Judge Dismisses 110 of the Felony Counts Against Southern California Attorney Accused of Loan Modification Scam

It was a Friday afternoon not more than a couple of months ago when Christopher Lee Diener, a 42 year-old Orange County lawyer, was arrested and charged with 118 felonies in connection with an alleged loan modification scam that was taking advantage of distressed homeowners.  Diener’s two partners were arrested as well.  They were each charged with 98 felony counts.

Diener was the first attorney in California to be arrested for running a loan modification scam.  The very first one.  Prosecutors said that Diener’s loan modification scam had defrauded 400 victims out of $1.25 million; that he took their money and did no work for the clients.  Finally, a real loan mod scammer in the flesh.

Clearly, Mr. Diener was the kind of threat to society that had to be immediately imprisoned and held on a seven-figure bail amount.  That afternoon he found himself facing up to 70 years in state prison if convicted.

Or, perhaps not.

During the three week preliminary hearing, Orange County Superior Court Judge Salvador Sarmiento, in conjunction with the District Attorney, DISMISSED 110 of the charges.  The judge said he simply heard no evidence on 60 counts, and Deputy District Attorney George McFetridge said he dismissed numerous other counts, and I suppose 50 qualifies as numerous, “in light of the evidentiary rulings,” meaning that he did so because the judge said he heard no evidence on 60 counts. Diener spent the entire month in jail before his bail was finally reduced and he was released.

118 – 110 = 8

Diener now faces just eight counts… six counts of grand theft from individual complaining witnesses, one count of grand theft of a credit card processing company and one count of conspiracy to commit grand theft.  Diener’s two co-defendants, who were originally charged with 98 counts, now face only four counts each.  Diener’s attorney, Lisa Bethune, estimates the total dollars involved in the eight charges at less than $60,000, which compared with $1.25 million, looks something like this:

You mean to say that the District Attorney prosecuting the case, who presumably had reviewed the evidence, made the decision to file the charges, had Mr. Diener arrested and then argued for a seven-figure bail amount, suggesting that he was a threat to the public, then listened to the evidence that he himself presented at the preliminary hearing… and didn’t hear any evidence of what he had charged?  At a preliminary hearing, where he only had to show probable cause, a very low level of proof?  And 94% of the charges disappeared?  Seriously?  I hate it when that happens.

I’m no lawyer, but which is it… prosecutorial abuse or prosecutorial incompetence?  Is there a third possibility here?

Bethune stated: “This is so outrageous… I think the bottom line is, I don’t believe he’ll be found guilty of any crime. To have no sufficient evidence at the end of the preliminary hearing, where the standard of proof is the lowest there is — think about that.”

So, at this point, it’s not even clear whether the remaining eight counts will stand.  Bethune said she would attempt to have the remaining charges against her client dropped at the April 20 arraignment.

Diener’s is one of more than 400 lawyers under investigation by the state bar task force that has received more than 1,600 complaints made by distressed homeowners who paid the attorneys to help them obtain a loan modification, but they didn’t get one.  And since they weren’t able to sue their bank for not wanting to modify their loan, or the federal government for the Making Home Affordable loan modification program being an abject failure, they became angry and found a blog where someone told them they should complain to the state bar… so they did.

Okay, I realize that’s not what the distressed homeowners would say.  They’d say that they paid the attorney in question and he or she failed to do any work towards getting their loan modified.  But we all know that’s probably not true, right?  Because now we all know that it’s the banks that aren’t doing what they promised when they agreed to participate in President Obama’s Home Affordable Modification Program, or HAMP.  It’s not lawyers who modify loans, it’s banks that modify loans… or not… as in this example.

The state bar suspended Diener’s license last October, but has abated Diener’s case pending the outcome of the criminal matter.

Of course, none of that matters to I-can-tell-a-guilty-person-just-by-looking-at-him-Attorney General Jerry Brown, who has continued to use the issue to make himself sound like Elliott Ness, even if he looks more like a svelte Lou Grant from the Mary Tyler Moore television series of the 1970s.  Attorney General Brown is suing Diener and his partners, seeking civil penalties, restitution, an injunction, and the governor’s desk.

Bethune stated: “This is a lawyer with no previous record who really was setting out to help people with the best of intentions.  He lost a month of his life in custody.”  She says he has lost his ability to make a living as a result of the irrational persecution by the state.

(Okay, I added that last part about “irrational persecution,” but I’m guessing she would have liked adding it to her last sentence too. Just a guess though.  Don’t want to put words in her mouth.)

Okay guys, listen up:  If you’ve read what I’ve written about the whole loan modification scam witch hunt in the past, and I’ve written plenty, then you know that I think it’s a big Y2K kind of issue.  I mean, if the118 felony counts against Diener were actually 8… then are the 1600 complaints against attorneys that the state bar keeps using to scare us out of hiring an attorney when at risk of foreclosure, actually 96 valid complaints?

Either way, in a state with 36 million people and more foreclosures and distressed homeowners than I would care to count, the relatively insignificant numbers involved here sound awfully Y2K-like to me.

You remember Y2K… like as in… it doesn’t exist, or the numbers in which it does exist are so small relative to the country’s size and the size and scope of the foreclosure crisis, that we don’t need to fear that there’s a loan modification scam on every corner in America… which, if you listen to anyone in the administration pontificate this past year, you could easily start to believe was the case.

I’m not saying it is, and I’m not saying it isn’t… but if this case is any sort of representative example of what’s to come… then I’m dressing up as Edward R. Murrow next year for Halloween.  Until then…

Good night… and good luck.

Mandelman out.