Florida-Based Lender Processing Services Inc. to Pay $35 Million in Agreement to Resolve Criminal Fraud Violations Following Guilty Plea from Subsidiary CEO
Agreement Also Follows Closure of Subsidiary DocX Operations
Lender Processing Services Inc. (LPS), a publicly traded mortgage servicing company based in Jacksonville, Fla., has agreed to pay $35 million in criminal penalties and forfeiture to address its participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States. The settlement, which follows a felony guilty plea from the chief executive officer of wholly owned LPS subsidiary DocX LLC, was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Middle District of Florida Robert E. O’Neill.
The non-prosecution agreement, which LPS entered into today with the U.S. Department of Justice and the U.S. Attorney’s Office for the Middle District of Florida, requires the company to make the payment and meet a series of other conditions.
Lorraine Brown, the former CEO of DocX LLC, pleaded guilty on Nov. 20, 2012, in federal court in Jacksonville to conspiracy to commit mail and wire fraud. During her guilty plea, Brown admitted to her leadership role in the scheme.
LPS has taken a number of remedial actions to address the misconduct at DocX. Among other things, LPS has wound down all of DocX’s operations, re-executed and re-filed mortgage assignments as appropriate and terminated Brown and others. LPS has also demonstrated changes in its compliance, training and overall approach to ensuring its adherence to the law, and has retained an independent consultant to review and report on LPS’s document execution practices; assess related operational, compliance, legal and reputational risks; and establish a plan for reimbursing any financial injuries to mortgage servicers or borrowers.
According to the statement of facts accompanying the agreement, before its wind-down, DocX was in the business of assisting residential mortgage servicers with creating and executing mortgage-related documents to be filed with property recorders’ offices throughout the United States. Employees of DocX, at the direction of Brown and others, falsified signatures on the documents. Through this scheme and unbeknownst to the clients, Brown and subordinates at DocX directed authorized signers to allow other, unauthorized personnel to sign and to have documents notarized as if they were executed by authorized signers. These signing practices were used at DocX from at least March 2003 until late 2009, and were implemented to increase profits.
Also to increase profits, Brown hired temporary workers to sign as authorized signers. These temporary employees would sign mortgage-related documents at a much lower cost and without the quality controls represented to clients. These documents were then falsely notarized by employees at DocX, allowing the fraud scheme to remain undetected.
After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country. Many of these documents – particularly mortgage assignments, lost note affidavits and lost assignment affidavits – were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions.
In entering into the non-prosecution agreement with LPS, the Justice Department took several factors into consideration. Soon after discovering the misconduct at DocX, LPS conducted a thorough internal investigation, reported all of its findings to the government, cooperated with the government’s investigation and effectively remediated any problems it discovered. The government’s investigation also revealed that Brown and others at DocX took various steps to actively conceal the misconduct from detection, including from LPS senior management and auditors.
Brown, 51, of Alpharetta, Ga., faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. She is scheduled to be sentenced on April 23, 2013, before U.S. District Judge Henry Lee Adams Jr. in Jacksonville.
This case is being handled by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Justice Department’s Criminal Division Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida. The case is being investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.
Today’s disposition is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
From the Non-Prosecution Agreement…
This Agreement shall have a term of two years from the date of this Agreement, except as specifically provided below. It is understood that for the two-year term of this Agreement, LPS shall: (a) commit no crime whatsoever; (b) truthfully and completely disclose non-privileged information with respect to the activities of LPS, its officers and employees, and others concerning all matters about which the Government inquires of it, which information can be used for any purpose, except as otherwise limited in this Agreement; (c) bring to the Government’s attention all potentially criminal conduct by LPS or any of its employees that relates to violations of U.S. laws (i) concerning fraud or (ii) concerning mortgage or foreclosure document execution services; and (d) bring to the Government’s attention all criminal or regulatory investigations, administrative proceedings or civil actions brought by any governmental authority in the United States against LPS, its subsidiaries, or its employees that alleges fraud or violations of the laws governing mortgage or foreclosure document execution services.
Until the date upon which all investigations and prosecutions arising out of the conduct described in this Agreement are concluded, whether or not they are finished within the two-year term specified in the preceding paragraph, LPS shall, in connection with any investigation or prosecution arising out of the conduct described in this Agreement:
(a) cooperate fully with the Government, the Federal Bureau of Investigation, and any other law enforcement or government agency designated by the Government;
(b) assist the Government in any investigation or prosecution by providing logistical and technical support for any meeting, interview, grand jury proceeding, or any trial or other court proceeding;
(c) use its best efforts promptly to secure the attendance and truthful statements or testimony of any officer, agent or employee at any meeting or interview or before the grand jury or at any trial or other court proceeding; and
(d) provide the Government, upon request, all non-privileged information, documents, records, or other tangible evidence about which the Government or any designated law enforcement or government agency inquires.
It is understood that, if the Government determines in its sole discretion that LPS has committed any crime subsequent to the date of this Agreement, or that LPS has given false, incomplete, or misleading testimony or information at any time, or that LPS has otherwise violated any provision of this Agreement, LPS shall thereafter be subject to prosecution for any federal violation of which the Government has knowledge, including perjury and obstruction of justice. Any such prosecution that is not time-barred by the applicable statute of limitations on the date ofthe signing of this Agreement may be commenced against LPS, notwithstanding the expiration of the statute of limitations between the signing of this Agreement and the expiration of the term of the Agreement plus one year. Thus, by signing this Agreement, LPS agrees that the statute of limitations with respect to any prosecution based on the facts set forth in Appendix A that is not time-barred on the date that this Agreement is signed shall be tolled for the term of this Agreement plus one year.
It is understood that, if the Government determines in its sole discretion that LPS has committed any crime after signing this Agreement, or that LPS has given false, incomplete, or misleading testimony or information at any time, or that LPS has otherwise violated any provision of this Agreement: (a) all statements made by LPS or any of its employees to the Government or other designated law enforcement agents, including Appendix A, and any testimony given by LPS or any of its employees before a grand jury or other tribunal, whether prior or subsequent to the signing of this Agreement, and any leads derived from such statements or testimony, shall be admissible in evidence in any criminal proceeding brought against LPS; and (b) LPS shall assert no claim under the United States Constitution, any statute, Rule 410 of the Federal Rules of Evidence, or any other federal rule that such statements or any leads derived therefrom are inadmissible or should be suppressed. By signing this Agreement, LPS waives all rights in the foregoing respects.
Full Non-Prosecution Agreement below…