The economic crimes division of the Florida attorney general has issued subpoenas to three South Florida law firms that represent mortgage lenders. The firms are suspected of fraud in the foreclosure process.

The attorney general's investigation targets three firms representing mortgage lenders. The three law firms have handled the largest number of foreclosures in the state. In some cases, the firms handled thousands of foreclosures a month.

The investigation centers on allegations that the law firms used forged and fabricated documents in the foreclosure process, sometimes filing false documents with courts as they sought judgments against homeowners. Potentially thousands of foreclosed homeowners could be affected by improper actions by the firms under investigation.

The three firms under investigation are the Law Offices of David J. Stern in Plantation, the Law Offices of Marshall C. Watson in Fort Lauderdale, and Shapiro & Fishman, which has offices in Boca Raton and Tampa.

"Law firms are not immune to Florida deceptive and unfair trade practice" laws, said Attorney General Bill McCollum said in a July 11 press conference. "I want law firms to really think about it before they go through this volume."

McCollum compared the work of the law firms to mills churning out a large volume foreclosures.

Homeowner Complaints, Lawsuit Prompted Attorney General Investigation

In July, homeowner Ignacio Damian Figueroa filed a lawsuit against the Law Offices of David J. Stern, claiming that the firm generated fraudulent mortgage assignments in foreclosure cases. His lawyer is seeking class-action status in that case.

The attorney general was alerted to the potential fraud by attorneys representing other homeowners in the foreclosure process.

"I can tell you having seen some of this paperwork there is clearly some concern," said Mary Leontakianakos, director of the economic crimes division.

Leontakianakos said that the mistakes seen in the paperwork the Attorney General's Office has already examined could be the result of simple sloppiness, but in the worst-case scenario, they may demonstrate fraud.

The attorney general has requested reams of additional paperwork from the three firms, going back to at least January 1, 2008. The firms have until the end of the month to comply.

Attorneys representing the three lender-side law firms deny any fraud or unfair business practices. Jeffrey Tew, a Miami attorney representing the Law Offices of David J. Stern, points out that the foreclosure process is court-supervised, making it difficult for forged or fraudulent paperwork to be submitted.

"Every foreclosure file is personally supervised by a circuit judge who is there to do one thing: Make sure the rights of the borrower or lender are protected," said Tew.

He went on to point out that the firm employs 1,200 people and has handled as many as 75,000 foreclosures in the last year. Occasional errors would be expected, but he denies any systemic fraud.

"We're convinced that David's law firm has been acting appropriately," he concluded. "We don't have any concern about the outcome."

The lawyer representing Shapiro & Fishman said that the firm will cooperate the investigation but considers it groundless. The Law Offices of Marshall C. Watson declined to comment to the Miami Herald.

Related Resource:

"3 South Florida foreclosure law firms probed" (Miami Herald, August 11, 2010)