Here’s How the Foreclosure Reviews Could Have Been Done Much Faster and Cheaper

Yves here. The OCC made the not-surprising confession in Senate hearings last week that if it had to do them all over again, it would have handled them differently.

On the assumption that the OCC is sincere in its repentance, Michael Olenick offers one way to have executed the reviews at vastly lower cost than the botched process that resulted.

However, there is no particular reason to believe that. As we and other observers said from the announcement of the Fed and OCC consent orders, the IFR was never intended to be a serious exercise. The approach of having bank-friendly consultants hired by the banks assured a compromised outcome. Sadly, Sherrod Brown unwittingly gave the OCC a pass on this issue:

Mr. Stipano, OCC: The critical factors in our minds, first and foremost, is that any consultant that’s brought on have the right resources and expertise to do the job. I mean, that’s separate really from independence, but nonetheless very important. On the independence point, it is not realistic in most cases to expect that independent consultant would have no prior ties to the institution. I mean, they’re used so widely throughout the industry that most consultants that have the resources and the expertise have done work before. So trying to find consultants that are totally pristine in that regard is not really practicable…

Sen. Brown: We’re not – you used the word pristine. We don’t expect pristine here. That sounds too difficult.

Notice that it is taken without question that managing this sort of project requires special expertise. It did, but the regulators focused on the wrong kind. You needed serious real estate knowledge. Bank of America’s temps at Tampa Bay, who were paid $23 to $30 an hour, had vastly more relevant knowledge than better credentialed (fancier schools and degrees and big corporate work experience) contract consultants hired by Promontory for $60 and hour that were believed to have been billed out at $150 or more an hour. And while we are on the subject of expertise, as we discussed in our whistleblower series at some length, Promontory was lacking both in any relevant expertise (it knew bupkis about mortgages and servicing) and in the headcount to do the job. Yet thanks to its incestuous connections to the OCC, starting with the head of the firm, Gene Ludwig, having been a Comptroller of the Currency, its ability to do the job was never questioned.

By Michael Olenick, a regular contributor on Naked Capitalism. You can follow him on Twitter at @michael_olenick

The critical factors in our minds, first and foremost, is that any consultant that’s brought on have the right resources and expertise to do the job. Daniel P. Sipano, Deputy Chief Counsel, OCC

Years mired in the world of foreclosure fraud leaves one aghast at the level of sheer chutzpah people exhibit. It was difficult, in this context, to believe that the OCC could sink to a new low – especially now that Julie Williams, Chief Counsel of the OCC, exited her regulatory role, through the revolving door of course, and straight to Promontory, a firm she helped enrich enormously by approving it for three large consulting projects in the Independent foreclosure review. But the OCC managed to do the impossible last week in continuing to claim that the consultants they’d approved, and who demonstrated themselves incapable of managing the foreclosure reviews, were actually up to the task.

Some background: I work with computers, creating software that does smart things, usually with the goal of helping smart people. This year I’m fortunate enough to be working with a well-known business school. Last year it was a database of mortgage remittance reports. The year before that it was a systematic study of court cases enabling the ACLU to prove due process violations. I’m guessing readers get the picture…

In between some of those projects I thought I’d try something different and created a web-based program I called Find the Fraud. I uploaded a couple hundred thousand iffy documents, cross referenced to the data behind them, and put together a framework for people to systematically identify problems.

Despite my best intentions, the software never really caught on, probably because while the whole thing sounds cool it’s actually mind numbingly boring to systematically click through documents identifying patterns. Still, the software worked, guiding people first through one level review, then another depending upon what the first found, then another. We could create any number of reviews, and set things up so that reviewers were only presented with documents that were pertinent based on the results of past reviewers.

Listening to the OCC, the Federal Reserve, and the consultants testify last week you’d think I’d created the equivalent of cold fusion in my spare time, then pitched it after a few friends received electrical shocks from touching my beaker. Of course finding the software would have been brutally complex: thanks to it being in the prior intro to my NC articles it required searching for exotic keywords like “foreclosure fraud software.” Since nobody at the OCC knows how to use a search engine, and I’m sure not a single person there noticed any of my posts, it makes sense that nobody ever asked for help.

Creating the technology and frameworks for the reviews, the official line goes, is staggeringly difficult and requires enormous organizations. Or maybe not. IFR mega-consultant Promotory has only about 400 people, total, and many of those are high-level types whose jobs seem more like lobbyists than fraud auditors. It’s impossible to envision, say Julie Williams or Mary Shapiro picking through loan level files to see if the affidavits of indebtedness add up, or if the line items even make sense.

Actually there’s no need to imagine Julie wearing a green accountants visor because it didn’t happen. We know that the vast majority of “consultants” who actually touched loans were temps. An inside source told me about 1/3rd were paralegals – some with experience in this field but many without – while the rest had backgrounds more aligned with the culinary arts. Billing the Barista at $250 hour, while paying them their old wage, sounds like a quick way to make a couple billion dollars while finding essentially nothing, which is exactly what happened.

Radical idea though it might be the OCC could have hired me, or somebody like me, or a few of us, and had us quickly build out the technology and processes for these reviews. They could have simultaneously hired somebody who knew about staffing agencies to find both the temp reviewers and, being temp agencies, set up the rest of the infrastructure. They could have even found young lawyers who know state law – it’s a prerequisite of getting a license to practice – to double-check the work of the paralegals for state law compliance.

The OCC reports they reviewed 100,000 files at a cost of $2 billion, $20,000 per file. It’s impossible to ignore that many of the foreclosed properties probably sold for substantially less than that price at auction. Twenty thousand dollars could provide a substantive down-payment for those families rather than a month of country club dues for the consultants.

Left’s figure out how long it takes to review a file. I’ve been told by top-notch foreclosure defense lawyers two hours of lawyer review, max, plus a few hours of paralegal review depending on how messy things are. I’ll estimate high and dedicate eight hours of admin/data entry, four hours of bookkeeper review, four of paralegal review, and two for attorney review. I’ll pay an average of $15/hr. for data entry clerks, $26/hr. for bookkeepers and paralegals, and $85 for lawyers (these are junior lawyers and the legal field isn’t exactly booming right now: document review attorneys routinely work for about $35/hr.). Then I’ll mark the fees up three times because that’s the way it’s done.

Those extremely conservative figures – especially on time – comes to a cost of $498/file and a billing rate of $1,992/file. That comes to $199.2 million for our 100,000 files, including $149.4 million in profit, for about a years work. Not A Bad Gig.

We know reaching the borrowers and attracting their attention was difficult so let’s send them up to two certified letters; two more certified letters than they sent. We can have a professional designer create them so that they’re readable, and maybe we’ll even use some language like “Official Government Communication: Criminal Penalties for Misuse” to wake them up. At full certified first-class rates – this crowd doesn’t do discounts – and a steep $2 per piece printing budget, that comes to about another $49.5 million, and people may have noticed and answered the letters.

Finally there’s the technology. Let’s charge per file, since pay-as-you-go is the rage with tech lately. 100,000 files at a steep $200/file comes to another $20 million; let’s double that, with a setup charge, because money seems to be no object and throw $40 million to the techies.

I know I skipped overhead but some is baked into the temp rates and the rest is what the $150 million in profit is for, which would probably still leave many, many millions for whomever landed this project.

So the whole review could have cost $284.7 million. Since we’re padding everything else let’s round that up to $300 million, about 15% of the figure the consultants actually charged. Oh yeah, this process – unencumbered by managers shopping for their private islands – may have even found some fraud.

Realistically my figures are ridiculous. Nobody pays a 300% markup when purchasing 225,000 FTE days of labor, nor does a one-time-use document management system with business rules attached cost $40 million. Two dollars per letter for printing costs, when producing about four million – for material that is basically a government form, without postage – is so steep no printer would dare bid that high. I know the USPS is ailing so maybe they can be paid full price for the eight million certified mailings, though I’ve baked in an assumption the entire second mailing is necessary: that nobody answers the first. However, even when using these inflated rates, and marking that up, we get nowhere close to the figures these firms charged.

When the usual suspects are being investigated for fraud it may not make sense to rely upon the same people, using the same practices, and the same business processes to investigate the fraud. I’m not surprised that they only found only negligible fraud, nor that they were massively overpaid to do so; overcharge and under deliver seems to be the rallying cry of high finance. But when regulators claim, with a straight face, that they had no other alternative we’ve reached a new low in honesty or, more accurately, the lack thereof.

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    1. stan

      As a cop my whole working life of 32 years, I was always of the understanding writing checks without the funds in the bank a crime. A person doing so in my jurisdiction committed a felony if writing a check of $200 without funds. a few billion could be a problem.

      Question for any legal types. What would constitute a breach of a contract or consent order that would stop this mess and a real review would have to be done and completed? Is that a thing that could happen. If the checks can’t be cashed, would that be a problem to cause other actions?

      I know criminal law, but civil law is out of my area. Even though I went through a paralegal degree program, I never used it except for in the criminal area. But not much use there as a “street cop/investigator” over 30 years.

      1. just me

        Mr. Stipano, OCC: I think if we had it to do over again, we would take a different approach.

        Sen. Reed: You will have it to do over again.

        I keep hoping.

    1. stan

      I haven’t received one yet, but probably fall under the $300.00 category.

      After 3 years of at least and probably more like 7 “forbearance plans” Chase would stop for whatever reason they had at any given moment, I finally got a modification. But my modification worked out for the bank. My mortgage went up 27K and payments up over $100

      I wonder if my $300 (or whatever I get) will bounce like a tennis ball?

  1. Susan the other

    Michael laments that they did not consult him when he had the software to do the job which “could create any number of reviews, and set things up so the reviewers were only presented with documents that were pertinent based on the result of past reviewers.” A customized review process of sorts. But I would submit that they did read Michael, and carefully, because this is exactly what they did, incompetence notwithstanding. And incompetence intentional also.

    1. Susan the other

      The goal was to find no harm so those iterations to detect irregularities were cleverly used to their own ends. Maybe it was a dry run for another review to establish valid notes. Of course LPS may have made that irrelevant since they can manufacture any number of notes with any allonge after the securitization date scrubbed off. Proving a clear chain of title and a valid securitization. Basically not just a forgery, but destroying evidence. But conceivably a process of iterations to find the actual chain of title is possible, is it not? Let’s ask MERS.

      1. just me

        To both Michael and Susan:

        Kind of don’t know where to put this, but … I keep thinking of Pearl’s comments.

        1 – She was on her own doing file checking in Georgia and had comments for Joseph Smith, the national mortgage settlement monitor who will be a witness at tomorrow’s Senate hearing:
        Since Friday night, I have worked my way through four–yes–just four (of the first four) of these funky foreclosures.

        I cannot begin to emphasize how complicated these suckers are to sift through. It usually starts off with something like Wikipedia-ing the lender. BB & T. Fine. Oh boy!!! A lender that’s still in business–piece of cake, right? Wrong. Who did BB & T used to be? They merged with/acquired who? And who did that lender used to be and who did they merge with/acquire? So, after an hour or so–I’m at step two of a process that probably requires 200 steps–if you’re going to do it well enough to send it off to Matt Stoller or…..I dunno….determine whether or not a homeowner was illegally foreclosed upon.

        That’s one thing for Mr. Smith to contemplate. Here’s another “take-away” for Mr. Smith.

        I’m just a housewife and I sift through Georgia’s land records for free because that’s just how (ticked?) off I am. If someone like Mr. Smith could just arrange for these (public, btw) land records to be accessible and (ahem) free–I think Mr. Smith would find that this country is filled with thousands of obsessive people (like me) who would comb through these records for free. (Not that we should–it’s just that we do. You know the type–we’re like wind-up toys that you just can’t get to stop.)

        But, the fact is, if Mr. Smith were to hire an auditing firm to sift through our land records in search of fraud–he would probably be well-advised to have the employees at such firms trained by fraudclosure groupies like me because 1) we come equipped with thousands of hours of training 2) we’re free 3) we can start tomorrow.

        2 – she saw manufactured real estate papers — multiple “original” notes presented:

        btw, I do like her idea of crowdsourcing.

        And also, I wish someone would explain the “process” that Mr. Stipano kept talking about in the hearing, the “process” that the Senators need to go through to actually get information about what the consultants found because it’s all legally confidential and privileged and we can’t hear it. That’s a fail to start with.

        Also, what Senator Reed said, that these reviewing contracts need to be competitively, openly bid, something the federal government does as a matter of course. Which was a particularly ludicrous part of the hearing. Kudos to Sen. Reed:

        Sen. Reed: So what today is the policy of the offices of the Comptroller of the Currency with respect to investigating wrongdoing of banks? Is it to hire or augment your staff with a contractual relationship with these consultants directly –

        Mr. Stipano, OCC: Yeah.

        Sen. Reed: – or is to let the banks pick their favorite consultant?

        Mr. Stipano, OCC: Well, there are a number of alternatives. All of them have different pros and cons. The problem with having the OCC do this work itself is that it is just beyond the means of any federal banking agency to do this. I mean, again, the size, the scale, the scope, the complexity. I mean, it wouldn’t be, it’s not a question of bringing on some more examiners. We would probably have to triple or quadruple the size of our staff, or pretty much shut down our bank supervision operations. So that’s not an option. We could contract directly ourselves. The problem that we run into there are federal procurement rules and federal procurement requirements. These types of engagements have to be competitively bid. In this kind of engagement where there’s a lot of money at stake, there would be a lot of interest among many consultants in getting that business, so we would expect there’d be lots of bids, there would be contest and challenges. We might still be at a point now where we haven’t even begun the IFR because we’re still going through the procurement process, so that, that was, we felt that was too unwieldy and not a good option. And the only other option, the other option would be to have, you know, the banks themselves do it, but they were the ones that caused the problem in the first place. So, given the alternatives, we felt that this was the best option. I think there are different approaches that we could have taken that we didn’t take, you know, in the design of the program, and what we’re doing right now, and I have to be honest with you, Senator, I don’t have all the answers as I sit here, but we are looking back at what we did, we are evaluating it, and we are going to come up with ways to do this better in the future.

        Sen. Reed: So your bottom line was, because it had to be competitively bid, you felt that was not the appropriate approach?

        Mr. Stipano, OCC: Yeah, and maybe, maybe that – you know, I’m not a, I’m not an expert on federal procurement rules but we have experts in my agency that we consulted with, and the advice that we were given was that if we were to go down that road, that the process would go on for a very, very long period of time and it would delay getting money into the hands of the affected borrowers.

        Sen. Reed: Unlike the process you chose, which is going on for a long time, has not gotten a lot of money into the borrowers, and has been deemed a total failure.

        Mr. Stipano, OCC: Um. That process didn’t work either.

    2. diptherio

      As Michael is probably aware, the folks at Promontory were closely following his postings (a little bird told me, I swear). They were keen, you see, on finding out what not to do. They read his suggestions as “mistakes to avoid, if you don’t want to find fraud.” Even the Devil can use scripture for his purpose, as the saying goes…

  2. belinda crawford

    i sent corrrespondence to rust consulting and the federal reserve i gave them both a piece of my mind on this whole fiasco of crap that has been dished out to innocent borrowers that have been done so wrong in this whole ordeal.

  3. Wake Up America!

    Just read Change Agent’s comments and followed the link to read more. I smell a rat.

    Banks normally do not call to verify funds on a check for a couple of hundred or even a couple of thousand dollars. The process usually works with the customer depositing the check with the bank putting a hold on the funds (usually 3-5 business days) to ensure the check clears.

    Were the big banks (especially the ones part of the settlement) advised to stall customers? Is John Corzine running the show at Rust Consulting? This makes no sense.

    I have not received my check. I qualify for the maximum payout (foreclosure started on a current account) but I’m not holding my breath.

    A friend received their check yesterday. The wording with the largest font on the entire communication was as follows:

    “The Payment amount is final. There is no process to appeal the payment.”

    So if Rust Consulting screws up – whether by accident or design – and sends the wrong amount, there’s no appeal? I fully anticipate my 125K check to be for $300.

    There are no words to express my level of disappointment and anger.

    1. Pat

      Let me know if you actually get your 125k. I’m curious to see if they are really going to pay that amount out to someone. I am expecting 6k based on the categories provided. However, I would not be suprosed at all if I received $300.

  4. Wake Up America!

    Just did a search on the good folks at Rust Consulting. It appears bounced settlement checks have happened before:

    If the link does not work, type in “Rust Consulting checks are bouncing” in your search bar and you’ll find more.

    When it comes to paying agents for “settlements” it would appear the folks at Rust are the darlings for the finance industry.

    Check out some of the comments on for Rust. To borrow from Neil Young – with a twist – when it comes to promises “Rust never keeps.”

  5. Anonymous


    1.”contract consultants hired by Promontory for $60 an hour” I am curious as to which contract employees Promontory was paying that rate. I (much to my shame) was employed as an analyst by Promontory (through a legal staffing firm) in Denver. Nearly everyone were paid $18-$25. Does the $60 include the likely 100%+ markup charged by the staffing agencies?

    1. TomDor

      Just my gut and experience tells me that your actual pay was less than what the staffing firms charged for you – I have seen it in practice over and over. I am not Yves but, this level of detail is hard to get a hold of – I discovered this billing practice in an investigation unrelated to this OCC Promnotory set-up.
      I am used to seeing 9x mark up from the ’employee take home’ to the billing invoice that is presented to the ‘buyer of the service’ (Government/taxpayer/OCC.
      You will also find massive mark-up in the non-human component of these ‘clean-ups’ such as computer programs or the computer charges themselves.

    2. JL1965

      Back when I worked for KPMG Consulting, they billed me out to clients at $320 per hour, and KPMG paid me less than $50/hour.

    3. Yves Smith Post author

      The entire 140-150 person team at PNC was paid that much. I have it from two separate whistleblowers. They had MBAs and big corporate backgrounds on their resumes.

      Were you working on borrower letters or the statistical review? I have a sneaking suspicion the higher paid people were on the statistical review, that was to be used to justify the not finding any harm in the review of borrower letters.

      E-mail me at

  6. Anonymous

    2.”We know that the vast majority of “consultants” who actually touched loans were temps. An inside source told me about 1/3rd were paralegals – some with experience in this field but many without – while the rest had backgrounds more aligned with the culinary arts.”

    While I agree with the gist of this article (and have no doubt that the IFR was a complete sham), but the above quote does not jive with my experience as an analyst on this travesty. I did not know any paralegals on the review in Denver. Most were lawyers, some JDs studying for the bar, and some people inexplicably picked from the lower levels of the servicing industry. Your role in the coverup was apparently irrespective of this background, and people with staggering incompetence were regularly promoted over those with much greater experience, education, and knowledge.

    1. LucyLulu

      I saw ads (on Craigslist no less) for temps in Charlotte for mortgage consultants to review documents at the time they were hiring, presumably for the IFR. They were looking primarily for attorneys and IIRC paying in the $25-30/hr range, which I thought was a criminal rate. As mentioned before, unemployment among lawyers has been high, and apparently they were taking advantage of the desperation of the jobless.

  7. Anonymous

    To follow up my last comment, there were, in fact, people with great skills working this review. Those skills were (i suspect deliberately) overlooked and not utilized.

  8. derrick haley

    I haven’t received a check yet. I am one of the 53 foreclosed on who was not in default and one of the 2800 original cases reviewed by the OCC in 2010. I am also one of 250 borrowers complaints reviewed by 39 state attorney generals in 2009 posted on the internet April 29,2009 under (AG’s Take Action on CWN Reports of Foreclosure Abuse). Nothing was done to stop what happened to us by any of them. Our home was sold October 5,2011 to my home church who tore it down to build a life center. We had one of the first internet post August 15, 2008 concerning servicers under (Countrywide Cashing in on Surprising Group of Homeowners | The Consumer Warning Network). The OCC, Louisiana Attorney General and Louisiana Office of Financial Institutions all had these internet post and over 50 pages of evidence concerning our complaints and did nothing. I filed a complaint directly to the OCC 11-28-2011 and was given Case #01887017. I also filed for review of my foreclosure in the Independant Foreclosure Review 12-28-2011 and was given Ref.# 1811662791. The case filed with the OCC should have concluded in about 90 days.The OCC deliberately held up giving me a decision for over a year and two months pretending to need information from BoA they already had. Finally on January 30, 2013 I recieved a letter from the OCC stating that my case with the OCC was being dismissed because it was in the scope of the IFR. I filed an appeal. Prior to the dismissal I had been told by the OCC Houston Office Manager Ms. Melinda Goodnight that Mr. Larry Hattix had instructed them not to review my case and to dismiss my case and all cases like mine were to be handled that way. The OCC has thousands of claims filed directly to them like mine they refused to review and dismissed to keep the harm servicers did to us hidden.

    1. progressive humanist

      Those of us following NC for several years have watched this drama unfold into deeper and deeper mires of shameless corruption.

      My heart breaks for the victims reporting here in the comments.

      All we’ve been able to do is watch as all of the state AGs sold their soulsto “stand” with Obama and Congress enablers of the banksters, who coddle Jamie Dimon and BoA at the White House, and then in the same week kill off the insider trading legislation that might even hint at stifling their culture of systemic corruption. (

      It’s time to develop alternative co-op banks, and starve the supply chain for these psychopathic “leaders”.

      1. DolleyMadison

        They don’t need our piddly deposits when the fed will give them 85 BILLION per month, and the courts, regulators and law enforcement will allow them to foreclose on any house they want, with or without a mortgage, with or without a default. We are a hair’s breadth away from a totalitarian state. Be afraid, be very afraid.

    1. just me

      Michael wrote:

      Radical idea though it might be the OCC could have hired me, or somebody like me, or a few of us, and had us quickly build out the technology and processes for these reviews. They could have simultaneously hired somebody who knew about staffing agencies to find both the temp reviewers and, being temp agencies, set up the rest of the infrastructure. They could have even found young lawyers who know state law – it’s a prerequisite of getting a license to practice – to double-check the work of the paralegals for state law compliance.

      My question is, if we know the chain of title is wrecked by MERS, or fraud occurred for all those other reasons the AGs signed off on on the mortgage settlement and that the OCC has acknowledged as well, why not put the money toward providing legal aid for the homeowners to sue?

      Neil Barofsky: “And you know it was really one of those dark moments in HAMP, when, or in the mortgage modification program, when Geithner and company blocked TARP money to be going to legal aid.”

      Hello! Foam’s not supposed to get a lawyer.

  9. Wake Up America!

    Another interesting angle to the checks sent out by Rust Consulting is that they have to be cashed within 90 days.

    Since only a small percentage of homeowners who were eligble for a review actually filed, I would have to believe the majority of the postcards and the checks were sent to an old address. And if you “lost” your home in 2009-10 the post office is not going to forward to your new address (USPS only forwards mail for 6 months).

    I had filed for the IFR and had updated the OCC with my post-foreclosure address; still, Rust sent the postcard to the address of my foreclosed property (they verified this by phone).

    It would have been fairly easy to use available technology to find/verify the current address for recipients (social security DTEC report, credit report, etc.). The fact that so many checks were mailed to the address of the foreclosed property 1-3 years ago shows how little thought and care went into this “program” (then again, what else would we expect).

    I have to believe hundreds of thousands if not millions of checks will go uncashed. Maybe that was the plan.

  10. just me

    How to see tomorrow’s Senate hearing? It’s part 2 — part 1 was last Thursday — will it be televised?

    Senate hearing info here:
    Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Foreclosure Reviews, Part II
    Housing, Transportation, and Community Development
    Wednesday, April 17, 2013
    10:00 AM – 12:00 PM

    Is not on C-Span text schedule for 4/17/13 here:,%202013

    (I assumed from the online video for last hearing that it was broadcast, but maybe not. has link for tomorrow’s hearing that doesn’t work for me now, but maybe it’ll work tomorrow?

    If anyone can do better than that, please do. I want to see this hearing.

    1. LucyLulu

      It may be televised Thursday, too, or even another day. The C-span schedule for Thursday wasn’t up yet. Sometimes they broadcast hearings from earlier in the week, esp. on weekends.
      But today, they broadcast a hearing from yesterday.

  11. David Petraitis

    This has me laughing so hard it is making me cry. How INSANE can it get… you can’t make this stuff up.

    A group of crooks rips a disabled vet geezer off for her house; the cop who is supposed to bust them; lets them go back out and do it more times; once caught the prosecutor makes a deal and lets them work off their time with community action (an audit); the community action time is overseen by their junkie parole officers who live on coke from the crooks; the judge stops the parole work out because it is too onerous on our poor crooks; and instead penalizes them for 300 bucks; and then the crooks assign the check to be written by a fly-by-night friendly loan sharking operation (named appropriately Rust); our geezer gets a check for 300 bucks; presents it back at the bank owned by the crooks; and THE CHECK BOUNCES?

    This is buffoonery, in tragic-comic operatic scale… only in America!

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