Lender Processing Services Makes False Statements About Pending Litigation in SEC Filing

Shortly after Lender Processing Services became the target of class action lawsuits for alleged illegal legal fee-splititing in early October, an investor commented that he had never seen a company do such a poor job of crisis management. The company halted trading at 3:45 PM for the not legitimate reason that they didn’t like how much the stock price had decayed that day. And when they had an investor conference call (not the next day, which would be the usual response cycle, but the day after that), it was remarkably unpersuasive.

LPS has become the object of more class action litigation in November, this time for alleged securities law claims, namely making false and misleading statements to investors from July 29, 2009 to October 4, 2010, including “deceptive and improper document execution and preparation related to foreclosure proceedings.”

LPS appears to be continuing both to do a lousy job of crisis management and making false statements to investors. The latest instance occurred on December 10. Readers may recall that Reuters published a major story on LPS on December 6, which confirmed many details about the inner workings of LPS’s processes for managing foreclosure mills that had been published on this blog a full two months earlier (LPS acts as an outsourced contractor to servicers). The Florida Times-Union ran a story based on the Reuters piece.

LPS claimed in a December 8 press release that the stories were inaccurate, but did not demand corrections, and Reuters said it stood by its account. On December 10, LPS wrote letters to the editor of Reuters and the Florida Times-Union and also filed them with the SEC as 8-K reports (click to enlarge):

Screen shot 2010-12-16 at 1.53.15 AM

The letter to the Times-Union, which you can read on the LPS website, contains a patently untrue statement about its pending litigation:

Furthermore, the Times-Union article said:

“A lawsuit filed in Mississippi in October alleges that the company engaged in illegal fee-splitting with law firms. A federal bankruptcy trustee has joined the plaintiffs in that suit.”

It is particularly unfortunate that the reporter did not do any fact checking on his reference to the Mississippi case. The statement is false. The Chapter 13 Trustee is named in the caption of the complaint as a matter of course.

Below is a copy of the amended claim, filed with the US Bankruptcy Court for the Northern Mississippi district on October 10. It very clearly states in Item 5 on the second page:

The additional plaintiff added by this amendment is Locke Barkley, the standing Chapter 13 Trustee for the Northern District of Mississippi who is joined as an additional plaintiff and who sues on behalf of herself and a class of persons defined as all Chapter 13 Trustees in the United States of America.

Chapter 13 trustees ARE Federal bankruptcy trustees. This is about as clear-cut a misrepresentation that you will ever see.

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