Mandelman Matters » Gov. Schwarzenegger

Gov. Arnold Rips the California Bar a New One: Refuses to Sign SB 641

Mandelman — Wed, 14 Oct 2009 08:05:49 +0000

The Governor of California, Arnold Schwarzenegger himself, refused to sign a bill that would have allowed the California State Bar to charge its members dues for the year. Yes, you read that right. The Governator basically just called the California State Bar… worthless. Not deserving of a plugged nickel.

Ooooh… snap!

Apparently, the State Bar can just start brown bagging it, from this point forward, as far as the Governor’s concerned anyway. According to the Governor, the State Bar issues include:

Salaries for staffers have risen significantly over the past five years.
Disciplinary costs up by $12 million, 2004 to 2008, while disciplinary inquiries have declined.
By failing to follow law, JNE Commission damaged its and State Bar’s reputation for impartiality.
Bar has become overly political, unresponsive to its membership, and inefficient.
State Bar’s role in evaluation of judicial nominees suggest Bar’s political agenda continues.

Wait… there was one more thing… I can’t remember… what was it… oh yeah, that’s right:

Lack of internal controls led to embezzlement of $676k by former employee.

I always forget the petty stuff.

I don’t know about you, but I could have skipped over the other infractions and gone straight for the whole “embezzlement of $676,000” thing, if I were the Governor. I don’t think you even need to bring the other points up. The embezzlement thing would have held up as a good enough reason to leave the bill unsigned, in my estimation.

So, what the hell is up at the California State Bar? Have the legal eagles over there gone awry? They’ve got a lot of guts calling every attorney who helps someone with a loan modification a “scammer” for charging a retainer in advance, when as an organization, their wheels are completely coming off.

Like, is the Bar going to come to some lawyer’s offices and say:

“We don’t like the fact that you’re helping homeowners and being mean to the banks.”

And the lawyer will go:

“Oh yeah, well give me back all of the money I’ve paid you that you squandered away on nothing.”

And the Bar says: “Scammer!”

And the lawyer responds: “Embezzler!”

Too funny.

According to the Gov’s statement to the California Assembly, “The State Bar cannot continue with business as usual.” He sounded pissed. I’d hate to have Arnold Schwarzenegger mad at me. (Too late.)

There’s no question now, but that the Bar is going to have to fix up their own glass house before their going to be allowed to collect dues from their members, and since they’ve been spending so much of their time throwing stones, it’s a real mess.

I think I’m going to start calling the Bar a bunch of crooks, or something like that. Wait… I’ve got it…

I think it’s very clear that based on what the Governor and Chief Justice of the California Supreme Court has said about the State Bar that the Bar should NOT be allowed to collect member dues of fees UP FRONT!

Therefore, I’d like to propose a bill stating that the California State Bar: “Can NOT claim, demand, charge, collect, or receive any membership dues or compensation until after the Bar has fully performed each and every service it contracted to perform or represented that it would perform.”

What goes around, comes around, baby…

Here’s the letter from the Governor to the State Assembly:

To the Members of the California State Senate:

I am returning Senate Bill 641 without my signature.

This bill would, among other provisions, authorize the State Bar to collect annual bar dues from its members for 2010.

In 1997, Governor Pete Wilson vetoed the annual State Bar dues bill, citing numerous concerns that the State Bar had become overly political, unresponsive to its membership, and inefficient. Unfortunately, twelve years later, inefficiencies remain unaddressed and questions about the State Bar’s role in the evaluation of judicial nominees suggest that the State Bar’s political agenda continues.

In July, the State Auditor released a report critical of the State Bar. Among the problems noted by the report: salaries for staff have risen significantly over the past five years; the costs of its disciplinary system have escalated by $12 million from 2004 to 2008 while the number of disciplinary inquiries opened has declined; and a lack of internal controls allowed the embezzlement of nearly $676,000 by a former employee. As the organization charged with regulating the professional conduct of its members, the conduct of the State Bar itself must be above reproach. Regrettably, it is not.

In addition, recent actions by the State Bar’s Judicial Nominees Evaluation Commission (JNE) also call into question the State Bar’s impartiality in considering judicial appointments. All JNE Commission proceedings are required by law to be confidential and qualification ratings are not to be released to the public prior to the Governor considering an appointment. Unfortunately, recent events have required the State Bar to launch an official inquiry into the confidentiality of such proceedings. Moreover, the Chief Justice of the Supreme Court has recently questioned the reliability of the Commission’s recommendations by noting its failure to follow statutory guidelines when considering judicial nominees. By failing to follow the law, the JNE Commission has damaged its reputation for impartiality and, in turn, the State Bar’s.

There is no question the State Bar has an essential role in the state’s justice system and must continue to oversee the licensing, education, and discipline of California’s lawyers. However, I am returning this bill without my signature because the State Bar cannot continue with business as usual. It must take the time to reexamine the problems noted by the State Auditor and continue its investigation into the JNE Commission. I urge the State Bar to resolve these issues as soon as possible so the Legislature can reintroduce this measure early next year.

Sincerely,

Arnold Schwarzenegger

STATE BAR PRESIDENT RESPONDS TO VETO OF FEE BILL

San Francisco, Oct. 12, 2009 — State Bar President Howard Miller today issued the following statement in response to Gov. Schwarzenegger’s veto of SB641, the State Bar fee bill:

“The Governor’s veto of the State Bar dues bill is regrettable, but we must take the Governor’s concerns seriously. Many of them are justified. There have been serious management and financial issues at the State Bar, starting with the embezzlement by a single employee over an eight-year period of $675,000. The State Auditor, and others, have also criticized with precision the management of the Office of Chief Trial Counsel. We will look closely at these and all other issues raised by the Governor. Events such as his veto message can challenge the State Bar to renew itself as an institution and its service to the public and the legal profession. I am confident the Board of Governors is up to that challenge.”

Founded in 1927 by the state legislature, the State Bar of California is an administrative arm of the California Supreme Court, serving the public and seeking to improve the justice system for more than 80 years. All lawyers practicing law in California must be members of the State Bar. By October 2009, membership reached more than 223,000.

Gov. Schwarzenegger Move Will Deprive Homeowners of Legal Representation When Negotiating Loan Modifications

Mandelman — Sun, 05 Jul 2009 14:34:05 +0000

California Senate Bill 94, originally intended to protect distressed homeowners by preventing non-attorneys from charging upfront fees for helping homeowners obtain loan modifications, has been expanded to prevent attorneys from accepting a retainer in advance when representing a client seeking a loan modification.

According to an informed source inside the California Assembly’s Committee on Banking and Finance, the expansion of the bill to include attorneys was demanded by Governor Schwarzenegger’s administration.

Apparently, the committee was told “the (Governor’s) administration said they would not sign the bill unless it prohibited attorneys from accepting funds in advance, in addition to all others mentioned”.

The Commission on Homeowner Representation, a group of law firms that individually offer to assist homeowners obtain loan modifications opposes the bill and plans to testify at the hearing being held by the California Assembly’s Committee on Banking and Finance in Sacramento on Monday, July 6, 2009.

The language in the bill that affects attorneys charging retainers reads:

5) Prohibits persons including attorneys, until January 1, 2013, who negotiates attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other compensation paid by the borrower to do any of the following:

a) Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she would perform.

According to the Commission’s attorney members, this provision would mean that law firms would no longer be able to offer to represent homeowners who are at risk of losing their homes to foreclosure in loan modification negotiations with banks and mortgage servicers. “California’s homeowners are the ones losing here,” says Martin Andelman, the Commission’s organizer, who is an outspoken advocate for homeowners. “There’s no precedent for this. This is just the banking lobby influencing our government once again. The banks are required by law to negotiate in their own best interest. Who represents the homeowner’s best interests?”

Advocates of the bill say that homeowners don’t need to hire an attorney to obtain a loan modification from their lender, but those familiar with the realities of negotiating with a bank over the terms of a loan modification say that’s an absurd argument. “There are lots of things I may or may not be capable of doing on my own. That has nothing to do with it. If I choose to be represented by counsel, I have that right, and this bill would deprive me of that right by making it impossible for attorneys to offer the service,” states Andelman.

Shah Peerally, an attorney practicing in the Bay Area, says he finds the bill offensive on many levels.

“As attorneys, we are already regulated. We are officers of the court. We are held to a higher standard. If an attorneys that violate the law can lose their license to practice law. I understand that there have been “scammers” out there taking advantage of distressed homeowners, and that has to be addressed, but the way to address that problem is not to leave homeowners with no legitimate source of legal assistance. The banks will take advantage of them like they did when the put people into these loans in the first place.”

Jeff Miller, an attorney with offices in Pasadena had this to say about the proposed bill:

“Every day we see people who tell us that they can’t do it on their own. They don’t have the skills or the time or the energy or the know-how. Their lenders have told them that no relief is available or their lenders lose their submittals or simply wear them down over time. The lenders’ interests in a loan modification are opposed to that of the borrower. There is absolutely a place in the loan modification, loss mitigation and foreclosure arenas for competent legal counsel.”

Jeffrey Hoffman, a bankruptcy attorney practicing in Oakland had this to say:

“Restricting payments for loan modification services is problematic per se and is an incorrect reaction to the scams and ripoffs that people are suffering from incompetent or dishonest people purporting to offer loan modifications. A far better approach would be to regulate the loan modification industry. This legislation will greatly harm the general public by removing a strong tool available to people for negotiating a good loan modification for them, because attorneys will not be assured of being paid for this service and will thus no longer be able to offer it.”

Here’s a small part of what Penny K. Jariabka, a Loss Mitigation manager who works for attorney Jeffrey Miller, had to say:

“Every lender has different unpublished guidelines which are constantly changing with new programs. How can the consumer keep up with the guidelines? We are a Law Firm and we must fight to stay current and this is our job! I recently spoke with a Countrywide representative who admitted that between the merger, new software, new programs and Bank of America changes, they don’t really know what happened to mortgage loan modification packages submitted in January, February and March. These clients need legal representation to make sure that they have rights and are not lost in the shuffle.

I am shocked that the State of California is even considering passing legislation prohibiting its citizens from receiving legal representation, for any reason. I thought it was a right of any citizen, per the Bill of Rights, to seek counsel, to hire an attorney to represent them if they felt they could not adequately represent themselves.”

And, Andelman says…

“This is yet another example of the banking lobby driving legislation that’s in the best interest of the banks, but harms homeowners by depriving them of their right to legal representation. We’ve seen the banking lobby kill bankruptcy reform in Congress, and then we’ve seen them water down the credit card reform bill as well. Now they want homeowners to come alone to the negotiations over a loan modification. The bank has attorneys, mortgage experts, and professional negotiators… but the homeowner who is often scared, emotional, and unknowledegable should come alone. I can’t believe that sounds like a good idea to anyone, and every single California homeowner should be outraged that the legislature would try to deprive them of their right to legal representation.”

We urge everyone to let members of the California legislature know that they must oppose SB 94, because homeowners need to be represented when negotiating with lenders, and it’s not fair to deprive anyone from being able to obtain legal representation if they so desire. While SB 94 doesn’t make it illegal for a homeowner to hire an attorney, it does make it illegal for an attorney to charge a retainer and that means that no attorneys will offer services related to a loan modification.

Obtaining a loan modification from a given lender can take four months and longer. Billing a client once a loan modification has been obtained is not a valid business model as there is no assurance that a homeowner would pay the bill, and no recourse should the bill not be paid. Making it illegal for a lawyer to accept a retainer when handling a loan modification for a client, would stop attorneys from offering the service, and thereby deprive California’s homeowners from their right to hire legal representation if they so desire.

The only group this provision helps is the bankers, and with the hundreds of billions of bailout dollars WE’VE GIVEN THEM, don’t you think they have enough going for them? Homeowners NEED help. Don’t deprive them of their right to counsel! If it’s not you today… how will you feel if it is one day, and there’s not a lawyer you can turn to for help… because the state passed a law saying that lawyers couldn’t charge for this service the way they do for all others?

Make your views known… send emails to the California Assembly Members below TODAY… and please pass it on… ask everyone you know to do the same… Thank you!

California Assembly Committee on Banking and Finance:

Pedro Nava, Chair (D-35) Santa Barbara

Ph. 916-319-2035

Email: assemblymember.nava@assembly.ca.gov

Roger Niello, Vice Chair (R-5) Folsom

Ph. 916-319-2005

Email: assemblymember.niello@assembly.ca.gov

Noreen Evans (D-7) Napa

Ph. 916-319-2007

Email: assemblymember.evans@assembly.ca.gov

Paul Fong (D-22) Cupertino, Santa Clara

916-319-2022