Hatchet Job by Florida Inspector General to Justify Firing of Two Lawyers for Foreclosure Fraud Investigations

The usual stereotype of corruption on the US state level is that, depending on the day, Louisiana or Mississippi tops the list. But the cesspool created by the widening foreclosure crisis in Florida puts anything in kudzu-land to shame.

The object lesson is a statement issued by the Florida Office of the Inspector General concerning its decision not to investigate the firing (or more accurately, resignation under duress) of two lawyers in the attorneys general’s office, June Clarkson and Theresa Edwards, who believe they were canned for political reasons, namely, for being too aggressive in investigating foreclosure abuses. Note that these firings came shortly after they received exemplary performance reviews.

Now narrowly, there may indeed be nothing to investigate relative to their firing, in that workers in the US have pretty close to zero rights and a boss can indeed fire someone simply for not sharing his sense of priories. But there is a more general question of public interest as to whether a firing in a public office was indeed politically motivated, particularly if the investigators were ruffling the feathers of parties that the AG did not want to annoy (and as the brief one page conclusion notes, Florida does have statutes against “misuse of a public position” but query how that is interpreted in practice).

As we will discuss further, this astonishingly shoddy document tries to bury the matter by publishing write-ups of long complaints by the parties immediately involved in the firing (Associate AG Richard Lawson, Assistant AGs Trish Conners and Carlos Muniz) and by one of the parties targeted, namely, a letter from Lender Processing Services. Regular readers of this blog will know LPS is engaged in questionable conduct and has been the subject of investigations by the US Trustee’s office, a branch of the Department of Justice. It is currently the target of a wide-ranging lawsuit by the Nevada State attorney general Catherine Cortez Masto, an investigation by the FDIC, has signed a consent decree with the OCC for questionable conduct, and is subject of private lawsuits, including one joined by the Chapter 13 trustees as a class, for impermissible legal fee sharing. (We’ve also described how LPS lied in SEC filings).

Effectively, this “review” is an effort at reputation/character assassination via the release of pretty much only one side of a “he said, she said” (Clarkson and Edwards were given a brief phone interview which was limited to two conversations Lawson had with them about their performance; they were given no opportunity to contest the allegations made in the subsequent interviews, which were not just with Lawson, Conners, and Muniz, but also five other members of the AG’s office).

To put it mildly, if you read the 85 page document and didn’t know the context (the extensive, widespread evidence of bad conduct and strained pleadings by the foreclosure mills and LPS, and the prior tip top reviews received by Clarkson and Edwards), you’d think they were fuckups of the first order and were lucky to have jobs. This is heresay presented as unvarished truth, and the unsupported (and as we will discuss later, often obviously untrue or at best misleading) charges extend to two Florida foreclosure fraud investigators, Lisa Epstein and Lynn Szymoniak.

To back up and give a bit more context first (and do read the very good overview by Dave Dayen), the Florida attorney’s general office recently underwent a regime change. The old AG, Bill McCollum, was a Republican but nevertheless launched some investigations into foreclosure abuses, specifically against the biggest foreclosure mills in the state. He left leave last January, replaced by Pam Bondi, who clearly has a much more conciliatory posture towards the mortgage industrial complex (she is on the executive committee of the now multi-state foreclosure settlement effort). In keeping, the old head of the economic crimes division was replace by the aforementioned Richard Lawson, who was in the business of defending white collar criminals, primarily banksters. And he made it clear that he wanted the fraud investigations to be treated “with great sensitivity.” I have to tell you, both in context and based on his actions, that means “go easy and do everything you can to protect the reputations of the parties charged.” Do you think this is even remotely the right priority for the head of an economic crimes unit?

The irony of this report are the repeated complaints about the “unprofessional” conduct of Clarkson and Edwards. Given that the IG considers a barely ordered document dump to be tantamount to a report, I find it hard to believe that the standard of professionalism among legal officers in the Florida government is measurable, let alone high enough for the two canned attorneys to fall short of it.

Similarly, for anyone who has been in the private sector (and that is where Lawson came from) the conduct of the firing was highly irregular. It’s normal for even routing firings to go through a process: the employee is given a warning and/or put on probation, with a witness present, they are told what concrete steps they need to take to improve performance, and notes of the conversation are entered into their personnel file. And most important, firings are always done with a witness present. Instead, Lawson had a one conversations with Edwards and Clarkson, and seems to conveyed his unhappiness primarily through their immediate boss, Robert Julian, who found Clarkson and Edwards to be “invaluable.” From what I can tell, assistant chief AG Robert Julian fired both Clarkson and Edwards verbally via Edwards alone, again a mind-boggling procedure. Lawson operated like a rank amateur, yet keeps harping on “professionalism.” More than a bit of projection at work?

There may be validity in the some substantive complaints. For instance, Lawson claims the duo mistakenly said the SEC was going after LPS when it was the FDIC who was probing LPS. They also called Fidelity a f/k/a (formerly known as) of LPS when it is the reverse (LPS was spun out of Fidelity). But these mistakes were in internal communications, and while they might be worrisome, what matters is what gets out the door. Another complaint is the case files being transferred from Clarkson and Edwards another attorney being in disorder. But we have no context. If Lawson made the assignment abruptly and didn’t give them Clarkson and Edwards time to organize them (and the state apparently lacks a document management system), it shouldn’t be a surprise that the materials were not well organized. In addition, at various points Lawson asked these investigators if they had evidence of allegations made against LPS, such as not being paid by the servicer, and Clarkson and Edwards saying “no”. Just because they did not have evidence in hand did not mean the allegations were untrue and not provable.

The reason I view even these complaints with skepticism is that much of what Lawson says that can be evaluated ranges from strained to embarrassing. Here are some examples.

In the “you cannot make this up” category, Lawson, a law enforcement official, defends forgeries:

Huh, is he SERIOUSLY trying to say that if, say, the janitor signs a corporate check he found lying around the office to pay the company electrical bill, it isn’t fraud? The knowledge in our culture that people sign documents only in their own name is so widely shared that it seems utterly implausible that ANYONE, let alone people in the business of preparing documents involved in legal procedures, could think forgeries are legitimate. The LPS filings by Masto have barely-above-minimum wage witnesses saying they were uncomfortable with “surrogate signing,” a recent Orwellianism for forgery, even after multiple management assurances that it was fine. Lawson’s formulation gets us into Humpty Dumpty “forgery is not forgery if I say it is not forgery” land. He is trying to wind the clock back to before the 1677 Statue of Frauds.

And we have this remark:

Gee, if that’s the case, why is this on the AG’s website now (note the last paragraph)?

Similarly, Lawson also seeks to blame fallure of efforts against foreclosure mill Shapiro & Fishman on inadequate fact gathering by Clarkson and Edwards, when it fact that case was lost pure and simple JURISDICTIONAL reasons. The state Supreme court said the AG could not go after attorneys, that this was a matter for the judicial branch.

Lawson again criticizes Clarkson’s and Edward’s legal work because they were looking into dubious looking mortgage assignments. Lawson says he looked in a few legal reference books and concluded the lien didn’t matter, all that counted was the note. So he was effectively saying they were operating on a bad legal theory and off on a wild goose chase.

It might help if he’s get familiar with relevant decisions in his own state. Florida’s Fourth District Court of Appeals ruled specifically that this is not correct: a valid assignment is necessary before filing a foreclosure. And even more troubling, the attorneys in Bondi’s office did not inform the OIG investigator after this clarification, as required by the Code of Professional Conduct prohibiting lawyers from misleading a tribunal.

Lawson attacks a PowerPoint presentation by Clarkson and Edwards containing evidence of foreclosure abuses and forgeries. Lawson is unhappy with both the fact that it was released as well as its substance. Yet Dave Dayen points out it was requested and approved by the prior regime. It should have been excluded entirely from this investigation.

The most bizarre subtext is the complaint about the dealing with Szymoniak and Epstein. First, Lawson complains more than once about his staffers dealing with “foreclosure defense attorneys.” Ahem, if you are conducting an investigation, one of the first places you go is to parties making charges against the people you are targeting. Second, he criticizes them from accepting and using the documents they sent, when they are ALL public domain. Third, he seems upset that they obtained information via Florida’s public disclosure laws, which are arguably the most open in the nation. He tries charging that information was sent from the state improperly because they could not find evidence of written requests, when verbal requests are permitted under state statutes.

Par for the failure to validate any of the claims, we have this charge from the interview with Carlos Muniz:

There is a big problem with this: the subpoena was not released by the blogger in question, Lisa Epstein (again, part for stenography masquerading as a preliminary investigation, no one contacted either Epstein or Szymoniak even though both are mentioned repeatedly in the document). In fact, it appears that the first public mention of the Illinois subpoena of LPS was by the Illinois attorney general’s office on May 25, 2011 as reported by CNN. So if the AG released the subpoena, why would they call the Florida AG’s office to complain? In fact, AGs usually like publicity of their investigations. It seems far more likely that any complaint came from LPS.

So the message is loud and clear: if you take fraud seriously and try to combat it, you are at risk of career limiting attacks by people who care more about the reputations of the perps than about justice. The only hope here is that this report has so much in it that it patently untrue in it that it will blow up on the people trying to peddle the disinformation.

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  1. spacecabooie

    Bondi is the much younger wife of, and apparently the shill for, a politically and financially connected South Floridian. She has been represented in the Orlando Sentinel as somethng of another Repulican bimbo ala Pamela Harris. And somehow avoids the limelight in this one.

    I was surprised that Florida has joined the settlement – the way things seem to be going there, it must pain the FL AG immensely to join it.

  2. Catfish

    OT: I posted the following response to Hullabaloo re Atkins’ reply to Stoller

    There is no sense in which attacks on President Obama are a threat to liberalism. I have been a very frequent of the Obama Administration myself, and (commenters here notwithstanding) in most left-leaning circles have been characterized a frequent critic of the Administration, not a defender.

    You do, however defend the idea that anyone proposing a primary challenge against Obama should fully expect to be ejected from the Democratic party, and that they have only themselves to blame should that be the result of their exercising their basic democratic rights as party members.

    Some might consider that a rather ardent defense of Obama.

    My response was deleted within the half-hour.

    Such cowardly behavior is typical for Atkins.

    1. Yves Smith Post author

      Hah I tried fixing it earlier and managed to introduce some new glitches. I think it’s finally OK, thanks!

  3. indio007

    The forgery part is so deceptive or ignorant I want to puke.
    Black Letter Law? Sure I’ll have some…

    it is said in Bacon’s Abridgment tit “Forgery,” that the notion of forgery does not so much consist in the counterfeiting of a man’s hand and seal, but in the endeavoring to give the appearance of truth to a mere deceit and falsity, and either to impose that on the world as the solemn act of another which he is not a party to, or at least to make a man’s own act appear to have been done at a time when it was not done, and by force of such a falsity to give it an operation which it ought not to have. People v. Graham (N. Y.) 6 Parker, Cr. R. 135, 139.

    Yup that that covers it. IT WAS FORGERY.
    Also uttering but we need not go there.

    1. PL

      We’ll see who’s right about the forgery when a court in Florida addresses the issue. Until then, it’s just selective hearing on the part of the AG.

      1. indio007

        It’s forgery because a notary can’t allow a surrogate to sign, therefore because they are passing the document off as notarized, it’s forgery. It’ obvious a notary can’t delegate it’s delegated authority.

        Regardless this is all a mincing of words because there is no doubt it is uttering a false instrument. The only intent that matters with uttering is whether the party tried to pass off the document as genuine. They tried to pass off the documents as notarized. Which gives the document certain legal characteristics. Namely it is presumed by the state to be signed by who said they where signing it and for the purposes of court the document is self-authenticating. Again a notary can’t witness a surrogate signer. Again a deception as to the true character of the document.

        People try to say what happened is perjury. It’s not perjury because there was never actually a notary there!

  4. ron

    Yves, you crack me up, expecting these clowns to do something appropriated,honest above board,working in the public interest it seems beyond what we can expect from the political cast but glad to see you still get pissed off at there bad behavior!!!

  5. scraping_by

    The empty formalism signaled by “the black letter of the law” is really the well connected brushing off the rest of us.

    There are no absolutes in human language. The purely verbal analysis of law takes advantage of this by redefinings, reworkings, and just plain ignoring the real world scenarios that give rise to the law.

    We got this signal when the Supremes wouldn’t declare suppressing evidence an error in a trial. When an Alaska man tried to prove himself innocent of rape with a DNA test, they dismissed him because his trial had correctly gone through all the forms. The motions but not the reasons for the motions.

    As a general rule, subjective dismissal of objective reality is a right-wing trick. “What is truth?” was Henry Luce’s favorite saying when explaining why all his anonymous sources for Time’s political articles sounded so corporate Republican.

    The real world doesn’t get more leftist all the time, it’s just that “what is truth” goes further out corporate every time. Everyone in middle management understands they serve at the pleasure of their boss, whatever value they bring to the company. This is running government like a business.

    There was much scorn for the old civil service system and its protections, but we’re soon back to the point where it looks like the best practical idea.

  6. Greg R

    Clarkson and Edwards???

    “Ahh, but the strawberries, that’s, that’s where I had them, they laughed at me and made jokes, but I proved beyond the shadow of a doubt, and with geometric logic, that a duplicate key to the ward room icebox did exist…”

  7. PL

    Clarkson and Edwards were pioneer investigators conducting novel investigations of foreclosure mills and the default servicing industry. The report shows Associate AG Lawson micromanaging and second guessing them at every turn. He also overreacts to blowback from LPS’s attorney and makes pronouncements as if the law were settled in Florida–surrogate signing is not forgery! assignments do not matter!–when, in fact, the law continues to evolve to this day. After reading about his hatchet job I could only marvel that Clarkson and Edwards didn’t quit much earlier. It must have been intolerable for them.

  8. just me

    The PowerPoint with the Candyland slide! Now I know what we’re talking about.

    David Dayen’s background links to a PDF of Clarkson’s Powerpoint presentation, which I remember from this HuffPo article from October:

    Florida AG Pam Bondi Pressured By Targets Of Investigations To Soften Approach, Critics Say

    Jacksonville-based LPS was furious, particularly about one slide in the presentation: an image of the children’s board game Candyland, a satirical reference to the mortgage securitization process.

    That’s slide #10. But my favorite is slide #18, “if the mortgage is not properly assigned…. the result is chaos” — paired with the famous M.C. Escher staircase drawing.

    No wonder LPS was pissed and wanted to make Clarkson disappear! Mortgage fraud is disguised in plain sight by thousands of dense professional words — but these pictures make it easy to get — child’s play. My suggestion would be to make those slides famous/iconic/viral — maybe posting them individually on flickr or PhotoBucket so they could be picked up and posted easily by others. Start here.

    P.S. The Candyland slide has to do with the RMBS path … that’s the one that made LPS scream?

    1. Tyzao

      Wild Thing, I think I love you

      but I wanna know for sure!

      common & hold me tight

      (dedicated to the real Linda Green, pls stand up, pls stand up)

    2. Jim A

      “You sue on the note and foreclose under the mortgage.”

      Says it nicely IMHO. Of course the new AG seems to parrot the contention of those who have lost/squandered/screwed up the mortgages that the note is all that they need. But without the mortgage, a home loan is no more secured than any other debt. You can sue to get your money, but you don’t have an automatic lein to a particular asset of the defaulter.

      1. PL

        That’s right, the new AG reveals he’s taking marching orders from the banks with ludicrous assertions about forged assignments not being important.

  9. Tyzao

    unbelievable — ever since the new constitution was enacted, Florida has been a cesspool for this kind of stuff, most of these types barely have any education at all, beyond high school, they are just good worker bees, who have demonstrated loyal servitude in exchange for a working environment which promotes incentive based corruption risk/reward. If you get caught, just be the fall guy, and get a nice settlement for being on parole for a year or two. On the other hand, one can simply sit in their air conditioned small corner office, grant passage to the locally connected counselors, and give all the college grads hell, until they decide to move on — or eventually “turn to the dark side.” At least that way you know they’ve been broken.

    BTW — has anyone FTPed all of the SEC filings? I was thinking to import to R and run some code on them. I could do it myself, but I don’t really know their FTP file structure, for things like trusts — FWP filings etc…and its just a lot of time to do so, with work etc…of course I could share collaborate with the group.


  10. Procopius

    A couple of years ago my attention was caught by an article somewhere about a Florida attorney named Scott Rothstein, who was accused of running a Ponzi scheme. I was intrigued because the name made me think of Arnold Rothstein and Fanny Brice and the marvelous song she sang, “My Man”, and …

    Anyway is stumbled across a blog at the Broward-Palm Beach New Times called The Pulp, and for several months watched in sickened fascination as stories were posted every day, both in the blog and the comments, about egregious widely known corruption and blatant display of illegality. The biggest target was the law firm where Rothstein had been the biggest money-maker, but included the county commission, the Ft. Lauderdale police department, and the Broward County Sheriff’s Office. What a fantastic morass of filth! I suppose we have much the same in Michigan, but at least we have the decency not to parade it in public.

  11. Procopius

    Whoops! Second paragraph, “Anyway is stumbled” s/b “Anyway I stumbled.” I often wish we had an edit function here. A “like” function would be nice, too.

  12. Fraud Guy

    Louisiana, Mississippi? Illinois, where 50% of the recent (elected) governors have been convicted of corruption. Where there are more governmental bodies than any other state? I think not.

  13. Woodrow Wilson

    Here’s what we know: The Rule of Law, for a very few, does not exist. Harsh language, protests, scribbles on various blogs/editorials have not worked. The looting and pillaging, and the financial socialism at the very top, at the expense of the rest of us, will continue.

    There apparently hasn’t been enough pillaging, because with literal millions victimized thus far, I haven’t read anywhere about politicians, or those that enable them, hanging from lampposts. Or maybe the thought is, civilized societies don’t do that kind of thing?

    Meanwhile, enjoy being pillaged, I’m sure more harsh language, peaceful protests, and “voting the bums out” will work.

  14. jim b

    let’s say you and i are having dinner, and we are in a hurry to go, and we ask for the check and we give our credit cards. you need to go to the bathroom, so you tell me just to sign your credit card in the interest of speed of leaving. if i do it am i committing fraud? and if not, how is this authorized “surrogate signing” thing any different?

    1. indio007

      This difference is the notary and presumption of authenticity the courts give the document.

      For example, the Federal Rules of Civil Procedure

      The following items of evidence are self-authenticating; they require no extrinsic evidence of authenticity in order to be admitted:
      (8) Acknowledged Documents. A document accompanied by a certificate of acknowledgment that is lawfully executed by a notary public or another officer who is authorized to take acknowledgments.

      Notarized documents are self-authenticating because the notary is a state-sanctioned witness. The function of the office is undermined by having a surrogate signer for either the affiant or the notary.

      AFAIK all Register of Deeds need a notarization on a document before they can be recorded because of the presumption of authenticity of the record and the true identity of the affiant.

      Again a surrogate signer defeats that purpose as well.

      1. jim b

        so then the notarizing is the issue and not signing on behalf of other people, such as one person signing for 15 different companies where they were conveyed signing authority, correct?

        1. Yves Smith Post author

          You are assuming the assertion re signing authority is accurate. It isn’t.

          Documents submitted to a court are meant to stand in lieu of testimony. They therefore are to be based on personal knowledge. Otherwise they are heresay and are inadmissible. Some of the documents submitted are affidavits re amounts due and owing, validity of transfers, etc. You can’t delegate signing authority and still have them be valid documents for submission to a court.

          Moreover, it is also not clear that the signing authority was indeed properly authorized. That can ONLY be conveyed by an officer of the corporation, such as its president, corporate secretary, corporate treasurer (and this is not per the formal C level titles, but per how the company is registered with the state). For MERS, signing authority was not authorized by a corporate officer but there is so much wrong with MERS no one much cares. Given the lack of attention to legal proprieties, I strongly suspect the parties that delegated the signing authority were not in fact the very few corporate officers in a position to do so.

          And to the credit card example. the rules of the credit card issuer are strict, they don’t allow anyone other than the cardholder to sign. They won’t bother pursuing anyone if the charge is honored, but they would most certainly regard someone else using a card as a fraud.

        2. indio007

          What Yves said is all true about the necessity of a corporate officer being the individual that can sign unless here is a corporate resolution (which involves voting) giving a particular and specific individual the authority to sign. An individual officer can’t make the decision.

          The part about the notary was assuming the surrogate authority thing was legally permissible. Even is it was permissible they have big problems.
          It just goes to show you how conniving LPS is to tell such a desperate lie that does not get them off the hook anyhow.

  15. Nate

    As a functional point of view, everything ( laws and accounting rules ) have to be drastically simplified. A society that relies too much in importance of lawyers and accountants will fail.

    1. Tyzão

      Maybe true, but that’s not the case in the USA. Our legal system should be called quasi-political, especially when we move towards the lower rungs of what I would label as vertically un-integrated. The idea of basing judgement on precedent rather than codified law is a problem in my opinion. Lets take the foreclosure cases first of all, if they had simply required an Agent Authorization Form with an original signature, most of the cases which are clogging the local courts would have simply not been filed, or thrown out already. From a functional point of view, in the USA, we have an obsession with individual liberties and economic freedoms. In a state of 20 million +, which is in a country of 300 million+ on a planet of 7+ billion, at some point we will need to start recording clearly defined laws with relevance to all levels of government (federal, regional, state, district, local). Most of the problems exist at the state, district, local level, where there is seemingly little or no connection to federal codes.

  16. Fíréan

    How are can we contact these persons, on both sides of the situation reported here, that they may become aware thatw e, all around the world are aware of their actions ?

  17. larry

    “But these mistakes were in internal communications, and while they might be worrisome, what matters is what gets out the door.”

    the report indicates the mistake was publicly available on the AG web site..

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