NEW YORK, Aug 18 (Reuters) - California has broken up what
it called a ring of law firms that preyed on struggling
homeowners nationwide to pay thousands of dollars each to file
mass lawsuits against their mortgage lenders.
Kamala Harris, the state's attorney general, on Thursday
said she sued three law firms, four lawyers and 14 other
companies and individuals who conspired to fleece struggling
borrowers desperate to obtain mortgage relief.
She said these defendants took advantage of borrowers'
frustration with lenders and servicers, in a housing crisis now
in its fifth year and which hit California particularly hard.
"With the industry's growing reputation for fraud and the
legislative ban on advance fees for loan modification services,
defendants saw a more profitable opportunity to sell lawsuits
rather than loan modifications," the state said in its
complaint filed in the Los Angeles County superior court.
According to officials, the defendants solicited homeowners
in 17 U.S. states with at least 2 million pieces of mail, and
extracted retainer fees of up to $10,000 from each of roughly
2,500 borrowers to participate in "mass joinder" lawsuits.
Harris said these defendants would deceive borrowers into
believing their participation would help them avoid
foreclosures, reduce their loan balances or interest rates, or
even receive clear title to their homes.
Instead, she said borrowers were often provided bad legal
advice or unable to get answers to simple questions, including
whether they were in fact added to lawsuits. A disproportionate
number were black or Hispanic, officials said.
Victims were led to believe that the lawsuits "would be the
way that they could receive justice," Harris said at a news
conference monitored via webcast. "The only people who paid
were those homeowners."
California said its state bar seized the law practices and
attorney accounts of the three law firms, which are all based
in the state, and the four lawyers.
They are the Calabasas-based firm Kramer & Kaslow and its
principal Philip Kramer, who officials called the leader of the
scheme; Costa Mesa-based Mesa Law Group Corp and its principal
Paul Petersen; Walnut Creek- and Agoura Hills-based Mitchell J
Stein & Associates and its principal Mitchell Stein; and the
Encino-based lawyer Christopher Van Son.
The lawsuit alleges violations of several laws, and seek a
halt to the illegal practices, as well as fines and other
remedies. Kramer's firm was put into receivership on Monday.
A call to the Kramer firm was answered by a recorded
message. The Mesa law firm and Van Son did not respond to
requests for comment. Stein's office referred a call to the
office of U.S. Sen. Dianne Feinstein. A spokesman there had no
immediate comment.
The case is California v. The Law Offices of Kramer and
Kaslow et al, California Superior Court, Los Angeles County,
No. LC 094571.
For the state: AG Kamala Harris, Deputy AG James Toma,
Senior Assistant AG Frances Grunder and Supervising Deputy AG
Benjamin Diehl.
For the defendants: Not immediately available.
(Reporting by Jonathan Stempel; Additional reporting by Jeff
Roberts)
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