Oppenheim Law

DocX Shutdown Part of $35M ‘Robosigning’ Fraud Settlement

News   •   Feb 21, 2013 17:31 EST

This article was originally published by Laura Kresich for Lawyers.com

The Department of Justice on Feb. 15 announced a $35 million settlement with Lender Processing Services (LPS) subsidiary DocX, stemming from the so-called “robosigning” scandal of 2010.

DocX was in the business of helping mortgage servicers file the legal documents required for foreclosures.

Second Settlement, Same Song

The settlement follows the government’s allegations that DocX ran a scheme for six years to forge and file more than one million mortgage documents with property recorders around the country. It follows a felony guilty plea in November by DocX’s former CEO, Lorraine Brown, to charges of conspiracy to commit mail and wire fraud.

This marks the second time Jacksonville, Fla.-based LPS has been nailed for its part in the 2010 robosigning scandal, in which forged legal documents pertaining to mortgages and foreclosures were mass-produced by industry employees who robotically – and fraudulently – signed them in order to push them through the foreclosure process faster.

In January, the company settled similar charges brought by 46 state attorneys general for $1.4 million.

Prison Time Possible

According to the DOJ, DocX told its authorized signers to allow unauthorized and/or temporary employees to sign and notarize documents, making them appear to have been properly executed. “These signing practices were used at DocX from at least March 2003 until late 2009, and were implemented to increase profits,” said the DOJ.  

Brown could get up to five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, says the DOJ. She will be sentenced in April.

While DocX will be shut down as a result of the more recent settlement, LPS is still going strong,according to the company, which announced in its statement of fourth quarter financial results that it’s set aside $223 million to pay off the settlements.

“The conclusion of the Justice Department’s inquiry is another positive step for LPS,” said CEO Hugh Harris in a statement. “LPS has effectively dealt with its legacy issues related to past business practices” and is moving on, he said.

 ‘Too Big to Jail’

What does this mean for consumers who might have been victims of robosigning or falsely executed foreclosures?

LPS has re-executed and re-filed affected mortgage assignments, according to the DOJ. But one mortgage industry expert says the settlement won’t do anything for most of the people who lost their homes in the foreclosure crisis.

“They’re a little guy taking the hit,” says Roy Oppenheim, a partner with Oppenheim Law in Weston, Fla., of DocX. “They committed massive fraud on a regular basis at the employ of the banks. The banks knew they were doing it.”

Oppenheim says the government’s strategy of nailing a smaller company like DocX, rather than a big bank, is typical of the infamous “too big to fail” approach to the foreclosure crisis and recession. “The banks are too big to jail,” he says ruefully.

When robosigning was discovered, the banks put the brakes on the mass of foreclosures taking place, and people were able to stay in their homes. That meant they could keep spending money and pump up the failing economy, Oppenheim says. That was part of the government’s strategy, too.

“And it worked,” he says. The economy recovered. As for Brown and DocX, Oppenheim observes, “They’ll pay some fines . . . but nobody will go to jail.” Forging just one legal document can result in criminal penalties, including jail time, for fraud on the court and notary fraud.

“Why are they only paying fines,” he asks, “when other people do it and go to jail?” The answer, he says, is simple: “They are fronting.”

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