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Does Lender Processing Services Deserve the Corporate Death Penalty?

Posted By Barry Ritholtz On January 8, 2012 @ 10:14 am In Bailouts,Foreclosures,Legal | Comments Disabled

Before we begin our Sermon this Sunday, a bit of history:

Think back to the giant fraud that was Enron. It was enabled — indeed, it was only possible — by the criminal behavior of their “Big Five” accounting firm, Arthur Andersen. This massive fraud perpetrated on the investing public was only possible due to the cooperation and active participation of their accountant, who were found guilty of “obstructing justice when it destroyed Enron Corp. documents while on notice of a federal investigation” charges. For this sin relating to their handling of Enron’s audits, Arthur Anderson was forced to “decertify,” voluntarily surrendering their license to be Certified Public Accountants in the United States. By voluntary, we mean they had no other choice.

Hence, for their complicity in the Enron scandal, Arthur Anderson was taken out back like Old Yeller and put down. Their senior officers and accountants scattered to the other major firms with their clients in tow. Even their consulting firm, Accenture, luckily lost the name Arthur Andersen Consulting in 2000, removed all visible signs of affiliation.

Once Andersen was de-certified from Accountancy,  AA was no more.

Today, we have what appears to be a parallel fraud: The processing of foreclosure documents by legal services giant Lender Processing Services. Thanks to the diligent worh of Attorneys General in states such as Nevada [1], New York [2], Delaware, California [2] (but not Florida [3]), we are starting to learn the extent of what took place under the auspices of LPS:

•  former L.P.S. employee who worked in “attorney management,” overseeing firms that performed legal work for foreclosures, told Nevada investigators that L.P.S. required him to resolve issues raised by the firms at a rate of 30 foreclosure files every hour (2 minutes per)

• Former workers described their work as “surrogate signers.” Their job was to forge signatures on documents.

• Other employees were hired through temp agencies, paid $11 an hour and told that her job was “to sign somebody else’s signature on documents,” the lawsuit said. Investigators were informed she signed roughly 2,000 documents a day for months — well over 100,000 foreclosure docs.

• Notarization was similarly dishonest, with workers notarizing documents (as a Notary) that they had fraudulently signed as a surrogate.

• Borrowers were confronted with documents containing “false assertions about which entity was authorized to foreclose, and false assertions about whether the consumer was delinquent on a loan payment.”

I have a question for Bank of America and Citi: Why haven’t you thrown these LPS weasels under the bus? What dirt they have on you preventing a simple j’accuse! ? What the hurry to settle before an investigation [4]?

The end game for this is fairly obvious: Find the fuckers who authorized this, prosecute and convict them, and throw their sorry asses in jail. If the orders came from high enough up the food chain, why not pursue a similar Arthur Anderson penalty. Wat this broad corporate policy, or the work of a rogue banker? There is the answer to the death penalty question. After all, if a legal services firm is committing fraud, what bank or law firm can ever work with them? Depending upon the outcome of these AG investigations, a corporate death penalty could very well be the appropriate remedy.

This is going to get very interesting this year . . .

>

Source:
From East and West, Foreclosure Horror Stories [5]
GRETCHEN MORGENSON
NYT, January 7, 2012 
http://www.nytimes.com/2012/01/08/business/mortgage-servicing-horror-stories-fair-game.html

Previously:
Why Foreclosure Fraud Is So Dangerous to Property Rights [6] (October 12th, 2010)

Foreclosure Fraud: “Systemic, Industrywide, Pervasive” [7] (October 16th, 2010)

Legal ‘Impossibilities’ & Foreclosure Errors [8] (October 14th, 2010) see also [9]Impossible’ Foreclosure: Never Late on a Payment [9] (December 29th, 2010)

Banks Still Fabricating Docs, Commiting Foreclosure Fraud [10] (September 1st, 2011)

Fraudclosure Errors Destroying Americans’ Property Rights [11] (October 19th, 2011)

Banks Pressing for Foreclosure Settlement Before Investigation [12] (November 23rd, 2011) see also Florida AG Takes Orders, Money from Fraudclosure Firm [13] (October 12th, 2011)

Foreclosure Fraud For Dummies (Part One [14], Part Two [15], Part Three [16], and Part Four [17])

Even more links here [18]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2012/01/lender-processing-services-time-for-the-corporate-death-penalty/

URLs in this post:

[1] Nevada: http://www.ritholtz.com/blog/2011/11/nevada-ag-robosigning-indictments/

[2] New York: http://www.ritholtz.com/blog/2011/05/ny-california-ags-are-prosecuting-bank-fraud/

[3] not Florida: http://www.ritholtz.com/blog/2011/10/florida-ag-taking-orders-dirty-money-from-fraudclosure-firm/

[4] before an investigation: http://www.ritholtz.com/blog../2011/11/banks-pressing-for-foreclosure-settlement-prior-to-investigations/

[5] From East and West, Foreclosure Horror Stories : http://www.nytimes.com/2012/01/08/business/mortgage-servicing-horror-stories-fair-game.html

[6] Why Foreclosure Fraud Is So Dangerous to Property Rights: http://www.ritholtz.com/blog/2010/10/why-foreclosure-fraud-is-so-dangerous-to-property-rights/

[7] Foreclosure Fraud: “Systemic, Industrywide, Pervasive”: http://www.ritholtz.com/blog/2010/10/systemic-industrywide-pervasive/

[8] Legal ‘Impossibilities’ & Foreclosure Errors: http://www.ritholtz.com/blog/2010/10/examples-massive-foreclosure-errors/

[9] ‘: http://www.ritholtz.com/blog/2010/12/impossible-foreclosure-never-late-on-a-payment/

[10] Banks Still Fabricating Docs, Commiting Foreclosure Fraud: http://www.ritholtz.com/blog/2011/09/banks-continue-to-fabricate-documents-commit-foreclosure-fraud/

[11] Fraudclosure Errors Destroying Americans’ Property Rights: http://www.ritholtz.com/blog/2011/10/fraudclosure-errors-destroying-americans-property-rights/

[12] Banks Pressing for Foreclosure Settlement Before Investigation: http://www.ritholtz.com/blog/2011/11/banks-pressing-for-foreclosure-settlement-prior-to-investigations/

[13] Florida AG Takes Orders, Money from Fraudclosure Firm: http://www.ritholtz.com/blog../2011/10/florida-ag-taking-orders-dirty-money-from-fraudclosure-firm/

[14] Part One: http://www.ritholtz.com/blog../2010/10/2010/10/foreclosure-fraud-for-dummies-1-the-chains-and-the-stakes/

[15] Part Two: http://www.ritholtz.com/blog../2010/10/2010/10/foreclosure-fraud-for-dummies-2-what-is-a-note-and-why-is-it-so-important/

[16] Part Three: http://www.ritholtz.com/blog../2010/10/foreclosure-fraud-for-dummies-3-why-are-servicers-so-bad-at-their-job/

[17] Part Four: http://www.ritholtz.com/blog/2010/10/foreclosure-fraud-for-dummies-4-how-could-this-explode-into-a-systemic-crisis/

[18] here: http://www.ritholtz.com/blog/2010/10/foreclosure-fraud-linkfest/

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