Florida’s once-heralded foreclosure mill investigations have fizzled as the attorney general’s office has failed to find the right strategy to continue its pursuit and three law firms call for the cases to be dismissed.
This week, an attempt to have the Florida Supreme Court weigh in on whether the state has the authority to subpoena the Law Offices of David J. Stern was denied by the 4th District Court of Appeal.
The decision effectively ends the investigations into complaints that the firms doctored court paperwork in an attempt to speed foreclosures.
“It means the buck has stopped” with the appeals court, said Royal Palm Beach-based foreclosure defense attorney Tom Ice. “No appeal to the Florida Supreme Court.”
Even before Wednesday’s ruling – from the very beginning of the investigations – there has been uncertainty about how to prosecute a civil case against the firms.
In 2010, flooded with complaints about unbridled foreclosures, former Assistant Attorneys General Theresa Edwards and June Clarkson said they felt their only option to protect consumers was to go after the law firms under the Florida Deceptive and Unfair Trade Practices Act.
The act governs trade or commerce, but it is unclear whether it can be used against law firms. Attorneys for the firms argue that what they are accused of did not qualify as “trade or commerce” and that the statute is intended to protect consumers. Technically, the consumers were the banks, they say.
Now, more than a year and a half after the investigations were announced during a news conference convened by former Attorney General Bill McCollum, Edwards and Clarkson have been fired, two of the firms have closed, and it is debatable whether there is a legal path to hold the Florida firms accountable.
“This denial is significant,” Attorney General Pam Bondi’s office said in a statement. “The attorney general’s office will now assess each of its seven pending investigations into law firms for potential misconduct in foreclosure cases to determine whether there are other avenues through which the office can pursue foreclosurerelated misconduct.”
In interviews taken as part of a state inspector general’s inquiry into the May firing of Edwards and Clarkson, one leading investigator said that despite increased resources dedicated to the investigations, the state was not close to filing formal complaints.
“The Florida Office of the Attorney General still cannot figure it out,” the January report paraphrases former Chief Assistant Attorney General Robert Julian as saying about why Edwards and Clarkson shouldn’t be blamed for an inability to build a case against the firms.
The Tampa-based Florida Default Law Group points to the inspector general’s report as evidence of why the cases should end.
“It is our understanding that the attorney general’s investigation into our firm has been completed and now that the Office of Inspector General report shows the lack of any substance supporting the investigation, it should be dismissed,” said Ron Wolfe, Florida Default Law Group managing partner.
Attorney Gerald Richman, who is representing the Boca Raton firm of Shapiro & Fishman, agrees.
“I think it’s in everybody’s interest for this to be closed as soon as possible,” Richman said.
The Law Offices of Marshall C. Watson in Fort Lauderdale settled with the state last year for $2 million. Stern’s firm and the Ben-Ezra & Katz law firm have closed, but are still under investigation. Also under investigation are Albertelli Law, Law Offices of Daniel Consuegra and Kahane & Associates.
In December, after losing an appeal in the 4th District Court of Appeal to subpoena Stern, Bondi asked the court to certify its decision as one of “great public importance” so she could appeal to the Florida Supreme Court.
But some foreclosure defense attorneys believe the move was a hollow gesture to appease critics.
Instead of looking to the Supreme Court, Bondi’s office could have issued subpoenas under a different statute, possibly criminal investigative subpoenas, Ice said.
“But the attorney general’s office hasn’t availed itself of that opportunity, which leads me to believe the certification request was a mere pretense for political purposes,” he said.
Edwards and Clarkson, who were forced to resign in May despite exemplary evaluations, said the attorney general’s office is trying to make it appear it has no power. But Edwards acknowledged that taking on law firms is tricky and the legal avenues to pursue a case were in constant debate.
Still, with consumer complaints coming in daily, Edwards said they were frustrated by the lack of a clear course and tried to find a way to “shoehorn” the concerns into the 501 statute.
“Otherwise, here we are, the attorney general’s office, and we were unable to do anything,” Edwards said.
Despite the apparent legal defeat, Edwards and Clarkson said they are proud they helped bring national attention to the foreclosure processing issues.
“We still feel we accomplished a lot, and different people have picked up that torch,” Edwards said. “We woke up the entire country.”
