What Can DocXs Brown Do for LPS, Besides Forge a Million Documents


Some of my earliest memories having to do with grown-ups lying came from the Watergate hearings.


We only had the one television set downstairs and my father wouldn’t watch anything else for what seemed like several years.  I was about 12 years old at the time, so I didn’t understand everything I was being shown, but I understood one thing for sure… these guys were lying their asses off.


I remember the Saturday Night Massacre too.  Special Prosecutor Archibald Cox had issued a subpoena to President Nixon, asking for copies of taped conversations.  When Nixon refused to comply, I knew he was lying and so did everyone else.  The next day, when Nixon fired Cox, and then Attorney General Elliott Richardson and Deputy Attorney General William Ruckelshaus both resigned, and it came out that they resigned because they had refused to fire Cox… well, it didn’t take a fully developed adult brain to figure out what was going on… Nixon was lying.


Congress was not happy.  People called it an abuse of presidential power and right after that NBC’s poll showed that 44 percent of Americans were in favor of impeaching the president.  I was too young to really understand the significance of an impeachment, but regardless, I soon started wearing my “Impeach Nixon” button to school every day.  One of my teachers tried to force me to take it off in class, but I had liberal Democrat, college professor parents, so there wasn’t any chance of my First Amendment rights being trampled on at 12.


So, since then, I’ve seen several presidents lie their butts off… Iran-Contra comes to mind… and who will ever forget President Clinton saying that it depended on what the definition of “is” was, or making the case that blow jobs weren’t sex?  There’s no way to make up stuff like that.


Honestly, my biggest surprise was when G.W. Bush said there were WMDs in Iraq… and so we went to war and six months later it came out that there weren’t WMDs.  I was flabbergasted.  I was simply used to my government lying better than that.  Now they decided to tell the truth about things like this?  Since when?


I was expecting a Photoshopped picture of a camel with a nuclear weapon tied to its back to come out in a hurry.  When none appeared, I wasn’t sure what to think.  In some ways, it made me long for the guys who brought us the Gulf of Tonkin.  Apparently, I’m more comfortable with my government lying in order to perpetrate an evil war mongering plan, than I am with one that just bungles things from time to time.



DocX Pleads Guilty… LPS Had No Clue…


Anyway, so now we’ve all heard that a DocX executive, who was apparently the company’s founder, pled guilty last week to federal and state charges related to what the media branded, “robo-signing,” during the fall of 2010.  Prosecutors in the case say that Lorraine Brown and others directed DocX employees to forge and falsify signatures on various documents, which allowed the company to make more money.


According to the U.S. Department of Justice, between 2003 and 2009, more than a million fraudulent documents, used to foreclose on and evict distressed borrowers from their homes, were created by DocX and filed in recorders’ offices across the country.  And during that timeframe, DocX’s gross revenues were roughly $60 million.


Now, DocX LLC was acquired by Lender Processing Services, known as LPS, in August of 2005.  And LPS is a public company with shareholders that include the who’s who of the banking and finance world.  JPMorgan Chase, for example, owns just over a million shares, and Goldman Sachs owns just under a million.  (You can check out the list of major shareholders in LPS by clicking HERE.)


They’re a company with north of $2 billion in annual revenue, and as it says on their Website


“Our clients, including a majority of the 50 largest banks in the U.S., trust LPS’ in-depth experience, high-quality technology solutions and robust data and analytics to support their success.

Throughout 50 years of commitment to the financial services community, LPS has built an enviable reputation for unmatched innovation on a solid foundation of trust.

LPS is the nation’s leading provider of mortgage processing services; settlement services; default solutions; mortgage performance data/analytics; and real estate solutions. We are committed to helping clients reduce costs, minimize risk and grow their businesses.”


Well, that certainly describes a very sophisticated organization, wouldn’t you say?  I mean, “unmatched innovation on a solid foundation of trust?”  Not to mention all those data, analytics and real estate solutions.  They’ve got to have some serious industry experience and technical expertise over there.  As a matter of fact, LPS is ranked 11th on the FinTech 100 list, which apparently is an annual ranking of the world’s top technology providers to the financial services industry.


So, okay fine.  Now here’s the sentence that caused me to pause…


“Prosecutors said Brown concealed the practice from clients and DocX’s parent company, Lender Processing Services Inc.”


Excuse me?  More than a MILLION DOCUMENTS were FORGED or falsified over a SIX YEAR period of time, and a woman named Lorraine from Alpharetta, Georgia “concealed the practice” from LPS?  For SIX YEARS, she CONCEALED the fact that over a MILLION documents had been FORGED or FALSIFIED?


Do I have that right?  Is that what I’m to believe?  She hid it from LPS.  For SIX years.  A million documents.    And the whole time, LPS must have just thought she was great at getting the signatures she needed.  They had no idea that some of the signatures might take longer to get than it was taking her to get them.  LPS had no idea anything might be awry.


Damn, this woman has unbelievable skills.  She should be working for the CIA.


According to federal court documents, Brown pleaded guilty to conspiracy to commit mail and wire fraud in U.S. District Court in Florida.  The maximum federal sentence is five years in prison and a $250,000 fine, or twice the gross gain, whatever that means.


Fox News reported the story, but so did everyone else on the Internet.  One of the best might just be Zerohedge, but you can also find the story in great detail on Naked Capitalism and as of today, in the New York Times story by Gretchen Morgenson.


All of them quoted Brown’s attorney, Mark Rosenblum, issued a statement last Tuesday saying…


“Lori didn’t expect to be in this position. But now that she is, she’s facing it with grace and dignity.  Without doubt, this is a difficult day for Lori, but it’s also a good day.  By negotiating a settlement to her situation and entering her guilty plea, Lori has started the process of getting on with the rest of her life.”


What was that?  She didn’t expect to be in this position?  What position did she expect to be in after directing employees to forge and falsify a million documents right under the proverbial nose of LPS, one of the most experienced and technically advanced companies in the world?  Did she think no one would ever notice a million documents being forged?


And here’s what I want to know… what if she hadn’t forged and falsified these million documents?  What would have happened then?  I mean, not every document that came out of DocX was forged or falsified, right?  A million were, but weren’t there some that were done without the need for forgers?  Her plea agreement said she did it to increase her profits, but by how much did she increase them?


I only ask because it occurs to me that because of her no delay volume signing of documents, quite a few other companies were able to make a lot more money a lot faster too.  It wouldn’t have just been her company that benefitted from no delays in foreclosure documents being signed would it?


Max Gardner told me, and everyone else that attended his week long foreclosure boot camp training sessions, that the law firms that are hired to foreclose are paid based on how “efficient” they are at foreclosing, or in other words, how fast they get the job done.  So, it seems to me that the faster documents were signed, the faster David Stern could replace his 160 foot yacht with his new 200 foot yacht.


And don’t almost all of the foreclosure law firms have a very close relationship with LPS?  In fact didn’t attorney Nick Wooten sue LPS for engaging in a fee splitting scheme with these law firms.  Why… yes he did at that.  According to HousingWire in May of 2011…


“Wooten accused LPS of conducting an illegal fee-splitting scheme with default services attorneys who handle foreclosures using LPS’ technology platform.”


And Nick wasn’t the only lawyer to file suit against LPS having to do with this issue.  In February of 2011, Daily Finance reported the following…


“Jonathan and Darlene Thorne accuse the companies, LPS Default Solutions and Prommis Solutions, and their attorneys of having an illegal and fraudulent business model through which non-attorneys secretly practice law and illegally share legal fees. Because many of these fees are for bankruptcy work and are ultimately paid by the debtor, the suit explains, the business model isn’t just illegal — it’s also a fraud on the bankruptcy court system in violation of the bankruptcy code, rules and processes.”


“The suit also adds detail about the time pressure LPS Default Solutions puts on its network attorneys, and how that pressure allegedly feeds document fraud in foreclosure filings, whether in state or bankruptcy court. Given LPS’s dominant market position, those pressures have widespread consequences.”


LPS’s business model has been accused of being flat out illegal… also from Daily Finance…


In a nutshell, two foreclosure middlemen, LPS Default Solutions and Prommis Solutions, gain revenue not from their bank “clients” — their services are free to the banks — but from attorneys in the foreclosure companies’ networks. The suit says the lawyers pay for referrals and all of the legal documents created by the non-lawyers that LPS and Prommis give them. (LPS says the attorneys pay for administrative and technology services.)

The suit says about a third of the attorneys’ fees flow to LPS. Because banks don’t have to pay for LPS’s services, LPS Default Solutions rapidly gained over half the foreclosure servicing market. 


LPS, of course, denies doing anything illegal, but at one point, when Prommis was considering an initial public offering, the company filed with the Securities and Exchange Commission and detailed the risks associated with its business. One of those risks, wouldn’t you know it, was that the authorities could determine that it was illegally practicing law.


LPS has been described as having a relentless focus on speed and volume.  In the Thorne complaint against LPS it says the following…


Since LPS rewards firms for speed with more money and more work, LPS creates “tremendous pressure for the lawyers involved to go to the golf course and ignore the documents provided by LPS Default and just let the non-lawyer staff at Prommis Solutions file the documents electronically for them until there is a problem… there’s so much financial pressure on the lawyers to perform actions rapidly that it should be clear that there can be no meaningful attorney involvement in the vast majority of these filings.”


The suit says that the preparation and filing of legal documents by non-lawyers constitutes the illegal practice of law and therefore involves illegal fee-splitting, but overall the complaint makes the point that the business model nearly guarantees fraudulent documents will be produced.


The complaint asks the questions: “How do you create paperwork at maximum speed without robo-signing? How do you maintain healthy profit margins unless you employ relatively uneducated people who have no idea what the paperwork they are processing means?”


Right, and yet LPS had no idea that Brown and DocX were forging a million documents?  It actually sounds to me like LPS might just be the world’s leading authority on what it takes to get foreclosure related documents signed…



The Forged Documents Price List… 


DocX was the company with the price list for creating documents that Maxine Waters was waving around during the congressional investigation a couple years back.  And the federal plea agreement alleges that Brown and co-conspirators “systematically trained employees to mimic the signatures of authorized signers and even tested them on their skill.”


But no one in the industry or at LPS had any idea this was going on?  Brown’s plea agreement said…


As foreclosures increased amid the housing crisis, DocX had “too many documents to sign and not enough people with signature authority.”  That led Brown to direct employees to forge the signatures of authorized signers to keep up with the volume.


But no one at LPS even developed an inkling that something like that could be the case?  That maybe the number of foreclosures might mean too many documents to sign and not enough people with signature authority?  I guess that’s possible… I mean they only missed it by A MILLION documents.


This past summer, LPS agreed to pay the State of Missouri $1.5 million and another $500,000 for the cost of the investigation into DocX.  So, that’s $2 million to Missouri… nice.  Did the state take a check, or do you suppose LPS paid in cash?  And get this…


Last Tuesday, LPS’s Michelle Kersch said…


“… the company immediately stopped the practice when it discovered the surrogate signing, terminated Brown and shut down DocX.  LPS is committed to ensuring that all employees operate with integrity and compliance in everything they do on behalf of the company,” spokeswoman Michelle Kersch said.


Uh huh. I’m sure they are… committed, that is.  And as soon as they get caught doing something, they stop doing it immediately.


West Virginia Federal Prison


The Columbia Tribune reported that Missouri’s Attorney General Koster said the sentence sends a signal to the financial services industry that high-level executives who abuse the system must serve time “like regular street criminals.”


Yeah, cause that’s what a regular street criminal would expect to get when busted for forging a million documents over six years in order to make $60 million… two years in what you know will be a minimum security country club type federal prison… and a $250,000 fine.  I don’t know all of the details, but it sounds to me like it was worth it.


In addition to her guilty plea in federal court, Brown will also plead guilty to one felony count of forgery, one felony count of perjury and one misdemeanor count of making a false declaration… and she’ll be sentenced to at least two years and not more than three years in prison for her crimes.


For forging a million documents she’ll plead guilty to one felony count of forgery?  And everyone’s good with that?  One felony count of forgery?  LPS gave the State of Missouri $2 million and the State of Missouri then only charged Brown with one count of forgery?


Oh who cares… it sounds fine to me… why the heck not?  Now spend a million bucks throwing her a damn going away party for all I care.  She’s like the Oliver North of the financial services industry.


“To our knowledge, this is the only senior executive to have been sentenced to prison for his or her role in the mortgage meltdown,” AG Koster said.


And I for one appreciate the tough-on-crime stance this country is taking by putting unknown executives from subsidiary companies behind bars for a couple of years, after they make their millions, and who knows how many hundreds of millions or even billions for their parent companies.


You’ve restored my faith in… well, in organized crime.


Mandelman out.

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