Florida’s Foreclosure King
Investigated For Questionable Practices
Abcnews.go.com/business/florida-foreclosure5JE9S
By RAY SANCHEZ
Oct. 12, 2010
A former paralegal with Florida’s largest foreclosure law
practice has told state investigators that the firm routinely signed court
paperwork without reading it, misdated records, forged signatures and passed
around notary stamps in the rush to foreclose on homes.
“This is just the beginning really,” the
paralegal, Tammie Lou Kapusta, told ABCNews.com. “It’s the tip of an
extreme iceberg.”
The allegations are the latest leveled against the firm of
multimillionaire attorney David J. Stern, who has amassed a fortune foreclosing
on the homes of struggling families on behalf of lenders.
The 50-year-old Stern even considered naming his $20-million
yacht “Su Casa Es Mi Casa – “Your House is My House,” an
acquaintance told the New York Times. After his wife and others reportedly
cautioned against it, Stern settled on Misunderstood. He denied to the newspaper
that he considered “Su Casa Es Mi Casa.”
“From David Stern’s perspective, he’s a lawyer given
defaulted mortgages to foreclose in a court proceeding,” said his lawyer,
Jeffrey Tew. “So it’s really wrong to vilify him. Let’s put it this way,
there is a well-organized defense bar who is making a lot of money keeping
people in their homes.”
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But it’s the booming mortgage-servicing industry that is
under legal scrutiny. Some 40 state attorneys general are expected to announce
this week a joint investigation into the industry in hopes of pressuring
financial institutions to rewrite a sea of troubled loans.
Across the nation, mortgage-servicers, which include units
of major banks such as Bank of America Corp., have been accused of submitting
fraudulent documents in thousands of foreclosure proceedings.
In Florida, Stern is foreclosure king, operating the large
law firm plus a foreclosure processing company and other support businesses
that he recently sold off.
His Plantation, Fla., firm, which filed 70,382 foreclosure
cases last year, is the largest of three under investigation by state Attorney
General Bill McCollum for allegedly filing improper documents with courts to
hasten the overloaded foreclosure process.
Foreclosure Industry Poster Boy
To detractors, the 50-year-old Stern has become emblematic
of the foreclosure crisis, the architect of what they call a giant assembly
line that has undermined struggling homeowners at a time of record
foreclosures. Nationwide, there were 2.8 million foreclosures in 2009. Florida
leads the nation in foreclosures with more than 400,000 filings this year
alone.
“He is notorious in Florida and, in the rest of the
country, we pay some attention to Florida because the worst behavior often
emanates from there,” said Linda Fisher, a professor and mortgage-fraud
expert at Seton Hall University’s law school. She said she had no direct
knowledge of the Stern’s practices. “I’ve heard some pretty bad stories
about Stern for at least the last couple of years or so.”
To defenders, Stern is a hard worker who has legally reaped
enormous profits representing banks and financial services in actions against
tens of thousands of delinquent borrowers.
“It’s really unfair to make the foreclosure lawyer …
somehow a villain,” Tew said. “With the increase in volume, there’s
no question that David firm’s revenues have grown dramatically but there’s
nothing wrong with that. He’s not gouging.”
Tew said Stern’s firm makes about $1,400 per foreclosure,
totaling about $98 million last year.
Florida’s Foreclosure King Investigated For Questionable
Practices
Page 2 of 2
Oct. 12, 2010
Still, the rising foreclosure tide also meant shortcuts and
sloppy legal work, according to Kapusta’s sworn statement to the state attorney
general.
The paralegal, who worked for Stern a little more than a
year, described an office where signatures on notarized documents were
regularly forged, legal papers were outsourced to Guam and the Philippines, and
shouting matches erupted when cases stalled.
The accusations, in a sworn statement taken late last month
by the Florida attorney general, coincide with mounting nationwide criticism of
the practices used to take homes from families.
Kapusta, who claims she was fired by the firm in July 2009
after refusing to falsify documents, said Stern’s business jumped from about
200 employees to 1,100 in one year as foreclosures skyrocketed and staff
struggled to keep up.
Notary stamps were always available, and employees such as
Kapusta, who were not notaries, routinely used them on official documents, she
said. Those who could best fake the signature of the person who verified
foreclosure affidavits were allegedly sought out to forge her name.
“If you focus on the way these businesses operate,
it’s, at best, sloppy and, at worst, fraudulent,” Fisher said of the firms
that have become known as foreclosure mills. “The whole system was broken
down.”
Tew dismissed Kapusta’s allegations as simply untrue, the
rants of a disgruntled former employee. “You can see she has a real
vindictiveness against the firm,” he said.
Stern’s lawyer denied any wrongdoing in the foreclosure process.
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“There is no question that there is a necessity to make
these foreclosures correct and appropriate,” Tew said. “We do not
admit that there was any intentional cutting of corners. There may have been
some human error on a very small percentage but there was no intentional
cutting of corners.”
In the past month, GMAC, JPMorgan Chase and Bank of America
have halted or slowed foreclosure procedures, after bank employees and
affiliates admitted to signing thousands of documents without knowing the
details of the cases.
“The problems with these firms – and they’re very
sloppy practices – is that they unacceptably cut legal corners and put the
burden on borrowers to basically pay whatever these folks have them pay,”
said Jeffrey Golant, an attorney in Pompano Beach. “They’re loading down
with junk fees and illegitimate charges, basically putting people who are
already struggling, maybe possibly in most cases legitimately behind on their
mortgages, but loading up with such abusive fees that people will never get out
of foreclosure.”
Yachts, Real Estate, Private Island
Still, the crisis has been good for Stern and the rest of
the mortgage-servicing industry. Stern and his wife Jeanine have brought nearly
$60 million in real estate in recent years, mostly in Florida, according to
property records.
His 16,000-square-foot mansion, valued at more than $15
million, occupies a corner lot in a private island community on the Atlantic
Intracoastal Waterway in Fort Lauderdale, according to the New York Times and
Mother Jones magazine.
The mansion is featured on a water-taxi tour of the area’s
grandest estates, including the homes of Jay Leno and billionaire Blockbuster
founder Wayne Huizenga, and the former residence of Desi Arnaz and Lucille
Ball. In addition to the 130-foot yacht, Stern reportedly has an automobile
collection that includes a 2008 Bugatti and multiple Ferraris, Porsches and
Mercedes.
But Tew declined to discuss his client’s assets.
“All that does is feed into this scenario that somehow
they’re taking advantage of poor people who are losing their houses and getting
rich off of it,” he said. “You could say the same thing about a neurosurgeon
that makes millions of dollars a year from people who sustained terrible head
injuries.”
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