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Editor’s Comment: It’s a gutsy move. The lawyer for the newspapers filed the complaint alleging illegal mark-ups in pricing. That filing indirectly attacks their own advertising revenues. What they are going to find is that the “trustees” are not trustees at all and where paid off to keep quiet.
Trustees are routinely “substituted” in robo style. That is because the original trustee would never do what the pretender lender wanted them to do. The old Trustee would exercise due diligence and demand some sort of proof that the “new creditor” actually owned the loan and that the loan was in default. That would create all sorts of problems for the pretenders, inasmuch as they don’t have the proof — because the proof doesn’t exist. The proof doesn’t exist because they don’t own the loan and the only way they can pretend to be the new creditor is with fabricated and forged documents.
So a new “Trustee” is either created or controlled by the pretenders with the understanding that they will do as they are told to do by the pretenders and not as the law requires. In exchange, the Trustee is given carte blanche to charge whatever they want making extra profits for allowing the pretenders to “rent” the professional license of the “new” trustee. Those extra fees — like the extra fees made by all the other intermediaries and conduits in the fake “securitization” chain, is the economic incentive to break the law, violate ethics and defraud the courts, borrowers and investors.
As the facts emerge, the attorney who played “trustee” will be shown to have dodged the requirements all the way around — so much so that the appointment of Northwest will be immediate reason to inquire as to whether their was an actual trustee at all as required by Oregon statutes. Thus the limited grievance filed by the gutsy attorney for the newspapers, is merely the tip of the iceberg.
This action is on the heals of hundreds of grievances filed against notaries, appraisers and real estate brokers for failing to comply with the ethical standards of their professions. The fact that the target is finally a lawyer, ups the ante quite a bit.
Perhaps, when all else has failed, prosecutors will do the right thing.
By Jeff Manning, The Oregonian
The Associated Press: A sign of the times across the country as foreclosures hit coast to coast.Michael Dillard, of the Karnopp Petersen law firm in Bend, filed the complaint last week against David Fennell, a lawyer and a principal owner of Northwest Trustee Services, which by its own account has handled more than 250,000 foreclosures.
Dillard alleges that Northwest Trustee and its advertising operation, FEI, charged its clients an undisclosed 18 percent premium over the actual price. These “deceptive and dishonest” tactics, Dillard said, allowed FEI to collect from its clients about $360,000 more than it actually paid for the foreclosure notices published in the Redmond newspaper just since 2009.
Those costs were then presumably passed on by banks to homeowners and others, Dillard said.
Stephen Routh, CEO of Northwest Trustee Services, denied that FEI was charging a secret premium. “The markup was fully disclosed to it customers,” Routh said. “It’s how they make a profit.”
The complaint is intriguing on several levels. Since the economic crash of 2008 let loose a tidal wave of home foreclosures, the financial industry has been accused many times over by homeowners of improperly and fraudulently repossessing homes. But in this case, one of Northwest Trustee’s own vendors alleges wrongdoing, with 26 pages of painstaking detail backing up the claim.
The complaint puts Western Communications, owner of the Redmond Spokesman, The Bulletin and a handful of other newspapers, in a delicate position. It is accusing one of its largest advertisers of underhanded billing practices even as the newspapers’ parent company struggles through a Chapter 11 bankruptcy.
The Bulletin published a lengthy story Tuesday about Northwest Trustee’s alleged overcharging.
The Oregonian published a story about Northwest Trustee Jan. 14, which focused on the company’s emergence during the foreclosure boom as one of the region’s largest newspaper advertisers and its decision to begin buying newspapers outright.
Markups add up
Northwest Trustee enjoys particular clout in central Oregon. The once-high-flying resort area is now one of Oregon’s foreclosure hotbeds.
The foreclosure disaster contained a big upside for Western Communications, which calls itself WesCom. Northwest Trustee ran all its foreclosure legal notices in the Redmond Spokesman.
“They’re one of our largest advertisers,” said John Costa, editor in chief. “It’s a significant piece of money.”
Through a convoluted series of events last spring, WesCom came to suspect that FEI may be charging its lender clients more for legal notices than it was actually paying.
It wasn’t a lot of money. Though the Spokesman generally charged just over $1,000 for the legal notice ads required by Oregon law, WesCom suspected FEI billed $1,185.
Fueling its suspicion were requests from FEI that WesCom continue to bill the lower rate but list the higher rate on invoices and other paperwork between the two companies.
WesCom hired Dillard to investigate. Last spring, according to his ethics complaint, he found evidence –two bills from Northwest Trustee to Sterling Savings Bank – that backed up WesCom’s hunch. Northwest Trustee charged Sterling the higher rate – $1,185. Sterling declined to comment for this story.
Editor has hunch
Costa decided the billing dispute had wider implications and was worthy of a story. In December, he assigned Bulletin reporter Heidi Hagemeier to investigate.
Hagemeier found additional bills from Northwest Trustee to U.S. Bancorp. Here too, Northwest Trustee charged the higher rate. One invoice listed Fennell as “payee.”
It is, of course, common for businesses to include in their customer bills a markup for subcontractor charges. A home remodeling general contractor, for instance, will often charge the homeowner a surcharge on top of the bills from plumbers, electricials and other subcontractors.
The key difference in the case of Northwest Trustee, Dillard argued, is disclosure, or the lack thereof. “When your remodeling contractor marked up the subcontractors’ bills, he did not falsely represent to you that the plumbers bill was $600 when in fact it was really only $550,” he said.
2004 case
Bar ethical rules hold lawyers to a particularly stringent standard, as Fennell learned firsthand in 2004. Then, the Washington State Bar determined that a company within the Northwest Trustee umbrella was charging clients a 50 to 100 percent markup for posting foreclosure notices at people’s homes without disclosing it.
The markup was small – about $50 to $100. But both state bars deemed the undisclosed markup dishonest and suspended Fennell’s license a year.
It’s dangerous, of course, for WesCom to go public with its suspicions about one of its largest advertisers. The down economy and a dispute with a main lender, Bank of America, prompted WesCom to file for Chapter 11 reorganization in August.
“It wasn’t tempting at all to say ‘We’re just going to continue to take their money,'” Costa said. “We couldn’t be complicit in that. We have an obligation to tell the public.”
Northwest Trustee’s Routh said the ethics complaint is another hardball tactic in a strained relationship. Routh and Fennell started up the Oregon Legal Journal in 2009 as an alternative for its own foreclosure notices, a move that threatened WesCom’s Deschutes County foreclosure legal notice business.
And while it’s fashionable to bash the foreclosure business, Routh said, it’s important to note that newspapers have not hesitated to profit off the trend. The more than 2,000 FEI foreclosure notices the Spokesman has run since 2009 generated more than $2 million in revenue.
On Jan. 17, Dillard filed his bar complaint. He accused Fennell of “conduct involving dishonesty, fraud, deceit or misrepresentation that reflects adversely on the practice of law.”
Dillard and Costa said they believe the markups they allege Northwest Trustee was involved in could be widespread and “add up to hundreds of thousands of dollars of secret profits in central Oregon and perhaps millions of dollars elsewhere.”
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