Florida Protects Banking Giant Lender Processing Services, Ignores Hurting Homeowners
When June Clarkson and Theresa Edwards were called into a meeting last May with their boss at the Office of the Attorney General, they figured it was to talk about their promising new investigation. The two economic crime specialists were onto something big.
Florida was amid a staggering wave of foreclosures, but more and more homeowners were noticing odd problems: strange signatures, missing information, notary seals
with no signatures. With multiple investigations underway, Clarkson and Edwards had
Lender Processing Services
zeroed in on a single company — Lender Processing Services — they increasingly believed was illegally feasting on underwater residents.
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But as soon as they sat down, their boss cut to the chase: "You're both done at the end of the day. It's a done deal, all the way up to Tallahassee. You can either quit or be terminated."
The two were shocked. In the year since their abrupt firing, they've come to believe their termination happened because they were close to uncovering mass fraud by companies with ties to top Florida officials. "All these machinations were going on, and June and I were completely oblivious," Edwards says. "In hindsight, we were just so blind and stupid."
As Florida foreclosures spike yet again — Miami and Broward's rate leaped a shocking 11 percent last month — the pair's story is an infuriating window into how state officials have dragged their feet on prosecuting foreclosure firms at the expense of ordinary homeowners.
Clarkson, a small, lively woman with blond hair and glasses, had left a private law firm to accept a sub-$60,000-a-year job with the AG. She relished the idea of being a public watchdog, of digging into the records of companies to catch them trying to cheat customers.
The long, twisted trail that led her and Edwards to LPS began in 2010 with Lynn Szymoniak, a woman who could easily have been mistaken for an obsessive nutjob. Szymoniak's living room contained a wall of binders filled with copies of other people's court records. She burned out one copy machine, and a neighbor donated another. At meetings with fellow foreclosure activists, she showed up carrying reams of paper and giant, blown-up copies of documents.
But Szymoniak, a wonkish lawyer, had hit on a real problem: While investigating missing signatures on her own foreclosure papers, she discovered a woman named Linda Green. Green's name had been signed on thousands of documents, attached to various high-ranking job titles like vice president for at least ten companies in scores of cases. Many of the signatures looked nothing alike.
Convinced that major fraud was occurring, Szymoniak contacted a range of authorities. None seemed interested — until she met Clarkson.
Clarkson and Edwards were also skeptical at first. "As soon as you start promoting any kind of huge, vast conspiracy by large institutions, I think there's a real reason for everybody to take three steps back," Szymoniak says.
But her information checked out. Following the trail of her research led them to LPS, which has offices around the country and more than 8,000 employees. DocX, the Georgia company where Linda Green signed documents, had been acquired by Fidelity National and then effectively merged with LPS. Clarkson recalls, "I really started to say, 'This is LPS. They're behind it all.'"
What DocX and other companies were doing came to be known as "robo-signing." Szymoniak's research had effectively uncovered the practice, which involved people signing their own names or others on documents that weren't always properly filled out or notarized.
Robo-signing became national news in the fall of 2010, after Clarkson and Edwards took sworn statements of employees of the Plantation firm of David Stern, which used similar tactics. The employees said they had spent all day scrawling their names in ink on thousands of mortgage documents they hadn't read as banks foreclosed on more and more struggling homeowners. These unread, sloppy documents went straight into court records.
Clarkson became increasingly convinced that LPS was playing the same game as Stern. In December 2010, she gave a presentation to the Association of Court Clerks outlining the problems she'd found: documents made out to "bogus assignee," a placeholder used when cases were filed too quickly; banks giving mortgages to themselves; an assignment dated 9/9/9999.
Behind the scenes, Clarkson's investigation into LPS reached even further. She soon filed a subpoena of the company's internal records. "They responded by trying to flood me and Theresa with about two external hard drives, notebooks that would fill a table, CDs and electronics, online files," Clarkson says.
But the closer Clarkson and Edwards got to LPS, the harder the blowback they felt. A month after the clerks' meeting, on January 6, 2011, Joan Meyer, a lawyer for LPS, sent a harsh letter. Meyer castigated the investigators for calling the company's signatures "forgeries."
Then, in February 2011, Tallahassee-based Economic Crimes Director Richard Lawson stopped by to chew the pair out for complaints he'd fielded similar to the ones in Meyer's letter.
Three months later, Clark and Edwards were out on their asses. It was only after their dismissal that the pair realized how close LPS was to top officials in Gov. Rick Scott's administration.
Attorney General Pam Bondi's campaign, for instance, received $500 (the maximum contribution) from LPS, as well as LPS Agency Sales and Posting, an affiliate in California. Donations of $500 were also recorded from each of five mortgage-related companies that share an address in Jacksonville with LPS's Florida office.
The company has also hired away a top official once tasked with investigating economic crimes. Former Deputy Attorney General Joe Jacquot accepted a job as senior vice president of government affairs for LPS the same month Clarkson and Edwards were fired. Mary Leontakianakos, who was director of economic crimes during their tenure, took a job at the law firm of Marshall Watson, which had prepared Lynn Szymoniak's faulty paperwork.
Emails also show the company lobbying top prosecutors. When the Michigan attorney general publicized an investigation of the company, Meyer, the LPS attorney, emailed Vicki Butler, an economic crimes unit supervisor.
"These public announcements can deeply impact LPS's business operations and stock price," she complained. In another email, she asked Butler to try to persuade the Michigan office to pursue a civil, rather than criminal, case against the company.
In the end, by firing LPS's harshest critics — herself and Edwards — Clarkson says, "Bondi was, in my opinion, protecting LPS."
Bondi's office declined to comment for this story. LPS says in a statement that it "has fully cooperated with Attorneys General... LPS is not aware of any person who was wrongfully foreclosed upon as a result of a potential error in the processes used by its employees."
There have been some significant court victories against firms preying on foreclosed homeowners since Edwards and Clarkson left the prosecutor's office.
Szymoniak, who later aired her findings about Linda Green's signatures in a 60 Minutes episode, sued Bank of America, J.P. Morgan Chase, and other banks, with the federal Department of Justice joining her case. The details are under seal, but in March, the government reached a partial settlement for $95 million. Szymoniak is entitled to $18 million. Nearly penniless from three years of full-time research, she's looking forward to the payday, although half will go to her lawyers and a portion will go to funding a summer camp for kids made homeless by foreclosure.
A landmark case now being considered by the Florida Supreme Court, meanwhile, could prevent banks from simply dropping a foreclosure suit once the defendant claims they've used fraudulent documents — a tactic that has allowed banks to escape scot-free on the rare occasions when fraud is taken seriously in court.
And attorneys general from 49 states (all except Oklahoma) filed suit against most of the major mortgage lenders and service providers. Those big firms were accused of submitting improper documentation to courts, making use of robo-signing, and other violations. The states announced they won a $25 billion settlement this year, and the companies agreed to some reforms. Part of the payout will be divided among affected homeowners, although attorneys doubt homeowners will receive as much as the banks and states have announced.
As for LPS, there are still several ongoing, open investigations against the company, including in Nevada and Florida.
Edwards and Clarkson aren't prosecutors anymore. But the two haven't left the issue behind. Among local foreclosure activists, they've become something like martyrs to the cause. Occupy protesters, for instance, have begun showing up at hearings the two hold on the problem, sometimes toting signs and banners.
Despite their experience in civil court, Clarkson and Edwards won't be suing the state for firing them. (Bondi released an 85-page report on their termination in January, finding they'd been fired for sloppy record keeping and improperly calling LPS's bad signatures "fraud.")
Instead, they're practicing law in Fort Lauderdale and waiting to see if anything ever comes out of their investigation into LPS, which Bondi claims was passed on to other investigators in the office.
"In case there is an ongoing investigation, I don't want to say anything to jeopardize it," Clarkson says, "because it's really important that it gets done."
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