DJSP Enterprises' rise and fall. Chart courtesy Bloomberg.
The saga of Florida foreclosure king David J. Stern offered a bit of everything. Bogus paperwork filed by Stern’s team of lawyers. A dizzying caseload of 1,600 foreclosures per attorney. Callow lawyers too swamped to show up in court and befuddled when they did.
His firm visited “massive injury” on Florida’s foreclosure system, a judge wrote yesterday in recommending that Stern be disbarred.
And like any good South Florida scandal, Stern’s rise and fall included a publicly traded company that paid him handsomely. In 2010, Stern collected a big payday by selling his back-office document preparation services to Chardan 2008 China Acquisition Corp., a British Virgin Islands shell company formed in 2008 with a $55 million IPO.
Stern’s payday was rich. In exchange for turning over a company that had collected $260 million in fees in 2009, Stern received $58.5 million in cash. He also got a promissory note worth $52.5 million and the promise of another $35 million in cash, according to a Securities and Exchange Commission filing by the renamed company, DJSP Enterprises.
As two DJSP investors described the deal in a federal suit last year, “In substance, Stern was selling a 75-80% interest in his non-legal-services businesses to the prior Chardan shareholders for $145 million.”
After briefly hitting $13.50, DJSP shares plummeted. But Stern’s personal real estate empire remains intact. According to property recrods, Stern in 2008 paid $17 million for two homes in Hillsboro Beach and in 2009 paid $8 million for a house in Fort Lauderdale and $6.9 million for a condo in Fort Lauderdale.
His shell company payday was noted by Palm Beach County Circuit Judge Nancy Perez, who presided over his disbarment hearing. She wrote:
Mr. Stern’s letter of abandonment states that he did not have the financial resources to properly withdraw from his pending cases. Mr. Stern’s declaration revealed his net worth and that he did in fact possess sufficient resources to properly withdraw from cases. I am not persuaded by his argument that his reference to lack of financial resources related to the firm’s net worth only. … His statement was a misrepresentation.
