Chain of Title (22 page)

“Correct.”

Tom pointed down at the mortgage assignment. “If you just look at the document itself, you will see that the expiration date is more than four years after the execution date.”

“Okay.”

“Which means that unless they are capable of time travel,” Tom said, his voice rising slightly, “they couldn't have used that stamp that wasn't going to be issued until after this document was executed.”

At that point Samons's personal lawyer, David Bakalar, requested that the deposition be taken off the record. When they came back, Bakalar stipulated that every one of the twenty-one notarized assignments in Tom's pile had fraudulent dates, based on the notary stamps.

Michael posted the Samons deposition, and so did Matt Weidner, at virtually the same time. Shortly afterward, Matt got a call from an unidentified Stern employee, saying there was plenty more to come. A national reporter, Andy Kroll from
Mother Jones
magazine, had been poking around the operation for months, interviewing former employees. The anonymous insider worked in the process service department, and started feeding Matt information about dual sets of books and massive overbilling. Matt told them this was just what he needed to take Stern down. The insider replied that it would never happen, because Stern was too tied into the power structure in Florida.

“But if I put everything in public, it can't be ignored,” Matt insisted.

“That's what you think,” was the reply.

13

THE NINTH FLOOR

Like Lisa, Lynn delivered a stack of letters to state and federal officials, urging them to investigate foreclosure fraud. The Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the House Financial Services Committee, the Financial Crisis Inquiry Commission, the state attorney for Palm Beach County, and every one of Florida's sixty-seven county clerks of courts got detailed information, with binders an inch and a half thick. “
It is very possible that one letter to any of these authorities will be ignored,” Lynn wrote in a February 9
Fraud Digest
post. “If they receive 10, they may open a file. If they receive 100, they may be compelled to act. If they receive 1,000, they may actually conduct an investigation, discover the truth and demand an end to these shameful and illegal practices.”

Only Lynn's friends in the U.S. attorney's office in Jacksonville had opened any sort of investigation. Lynn spent hours on the phone with prosecutors, teaching them about mortgage-backed securities. It was a slow process. But even without deep knowledge of securitization, they had the physical evidence of fraudulent documents polluting state courts. Somebody was creating those documents, and somebody else was authorizing them to do it. To Lynn, it seemed like a relatively easy white-collar criminal case, where you work your way up the ladder to prosecute those responsible. But because so many people in the Jacksonville office knew Lynn, she wondered if they were overcompensating by casting undue skepticism on her claims. She would write to her friends in Jacksonville stressing her restlessness:
“I just drove by an underpass under I-95, I think that's where I'll be living next.”

Prosecutors strongly hinted that DocX executives were on the short list for indictment. But when Lynn tried to depose them in her own foreclosure case, suddenly New York–based “TBLs” (tall-building lawyers) for Lender Processing Services marched into court. They claimed the depositions constituted harassment of LPS employees. In court, with Lisa and Michael in the gallery—they all attended each other's hearings for moral support—
Judge Diana Lewis granted LPS's motion for a protective order. “You can revisit it later if you give me a better reason,” the judge told Lynn.

Lynn filed an IRS whistleblower claim over REMIC tax law, which stipulates that mortgage assignments and note endorsements illegally made after the trust closing date trigger major penalties equaling 100 percent of the late “contribution” (i.e., the full value of the mortgage). Lynn wrote up a long, detailed complaint explaining that these trusts were acquiring defaulted loans two or three years after the closing date, with a mountain of physical evidence confirming it. The IRS brought Lynn to New York for an interview. Agents displayed little understanding of trusts and securitization, and mostly focused on questioning Lynn's credibility as a witness. Then one of them asked, “Ms. Szymoniak, exactly how much money is at stake here?”

If every securitized mortgage in the United States were taken into account, the total could equal trillions of dollars. Lynn said she couldn't know without further analysis.

“But that's your job as a whistleblower,” the agent said.

The meeting broke up.

After the class action lawsuit withered, the notion of a
qui tam
case, which Lynn initially found impractical, reentered the conversation. Dick Harpootlian didn't know much about a
qui tam
, but Ken Suggs, the other lawyer, suggested a New York firm named Grant and Eisenhofer, which specialized in False Claims Act cases. Lynn got a loan from her ex, Mark Cullen, to return to New York and meet with Grant and Eisenhofer attorney Reuben Guttman.
He had won some of the largest awards in the history of the False Claims Act; there was really nobody better for this case.

Lynn took her class action draft and restructured it as a False Claims Act complaint, supplemented by evidence uncovered by her, Damian
Figueroa, and other homeowners across the country. The critical challenge was proving how the government was harmed by these schemes. First Lynn alleged plain old securities fraud. Through bailout programs like Maiden Lane, intended to help Bear Stearns and AIG,
the government purchased tens of billions of dollars' worth of mortgage-backed securities.
And the Federal Reserve bought trillions in mortgage-backed securities after the crisis in an attempt to lower long-term mortgage rates. When trustees spent money to mock up documents, they charged investors in the securities. So because the trusts failed to receive mortgages and notes, investors—including the government—had to pay for the cover-up. Lynn asked Damian for help, and the two of them found the trusts for federal government mortgage bond purchases and identified forged mortgage assignments associated with them.

In addition, Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, used servicers for the loans they acquired, meaning that they paid for fraudulent mortgage assignment preparation. The REMIC tax issue, which the IRS seemed disinclined to pursue, provided another count. There was a final possibility with the Federal Housing Administration, which provided insurance to mortgage companies on qualifying loans; they paid out insurance on foreclosed homes based on fraudulent mortgage documents, literally false claims.

While Lynn wasn't enthused about winning money for the government after they ignored subprime lending, bailed out banks, and did little to help struggling homeowners, she did think her
qui tam
could serve as a template for investors in mortgage-backed securities to force payback. She saw any possibility to increase pressure on the banks as positive.

Before the meeting, Lynn sent her three-hundred-page draft complaint to Reuben Guttman at Grant and Eisenhofer. Upon her arrival, Reuben greeted Lynn and said, “I started to read this but I couldn't understand any of it. Why don't you just explain to me what this is about?” Lynn gave him the remedial version, and at the end of it, Reuben said, “I maybe understood 25 percent of what you just said, and I get the feeling you dumbed it down a lot for me, but you said it very convincingly.” Lynn thought,
This is what it must be like to have Jon Stewart as your lawyer
.

Another lawyer in the room, who specialized in securities law, said maybe Reuben should get some lunch while he met with Lynn privately.
They reviewed several technical issues, from statutes of limitations to provisions of the pooling and servicing agreements governing the securitizations. When they finished, Reuben said they'd give Lynn an answer within the week.

When Lynn returned home, she pulled out a map of the United States and a box of red round-headed pins. Leafing through her wall of mortgage assignments, which dominated the front room, Lynn located the cities where they were made and stuck a corresponding pin on the map, the way a cop would analyze where bad drugs originated. Lynn only wanted to meet with prosecutors in places with a pin: venue and jurisdiction meant a lot. Select Portfolio Servicing documents came out of Utah. Citi's came from Missouri. Litton Loans, Saxon Mortgage, BAC Home Loans, and American Home Mortgage Servicing all had various sites in Texas. JPMorgan fabricated documents in Louisiana. Then she put a pin in Fort Mill, South Carolina, the home of America's Servicing Company, a division of Wells Fargo. Almost all the Wells documents originated there, really sloppy stuff, including assignments that were notarized but
unsigned
. South Carolina could provide an inroad; Dick Harpootlian knew everybody there.
Maybe she could get a prosecution going against America's Servicing Company, the way she got one in Jacksonville against LPS and DocX.

Before she could get a chance to pitch Dick, he called her. “I just want you to know we're all in. We're all going to do it.” The
qui tam
case was on.

Dick flew Lynn up to Columbia to meet Bill Nettles, who had just been installed U.S. attorney for South Carolina.
Nettles worked on voting rights issues in the 2008 Obama campaign. He brought his criminal staff to meet with Lynn, and she recognized a couple of them from the insurance fraud days. Lynn presented the scheme and named all the various law firms and document shops in the state. One of the biggest robo-signers in the Fort Mill office was named John Kennerty; Lynn found him signing as a MERS officer on behalf of at least twenty different banks. When Lynn mentioned Kennerty, one of the criminal staff exclaimed, “You mean they're forging the name of John Kennedy?” She had to talk them down on that one.

Nettles's staffers promised to assign an FBI agent right away, but that never really happened. The FBI claimed a lack of resources, though Lynn suspected it involved friction between Nettles, a former criminal defense attorney, and local agents resisting orders from someone who used to be on
the other side. Later Nettles's office asked Lynn if she wanted to meet with the U.S. attorney for the Western District of North Carolina, Anne Tompkins. Lynn consulted her map, finding that Fort Mill, South Carolina, was actually closer to Charlotte than to Columbia.

So Lynn flew out to Charlotte, the trip again paid for by her lawyers. While at home Lynn was broke, on the road she'd have an expense account. She'd pay for hotel rooms with old Marriott points; if she confined herself to the restaurant downstairs, she could eat for free as well. It was a strange life, jet-setting across the country but penniless in Palm Beach.

Tompkins, another recent Obama appointee, came with the FBI agent in charge of the region; they were on the same page. About twenty civil and criminal staffers attended the meeting. Tompkins agreed to investigate. A relieved Lynn got on her return flight, wanting only to go home and relax. Just before the plane took off, she reached forward for the in-flight magazine. The stranger sitting next to her, a thin, unassuming-looking man wearing a dark shirt, dark sport jacket, and glasses, leaned forward at the same time. He turned to face Lynn.

“You know what happens to people who sue banks?”

“What?”

“They end up
dead
.”

If it were a movie, the music would swell, the camera would dolly in to capture Lynn's terror, and the screen would cut to black. But because it was really happening, Lynn had to sit there for two hours next to the man who'd just threatened her life, while he casually flipped through magazines and ordered a drink. Cloak-and-dagger films don't teach you how to react for those two hours.
Should I call the flight attendant?
Lynn thought.
What would I say? That this man threatened to kill me if I sued a bank?
That was the other strange thing. Nobody at this point really
knew
Lynn had sued a bank. The class action was only live for a few days before being withdrawn.

Lynn opted to just gaze straight ahead catatonically, playing the words over and over in her head. She didn't move an inch the whole way to Palm Beach.

At the March happy hour, Michael told Lisa they needed to go to Miami that weekend. The Florida attorney general's office and something called
the Interagency Mortgage Task Force scheduled an event called “
The Housing Crisis: Who to Trust and Where to Turn.” A dozen state and local agencies and the federal Department of Housing and Urban Development planned to take part, soliciting information from the public about “mortgage fraud.”

Mortgage fraud meant something very particular to law enforcement: individual borrowers lying on their applications to acquire home loans, or scam artists ripping off homeowners with false promises about mortgage modifications. Nobody at this forum would expect allegations about phony documents and broken chains of title. But Lisa agreed they had to attend. She remembered the missed opportunity after she spoke to the lawyer from the Florida attorney general's office for ninety minutes but never heard back. This event offered a chance for a reboot.

There was one problem: the seminar fell on a Saturday. Attending would break Michael's vow to reserve weekends for his wife, Jennifer, and daughter, Nicole. Jennifer agreed that JPMorgan Chase tried to steal their house, but she didn't see why Michael had to investigate anyone else's foreclosure, especially if it took him away from his family.

For months Michael held to the separation between weekday and weekend, a wall between the online and offline worlds. Michael would log off
4closureFraud
on Fridays and not return until Monday. Lisa wouldn't be able to contact him. But Michael told his wife he was making an exception, just this once. The whole point of his preoccupation with foreclosure fraud was to hand it off to law enforcement, and this presented an opportunity. Jennifer didn't like it. When Michael walked out the door that Saturday morning in Port St. Lucie, he said in parting, “I'm doing this for us.” She slammed the door behind him.

At Lisa's co-op, Michael had to watch her put together dozens of printouts to hand to officials at the forum. “Let's go already,” Michael said. “We're like an hour late!” Lisa hurried up and finally made it into the car. They got a mile down I-95 before Lisa realized that she brought none of the printouts with her and they had to go back. Michael could only shake his head.

They drove seventy-five miles from West Palm Beach to Florida International University, a pleasant, palm-tree-lined campus that looked more like a corporate office park than a college. One massive building abutted
a man-made lake, the white façade reflected in the water. Inside, in a large hall, various agencies set up booths where individuals could present complaints or ask questions. The seminar was open to the public, but there was also a closed session with the Florida Department of Law Enforcement, the state Office of Financial Regulation, and the Miami-Dade Police Department. Lisa and Michael walked into the closed session, acting like they belonged there, and nobody stopped them. But as they suspected, the agencies were prepared to hear about mortgage fraud, these small-time scams. Banks trying to prove ownership of a loan by forging a document was a foreign concept. As Michael put it, mortgage fraud happens when you defraud a bank; foreclosure fraud is when the bank defrauds you.