the individual defendants initially operated the loan modification scam through National African American Relationships Institute, Inc. and NAARI Housing Counseling Agency, Inc. (the NAARI Entities).

The complaint alleges that the individual defendants, through the NAARI Entities, engaged in a scheme to defraud and extract thousands of dollars from African American homeowners by promising to obtain loan modifications in exchange for up-front fees ranging from $900 to $3,500. The complaint alleges that instead of securing the loan modifications, the defendants performed little or no work on behalf of the plaintiffs.  Rather, the individual defendants quickly became hard to reach. Eventually, the NAARI Entities closed their offices with no notification to plaintiffs beyond a recording on their old phone number.   After the NAARI Entities dissolved and filed for bankruptcy in October 2012, the fraudulent and illegal scam operation continued through a new corporation—Defendant All American Home Assistance Services, Inc., according to the complaint.

The complaint also alleges that the individual defendants, operating through the NAARI Entities and then All American, targeted their scam operations on African American homeowners, in violation of the federal Fair Housing Act and other federal and state laws. The plaintiffs’ claims against the defendants include violations of the Fair Housing Act and the Credit Repair Organizations Act, and claims of false advertising, unfair or deceptive practices, deceptive practices toward the elderly, fraud, breach of fiduciary duty, negligent misrepresentation, and unjust enrichment.

Pleadings and other pertinent case related documents:

 

Baker v. Platinum Law Group

Eight California homeowners have brought this lawsuit in California Superior Court in Los Angeles County against a network of California-based loan modification companies, as well as their owners and chief employees, asserting causes of action arising out of the defendants’ activities, including those for breach of contract, fraud, deceptive practices and violations of various California consumer protection statutes. The lawsuit alleges that the defendants operated a fraudulent scheme in which they lured homeowners in need of mortgage assistance with false promises of guaranteed mortgage loan modifications often backed by money-back guarantees, and then failed to deliver on those promises after collecting thousands of dollars in upfront fees and payments from the homeowners or to provide refunds. The plaintiffs seek monetary damages, including those related to the illegal upfront fees paid by plaintiffs, and injunctive relief to put a halt to the defendants’ deceptive practices.

Pleadings and other pertinent case related documents:

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