Rare Criminal Robo-Signing Foreclosure Case Tossed on a Technicality

Monday, March 11, 2013


Two Californians accused of directing the fraudulent notarization of mortgage foreclosure documents had their case thrown out by the judge, who objected to prosecutors characterizing it as forgery and introducing "irrelevant and highly inflammatory evidence" about how the evictions affected the homeowners.

Technically, it wasn’t legal forgery. But the Nevada prosecutors pursuing the case against Gary Trafford and Geraldine Sheppard of Orange County used the word as a generic reference to the 25,000 bogus documents notarized between 2005 and 2008 for Lender Processing Services, a Florida company used by banks to process home repossessions.

The case was one of only two criminal actions taken against financial institutions nationally who participated in the practice of faking ownership paperwork they couldn’t otherwise produce while pursuing foreclosure, according to the Los Angeles Times. Five mortgage companies have settled civil lawsuits over the so-called “robo signings” and other abuses for $25 billion, but criminal proceedings are another matter.

According to the Times, the only other criminal case filed over the widespread practice  ended in a guilty plea by a single employee of a Lender Processing Services subsidiary to one federal conspiracy charge. Banks and their employees have, by and large, avoided criminal charges related to the housing debacle that tanked the economy in 2008 and other nefarious deeds.

Senator Elizabeth Warren (D-Massachusetts) gave a verbal tongue-lashing to officials at the Treasury Department, Federal Reserve and Office of the Comptroller of the Currency during a hearing last week that focused on HSBC laundering billions of dollars for Mexican drug cartels, Iran and Libya. The bank paid $1.9 billion to settle the charges, but no one was criminally prosecuted.

“They did it over and over and over again across a period of years. And they were caught doing it, warned not to do it and kept right on doing it, and evidently making profits doing it,” Warren said.

Tracey Lawrence, the notary public who blew the whistle on Lender Processing Services, committed suicide last November after accusing Trafford and Sheppard of running the scheme. The nation’s largest mortgage servicing company acknowledged last November that signing procedures on some of documents were flawed.

The two loan officers were indicted on 606 counts of fraud. The number was eventually reduced to more than 100 counts, before the judge dismissed the case two weeks ago because of statements made by prosecutors to a grand jury in 2011.

Clark County District Court Judge Carolyn Ellsworth suggested that the prosecutors consider refiling the case and clean up their act for the grand jury.    

–Ken Broder


To Learn More:

Judge Rejects “Robo-Signing” Case, Citing Prosecution Misconduct (by E. Scott Reckard, Los Angeles Times)

Tracy Lawrence and the Foreclosure Suicide that America Ignored (by Mark Ames, The Daily Banter)

Elizabeth Warren: Banks Get Wrist Slaps While Drug Dealers Get Jail (by Mark Gongloff, Huffington Post)

Nevada Attorney General Masto Files 606 Count Criminal Indictment against Two Title Officers (by Yves Smith, Naked Capitalism)

The Obama Mortgage Settlement Is Just Another Bank Bailout in Disguise (by David Wallechinsky, AllGov)

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