Meet FL AG Pam Bondi, Foreclosure Fraudsters’ BFF

By | January 10, 2012

UPDATED: Emails between FL AG and LPS’s lawyers regarding lobbying the Michigan AG on LPS’s behalf added to discussion below, at “UPDATED”

UPDATE 2: CORRECTION: The section on AG Biondi’s financial disclosure was incorrect. That is, the facts about Bondi’s failure to disclose accounts were true, my description of the rule & thus analysis wrong. That’s fixed with added info below.

Our national foreclosure crisis has epicenters; Florida is one. Florida’s Multiple Listing Service currently lists 15,755 foreclosure properties in Miami alone (Jan 8, 2012). Prices have fallen so far in some areas homes are selling for less than “a used Toyota.”

Foreclosure statistics, like all numbers, fail to convey the human misery involved. If “irresponsible borrowers” caused Florida’s crisis, well, no one would look to the Attorney General for action. What does law enforcement have to do with irresponsible borrowers? But that’s not what happened–banker fraud and gambling wrecked the housing market. And now the banks are resorting to document fraud to process the millions of foreclosures their earlier bad acts set in motion.

The Foreclosure Crisis Is a Law Enforcement Issue

In front of the cameras every attorney general in this country understands the housing crisis is a law enforcement problem. That’s why all 50 states started negotiating with many of the banks that created this disaster. But signing up for those negotiations is not the same thing working to hold banks accountable, as the lawsuit recently filed by Massachusetts AG Martha Coakley proves.

Indeed, as detailed below, Florida’s AG Pam Bondi actions show that her commitment to holding the banks accountable doesn’t even rise to the level of lip service. Why? Is she is committed, as a matter of principle, to facilitating document fraud, “sewer service“, and all the other ugliness that mars Florida foreclosures?

FL AG Bondi v. NV AG Masto and CA AG Harris

A quick and dirty way to see Bondi’s priorities is to compare her actions with those of the AGs of Nevada and California. See, Florida’s pain is not shared throughout America, but it’s not the only foreclosure epicenter. Nevada and California are facing crises similar to Florida. And the AGs in both states are taking strong actions to protect their constituents and defend the rule of law.

For example, NV AG Catherine Cortez Masto has sued Bank of America for both its illegal abuses of Nevada homeowners and its bad faith in promptly violating a settlement it had signed over Countrywide’s lawlessness. Masto has further upped the law enforcement ante, twice: she criminally indicted people who organized and directed systematic forgery and fraud, and she sued Lender Processing Services (LPS), the major fraudulent document manufacturer. And I’m betting that more suits and indictments will follow.

In California AG Kamala Harris boldly decided to follow Masto‘s lead. Harris broke off from national AG-bank negotiations and teamed up with Masto; they jointly vowed serious law enforcement results flowing from pooled resources. While Harris has yet to indict anyone or file suit as a result of this new partnership, the partnership itself is a big deal. Since Florida, California and Nevada, one might think Bondi would rush to join their team. But no; AG Bondi won’t be joining Masto and Harris.

To the extent Bondi does anything, she’s been clear her priority is bringing such AGs back into the bank-friendly fold of the national ‘negotiations.’ (Note, when she made that statement she was speaking at the Bankers Club of Miami.) Indeed, the one time Bondi announced she might leave the negotiations was when she thought a weaker deal might be available. And it says a lot about both Bondi and the national negotiations that Bondi is on the executive committee of those negotiations.

Worse for Bondi, the AGs actively defending their constituents aren’t limited to NV, CA and MA; the AGs of New York, Delaware, Arizona and Michigan have acted too. In fact, Florida itself once had an Attorney General with the courage to tackle foreclosure fraud; Bondi’s predecessor, Bill McCollum. The difference between Bondi and McCollum can’t be explained by partisan politics; McCollum’s a Republican just like Bondi.

FL AG Bondi v. Ex-FL AG McCollum

Under McCollum’s leadership, the Florida Attorney General’s office was a leader in exposing and fighting foreclosure fraud. That leadership shows in his efforts to against foreclosure mills, like David Stern, Marshall C. WatsonFlorida Default Law Group, and Shapiro & Fishman; against sewer-service process servers like Pro-Vest and Gissen & Zawyer; and against LPS. Note: each of the links is to the investigation started under McCollum; you can tell by the investigation numbers, which begin with “10-” as in 2010, notwithstanding Bondi’s smiling face at the top of the webpage. (Bondi took over in January 2011.)

But even before those investigations, McCollum showed leadership in addressing the foreclosure issue. In 2009 he set up The Florida Attorney General Mortgage Foreclosure Defense Funding Grant Program, funding it with money from a 2008 Countrywide settlement. McCollum’s program made $4 million available statewide over two years to fund legal aid attorneys and paralegals who will provide free legal assistance to homeowners facing foreclosure. So far Bondi’s added another $1 million. That is to her credit, unless McCollum would’ve gotten much more.

Bondi added only one foreclosure fraud investigation to list, that of foreclosure mill Ben-Ezra Katz. While important, the investigation was hardly ground breaking as Fannie Mae had already stopped using the firm for the practices being investigated. And it’s no use to say hey, she’s continuing those earlier investigations–they’re listed as “active”, aren’t they?–because active is as active does. Bondi settled the case against Marshall C. Watson with a slap on the wrist last March. And her head of Economic Crimes, Richard Lawson, told Scott Maxwell of the Orlando Sentinel that the AG’s office wouldn’t be doing big prosecutions and settlements, preferring to work with the firms to change their cultures. True to Lawson’s word, so far we’ve not seen big settlements or big prosecutions.

But Bondi’s rejection of McCollum’s tough stand against foreclosure fraud is most perfectly captured by two documents and the events that link them: a 2010 PowerPoint presentation that lays out bank foreclosure fraud and forgery with devastating clarity, and a “report” that tries to cover up the political machinations underlying the firing of June Clarkson and Theresa Edwards, the two McCollum Assistant Attorney Generals who created the PowerPoint. David Dayen gives an overview of the issues and whitewash here; 4closurefraud.org is in progress on a nitty-gritty take down here; and Yves Smith adds important analysis here.

In short: when Clarkson and Edwards did their ground breaking work–when they blew the lid off foreclosure fraud, frankly–McCollum had their back. They got stellar performance reviews, and their work was widely used. Enter Bondi; all of a sudden the two champions of Florida law and Due Process are fired. The firing looked so political that eventually–more than two weeks after citizen activist Lisa Epstein emails a request for an investigation into the firings to the inspector general, Bondi makes a similar request. And the hey now, nothing to see here (except unfounded smears against citizens trying to help Floridians) report resulted.

Special Interest Influence in the Fl AG’s Office

Though AG McCollum stood behind Clarkson and Edwards, giving them the power of the AG’s office to fight foreclosure fraud, their enforcement activism was atypical for the Economic Crimes Division. Management within that office has a history of accommodating special interests that pre-dates Bondi. At least that’s what Andrew Spark lays out in his remarkable letter detailing the political obstacles placed in his way during his seven years working there. Spark released the letter August 6, 2011. He has since stopped working for the Florida AG, and currently has own law practice in Tampa.

Spark’s letter is no rant; it calmly details several specific instances of the office allowing “powerful interests” to shape law enforcement efforts. The topics ranged from deceptive car ads by a dealer so well connected his lawyer was on Bondi’s transition team, to abusive liability waivers from a major fitness company repped by the same lawyer, to deceptive marketing by a timeshare resale advertiser repped by a different well connected law firm. Spark also makes the point that the economic crimes division is badly staffed, in that it’s a civil litigation office but three of the four managers have essentially zero civil litigation experience.

On foreclosures, Spark makes clear that philosophically, he’s on the banks’ side, but he’s a law enforcer above all else. While he’s careful not to take a stand on Clarkson & Edwards’ firing, he does describe the considerable interference he encountered trying to investigate process servers after their case was reassigned to him. And he states that he believes Clarkson & Edwards were committed to doing good work, just like he is, and unlike the leadership of the Economic Crimes division. But he didn’t lay blame at Bondi’s feet.

I called Spark to follow up on his letter. Spark made clear that he still had no opinion about the Clarkson/Edwards firing, and still was not prepared to attack AG Bondi. Spark hopes that his letter and everything that has followed has made it difficult to impossible for cases to be improperly influenced.

As to that influence historically, Spark pointed me to a letter that lays bare the fundamental problem with the economic crimes division as he knew it. The letter is from Barry Richard, a well-connected lawyer at Greenberg Traurig (he was part of the Bush 2000 team in Florida.) Richard attacks June Clarkson for her conduct during a meeting with his client. Specifically, he felt she was too aggressive with her questioning. In the key sentence he says:

“I have represented many clients being investigated by the Attorney General’s Office over the past 30 years and I do not recall a single instance in which the Office requested or subpoenaed a client for a sworn statement in a civil case of this type.” [bold mine]

In response, Spark says:

“That statement, of which I was not aware when I left the Attorney General’s Office – and which concerns 30 years of practice against several Attorneys General, Republican and Democrat alike – is perhaps the most stunning indictment of the performance of a governmental agency I have ever seen. When faced with a matter handled by the Economic Crimes Division over the past three decades, apparently all someone has had to do is walk into the office of the right attorney and then get treated with such deference that it has been expected that the AG’s office won’t use one of its most basic and effective investigative tools.”

UPDATED:

An example of precisely how the right attorney is able to assist their client with the Florida Attorney General’s Office involves the national negotiation over foreclosure fraud. Although the discussion of those negotiations typically centers on the bailed-out banks, Lender Processing Services is also involved. Indeed, Republican Attorney General Bill Schuette issued criminal subpoenas to LPS. And in two emails obtained by Lisa Epstein in response to a public records request, LPS’s outside counsel Baker & McKenzie LLP asks the Florida AG’s office with help in minimizing the damage of the subpoenas to LPS and with persuading Michigan to switch its investigation from criminal to civil.

Though stunning in and of itself–it’s a new height of special influence when a company targeted for criminal investigation by one AG can call up the Florida AG and ask it to run interference–it’s far worse when you remember that at the time Baker & McKenzie made that request, LPS was under investigation by the FLORIDA AG’S OFFICE! The emails are part of a longer string available on Scrib’d here. If you look at the one on page 5, it’s clear Baker & McKenzie represent LPS. Then look at page 24, and then page 9.

On page 24 you find this email dated June 15th, written by Baker & McKenzie partner Joan E. Meyer:

“Vicki–[Vicki Butler is Spark’s former boss in the economic crimes division]

“If you have a chance this afternoon, I’d like to catch up. We just received notification that the MI AG (Bill Schuette) announced the issuance of criminal subpoenas against LPS and Docx. [sic] When I called, the assigned investigator hadn’t even heard of the AG meeting with LPS. I know that Michigan was already committed to be an on-site attendee. Could I talk to you about this issue generally? These public announcements can deeply impact LPS’s business operations and stock price and seem unnecessary if the AGs who issue them have already agreed to a meeting. Wondering if there’s anything we can do.”

Meyer then gives her contact information and signs the email.

If you look at page 9, here’s what you read:

“Vicki–

“Sue Sanford from the Michigan AG’s Office is going to call you about the State AG meeting with LPS. She may ask about converting her investigation from criminal to civil. If you are comfortable, please encourage her to join the civil group. I would like to share information with her and get her up to date regarding the information we provided at the meeting but thus far cannot because of the criminal restrictions.”

“Thanks and Regards,

“Joan”

Again, these asks go beyond beyond the types of issues raised by Spark, because it is a request that the FL AG’s office assist a company that it is itself investigating persuade another AG’s office to go easy on it, and switch from a criminal to a civil investigation.

I contacted the Michigan AG’s office with the emails to ask if they had any comment. If they give me any I’ll update immediately.

Making Friends: Campaign Contributions

I titled this post suggesting that Bondi and the foreclosure fraudsters are ‘Best Friends Forever’. I mean that both because her decisions seem to serve the interests of everyone involved in fraudulently foreclosing but also because there are amazingly close ties between her, others now and recently working for her, and the various foreclosure fraud participants her office has and is investigating. I mean, they seem to be friends.

The McCollum administration starts investigating LPS in February, 2010. In June, LPS gives $500 directly to Bondi‘s campaign. $500 might not seem like much, but Florida apparently caps individual donations at that level because no one other than the Republican Party and the State of Florida gave Bondi a dime more than that. In fact, several other LPS affiliates donated to Bondi; Michael Redman, founder of 4closurefraud.org, has the list here. Similarly, the McCollum administration starts investigating ProVest; again ProVest and its executives contribute to Bondi. Those individual contributions by target companies and their affiliates are likely the smallest part of the cash flow; contributions made to PACs and then to Bondi surely represent much larger amounts.

CORRECTED:

I can’t prove that those contributions bought anything. But I do know that Bondi’s a very savvy political operator who has money she doesn’t want scrutinized. But it doesn’t feel good that she took money from targets of the office she was running for, does it?

The contributions aren’t the only campaign related issue. Bondi, see, has to amend two years of financial disclosures because she claimed that she had no income and no bank accounts both years in 2010, and no bank accounts in 2009, Janet Zinc reported for the Tampa Bay Times. She listed only her house and car as assets, but was able to pay down her debts by $15,000. As crazy as it sounds, Bondi’s disclosures may have played by the rules, in particular a rule that facilitates hiding the disclosure of assets.

See, While it is true that if you have less than $1k in a bank account on December 31 you don’t have to disclose the account, not even if you had $1 million in there on December 30 and January 1 and in fact averaged a million a day in the account across the whole year, you would still need to disclose the money you stripped out on the 31st. As a result, there’s no rule that excuses Bondi’s failure to disclose any accounts–no checking, no savings, no retirement money. And while it’s true that she quit her job in 2010 to run, so that she didn’t have income from her job that year, she got the money to live on and pay down her assets somewhere, right?

After being challenged on her disclosures, Bondi has amended them. But that’s not particularly redemptive, in my view, simply because we’re talking about a 2009 disclosure as well. That suggests that but for the challenge her obviously incomplete disclosure would have remained. Can’t wait to see what she discloses next time.

From the need to disclose perspective, the magic of cleaning out the account on the 31st is so transformative it reminds me of a priest’s deathbed absolution of a mobster. But there’s more to it. Only a savvy political operative knows to strip accounts of assets on the 31st, and only someone with money they don’t want to disclose would bother.

Again, just because Bondi knows how to cross the legal t’s and dot the i’s while violating the spirit of the disclosure law doesn’t mean that she’s playing similar games regarding campaign contributions or anything else. But it does suggest she knows the rules of every political game and isn’t afraid to play; that she’s fluent in the language of winks and nods.

Making Friends: The Revolving Door

Beyond the campaign contributions to Bondi herself, there’s the revolving door that spins through her office out into companies her office is investigating for foreclosure fraud. Before laying out who took which turn through the door, I want to point out that the spinning door provides two opportunities for potentially improper influence.

The first is while the person is still employed in the government, but wants a more lucrative job in the private sector at some point. Does the company that offers that AG employee a job whenever he wants it get appreciative special treatment? Consider Spark’s letter again. He notes that Senior Financial Investigator William Featheringill said repeatedly that he had a standing job offer from the attorney who served on Bondi’s transition team whose clients received undue deference from the office, in part on Featheringill’s suggestion.

The next set of issues arises after the AG employee jumps ship to a company under investigation. Does she exert undue influence on her former colleagues for her new employer? Does she share information she’s not supposed to? While I don’t have an example from the Economic Crimes department, consider what went on at the SEC when an investigator wanted to talk to John Mack, then-CEO of Morgan Stanley, as described by Matt Taibbi. In short, Mack’s lawyers use their relationships to go way over the investigator’s head and stymie the investigation. And those weren’t even former SEC counsel; they came the NY AG’s office and the SDNY.

With that context, consider these spinning door stories:

Mary Leontakianakos joined the AG’s Office in 1992 and served as the director of the Economic Crimes division starting in 1998. Now she appears to be working for the foreclosure mill Marshall C. Watson, one of the firms her office investigated and settled with. As Spark lays out in great detail, her employment by Watson not only stinks, but she and Watson know it stinks, because they appear to have made efforts to hide the employment by giving her an unusual email address. In a follow up piece for the Palm Beach Post, Kimberly Miller explains that Leontakianakos left the AG’s office as of January 3, and took the Watson job in June. Her job there is “chief counsel overseeing the litigation and compliance departments.” With that portfolio, surely she’ll be the Watson employee calling the AG’s office any time Watson is under investigation.

Joe Jacquot was a Deputy Attorney General until he left in May to become a Senior Vice President for Lender Processing Services. Like Watson, LPS was under investigation at the time he joined them. Jacquot disclaimed any ethical concerns, as reported by Todd Ruger of the Herald Tribune. Ruger also reported on Erin Cullaro, an Assistant Attorney General who actually went too far for the Economic Crimes Division and was fired as a result. Cullaro, you see, was moonlighting as a document preparer for yet another foreclosure mill under investigation, the Florida Default Law Group. I’m grateful the AG’s office considered that too much; after all, that means Cullaro was doing precisely the kinds of document fraud her office was investigating. But it’s not quite as tidy as that. As Shannon Behnken reported for Tampa Bay Online, Cullaro originally had permission to spend “15 minutes a week” notarizing for the company, though that permission was granted before the investigation was opened.

Pam Bondi, Foreclosure Fraudsters BFF

Because Bondi has taken no meaningful action to deal with Florida’s devastating foreclosure crisis, even though her colleagues in similarly decimated states are acting strongly;

Because Bondi has taken no meaningful action to deal with Florida’s devastating foreclosure crisis, even though her predecessor showed leadership in defending Floridians;

Because Bondi fired the two attorneys doing the most to expose and combat foreclosure fraud;

Because Bondi takes campaign money from companies she’s investigating; and

Because Bondi has tolerated an Economic Crimes division functioning as discussed above for a year, so it’s no longer a problem she inherited;

Florida Attorney General Pam Bondi is Foreclosure Fraudsters BFF.

Special thanks to Michael Redman and Lisa Epstein.


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