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Foreclosure: Defending the lenders

It's not easy to defend one of the state's biggest foreclosure law firms, especially one accused of "fraud on the court" by a Duval County judge and facing allegations of "unfair and deceptive" actions by Florida's attorney general.

But defending the Tampa law firm of Shapiro & Fishman is exactly what Gerald Richman does. In a visit to the St. Petersburg Times, Richman said the problems with lenders' law firms and foreclosure filings have been blown out of proportion and the casualty isn't just the legal process, it's the U.S. economy.

"It does the overall economy no good to have so much litigation in limbo; it needs to be cleaned up," he said, referring to the hundreds of thousands of foreclosures pending and yet to be filed. "The public should not be misled in terms of what the problems are."

Richman, a Miami lawyer who has represented Shapiro & Fishman for 20 years, was accompanied by Robert Cadogan, a manager with Burson-Marsteller, a public relations firm hired in October.

Shapiro & Fishman, which also has an office in Boca Raton, gained public attention in August when then-Attorney General Bill McCollum launched an investigation into it and three other Florida law firms specializing in foreclosures: Marshall C. Watson, David J. Stern and Florida Default Law Group.

Shapiro & Fishman has been the only firm to successfully fight the state's subpoena, winning a ruling in October by Palm Beach Circuit Judge Jack Cox, who called the attorney general's action "invasive and highly unlikely to reveal actionable conduct." The state appealed the ruling and the 4th District Court of Appeal heard arguments in the case last month.

Richman said his client is willing to cooperate with the state but refuses to comply with what he calls an overly broad, politically motivated "fishing expedition." He said the firm filed a public records request for all complaints received by the Attorney General's Office involving Shapiro & Fishman. Of 10 banker boxes of complaints, he said only 41 mentioned the law firm.

"It's just unconscionable that a government agency would use its power that way and issue a press release that condemns a law firm that's doing its job for its clients in the eyes of the public without any justification for doing so," he said.

Richman's defense of Shapiro & Fishman, which was filing as many as 400 foreclosures cases a week before last fall's moratorium by lenders, fell into the following categories:

1. It's not us, it's the other guys.

Although he strenuously denied any wrongdoing at Shapiro & Fishman, Richman said there were plenty of parties to blame for what has turned into a legal morass. Among those cited by Richman were competitors at the David J. Stern firm ("He worked for us and we fired him"); the lenders who are their clients ("They gave us bad information"); government entities like Fannie Mae ("They have guidelines that mandate us to foreclose expeditiously"); and, last but not least, defense lawyers who delay the foreclosure process for no good reason.

"While we're focusing on law firms that do foreclosures, the (Florida) Bar may want to focus on law firms that defend foreclosures that aren't acting ethically," Richman said.

2. It's possible to do foreclosures at $1,300 a case without taking questionable shortcuts.

A handful of law firms have dominated the foreclosure business, charging lenders a flat fee rather than an hourly rate and making money through volume.

Richman said Shapiro & Fishman has been doing foreclosures for 20 years and can handle volume business — as many as 80 filings a day at one time — "efficiently and properly" as long as homeowners don't challenge the action. "If every single case were contested, they couldn't do it for that flat rate," he said. "There's not an incentive in the long run to cut corners, because you're going to lose credibility with the institutions you're representing."

Employees at Stern's firm, however, told the attorney general's investigators that pressure to move cases fast meant taking shortcuts — like not notifying homeowners of complaints and robosigning documents. At Marshall Watson, a lawyer said she was handling 5,000 to 6,000 foreclosures at a time.

Richman said certain steps that expedite foreclosures are perfectly legal but have gotten a bad rap in the press. For instance, he says there's nothing wrong with lenders filing foreclosures before they actually hold the mortgages, although judges are increasingly dismissing such cases.

"With all due respect, those judges are wrong," he said.

And having Shapiro & Fishman employees sign affidavits saying they are "vice presidents" of banks is merely a matter of convenience, Richman said.

"You don't have to be on salary or a shareholder to be authorized to sign something as a vice president," he said.

3. Okay, maybe we've made a few mistakes.

In a case in Duval County, Shapiro & Fishman filed a foreclosure action on behalf of Washington Mutual, then substituted JPMorgan Chase when, in fact, the mortgage was held by Fannie Mae. In August, Circuit Judge Jean Johnson dismissed the foreclosure case with prejudice, meaning it will be difficult to refile. She wrote that Shapiro & Fishman's acts amounted to a "knowing deception intended to prevent the defendants from discovery essential to defending the claim and are therefore fraud."

Before the final hearing, the client replaced Shapiro & Fishman with new lawyers. The replacement firm said Shapiro & Fishman had made "clerical errors" in the case. That reflects Richman's position.

Said Richman: "Given the tremendous volume of cases handled, the number of mistakes made are miniscule."

Foreclosure: Defending the lenders 03/18/11 [Last modified: Friday, March 18, 2011 7:13pm]
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