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State attorney general shuts down law firms accused of conning homeowners

August 27, 2011

State attorney general shuts down law firms accused of conning homeowners
By Eve Mitchell
Contra Costa Times

Posted: 08/18/2011 04:31:33 PM PDT
Updated: 08/18/2011 05:22:17 PM PDT

SAN FRANCISCO — The state Attorney General’s Office has shut down four Southern California law firms that allegedly conned about 2,500 California homeowners facing foreclosure into paying thousands of dollars to join a lawsuit against lenders that went nowhere.

The law firms made false promises to the plaintiffs to entice them to sue the lenders, telling them that foreclosure proceedings would be stopped and their monthly payments reduced, Attorney General Kamala Harris said Thursday at a news conference.

The attorney general is suing the law firms of Philip Kramer, Christopher Van Son, Paul W. Petersen and Mitchell Stein, which also has an office in Walnut Creek.

“It will bring justice to a number of homeowners of California who were targeted by predators,” Harris said. The suit, which seeks civil penalties, alleges false advertising and violations of the business and professions code.

The State Bar Association has taken over the practices of the law firms. Since 2009, 20 attorneys in California have either been disbarred or given up their license after they got in trouble from loan-modification rescue scams.

Harris alleges that the Southern California attorneys banded together to file “mass joinder” lawsuits, which effectively folded cases with separate but similar circumstances into one legal filing.

The law firms sent out mailers to homeowners in California and 16 other states who had trouble paying their mortgage.

The mailers gave the impression that a legal settlement was within reach and that the homeowners would benefit by becoming a named plaintiff.

Telemarketers gave homeowners misleading advice and information about the benefit of joining the case, according to Harris’ suit. Call center companies were also named in the suit.

Unlike conventional civil cases, which typically work on a contingency fee basis, the homeowners were required to pay from $4,000 to $10,000 to be added as a plaintiff. To date, about 2,500 homeowners, all from California, have been identified as victims, said Harris.

“They are really homeowners who have been victimized a second time,” she said.

Representatives of the Van Son, Kramer, and Petersen law firms could not be reached for comment. A man named Toby, who declined to give his last name and identified himself as a senior paralegal for Mitchell Stein, said the law firm had an active case in Los Angeles Superior Court.

“It’s not as simple as Kamala Harris filing suit,” he said.

No disciplinary charges have been filed against the attorneys by the Bar Association.

The attorney general’s lawsuit does not indicate whether the cases filed by the four law firms have any legal merit. To that end, the Bar Association will look at the circumstances of each case to see whether they should be referred to other lawyers. Clients can call the Bar Association at 213-765-1672 for more information.

A state law makes it illegal to ask for an upfront payment for loan-modification services. The law applies to real estate licensees and attorneys.

“Be wary of any person or company that asks for a fee in advance,” said Ophelia Basgal, regional counsel for the U.S. Department of Housing and Urban Development,

She reminded consumers that HUD-approved counseling agencies provide free help to homeowners facing foreclosure. Call 888-995-HOPE (4673) for more information.

Contact Eve Mitchell at 925-952-2690.
http://www.mercurynews.com/business/ci_18711337

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