Sunday, February 13, 2011
The Vicksburg Post
Stern Continued from Page B8. now 50, provides an inside look at how the foreclosure industry worked in the last decade — and how it fell apart. It also shows how banks, together with their law firms, built a quick-anddirty foreclosure machine that was designed to take as many houses, as fast as possible. Not long ago, the world of back-office bank procedures was of little interest to the public. But revelations last fall about robo-signers powering through hundreds of foreclosure affidavits a day, without verifying a single sentence, changed all that. Today the banking industry’s eviction juggernaut is under intense scrutiny as allegations of systemic foreclosure fraud mount. The 50 state attorneys general are conducting a foreclosure industry probe. So are state and federal regulators. Class-action lawsuits are gathering force, and, with increasing frequency, state judges are tossing out foreclosure suits in favor of homeowners. The developments are prolonging the housing market depression, casting doubt on mortgage ownership and calling into question whether mortgage-backed securities are, in fact, backed by nothing at all. The Florida attorney general’s economic crimes division is investigating three law firms, including Stern’s, over allegations that they created fraudulent legal documents, gouged homeowners with inflated fees,
B9
steered business to companies they owned and filed foreclosures without proving the bank actually had a legal interest in the loan. Florida authorities characterize the foreclosure process at these law firms as a “virtual morass� of “fake documents� and depicted Stern’s operations as something akin to the TV show “Lost� — only instead of people who went missing, it was paperwork. Stern’s employees churned out bogus mortgage assignments, faked signatures, falsified notarizations and foreclosed on people without verifying their identities, the amounts they owed or who owned their loans, said employee testimony. The attorney general is also looking at whether Stern paid kickbacks to big banks. “There’s a David Stern in every state, sometimes more than one,� says Jacksonville Legal Aid attorney April Charney, who has successfully stopped foreclosure for hundreds of Florida families. Stern denied repeated requests for comment. He did not answer inquiries at his office or at his main residence in Fort Lauderdale. Stern’s lawyer, Jeffrey Tew, agreed to an interview in late December at his Miami office, then canceled. Stern’s story, starting with his degree in 1986 from the South Texas College of Law, can only be pieced together through court documents, depositions and interviews. After working at a law firm for mortgage lenders, Stern started his own practice in Fort Lauderdale in 1994. Four years later, he got a massive break: the mortgage giant
Fannie Mae, a governmentbacked agency that provides market stability for mortgage lenders, named Stern to its exclusive attorney network. That meant Fannie directed banks to use Stern’s firm when foreclosing in Florida. Fannie also named Stern Attorney of the Year in 1998 and 1999. Employees from that era remember an office that liked to party together. Stern enjoyed dressing up for the bashes —one time as Michael Jackson. Almost from the beginning, Stern faced trouble. In 1998, he was named in a class-action lawsuit that said he padded fees on foreclosed homeowners. Stern settled for $2.2 million. According to legal testimony at the time from a Fannie Mae official, Fannie was warned about troubles at the Stern firm. But Fannie continued referrals. Fannie Mae spokeswoman Amy Bonitatibus said, “At all times, Fannie Mae has had a reasonable expectation that our servicers and the law firms adhere to proper procedures and conduct under the law. In instances where we learn that servicers or law firms are not adhering to our requirements or applicable law, we immediately engage and take appropriate action, which may include termination.� Soon after, Stern was sued again, this time for sexual harassment. A former paralegal said Stern created a “sexually laden� atmosphere in which he routinely “touched and grabbed and subjected to simulated intercourse� his employees. Stern settled that suit in 2000 for an
undisclosed amount. By this time, lawyers and homeowner activists also were warning lenders, federal regulators and the Florida Bar about Stern. In 2002, the Florida Supreme Court reprimanded Stern for submitting “potentially misleading� fee affidavits. None of the accusations stalled the firm’s growth. After the economy crashed in the fall of 2008 and ravaged the housing market, Florida, along with Nevada, Arizona and California, became foreclosure central. Stern’s caseload rose from 15,000 foreclosures in 2006 to 70,400 in 2009. His staff tripled to 1,200. To keep up with demand, Stern set up offices in the Philippines. When the U.S. staff responsible for entering bank data in the foreclosure files logged off, the offshore workers logged on. Revenue swelled from $41 million in 2006 to $260 million in 2009, said an SEC filing. The firm moved into a plush, marble-floored headquarters near Miami that was all glass and fountains. By now Stern was driving a Bugatti and had bought at least $60 million in property, including a 16,000-square-foot island compound that sits behind two security gates. But all the paperwork Stern’s firm was cranking out to make this fortune would soon come back to haunt him. The foreclosure business is a volume game. Banks typically pay law firms like Stern’s about $1,400 for each successful foreclosure. But the banks can pay a lot less if the firm doesn’t successfully foreclose within a certain time frame, usually
around six months. With so many foreclosures flooding in, Stern’s firm couldn’t keep up. Stern took shortcuts by hiring the young and cheap. “The girls would come out on the floor not knowing what they were doing,� says Tammie Lou Kapusta, who worked for Stern in 2008 and 2009. Employee depositions show a firm under constant pressure from the banks to move faster. Like many in the industry, Stern had a strategy to cope: robo-signing. One employee testified that Stern’s chief lieutenant, a one-time file clerk named Cheryl Samons who rose to become the firm’s chief operating officer, signed as many as 1,000 foreclosure affidavits a day without reading a single word. The employee said Samons’ hand got so tired that she told three other employees to forge her signature. Stern gave Samons a new BMW every year, paid all her bills and took care of the mortgage payment on her home, said testimony from two employees. Samons did not respond to request for comment. Billings surged. So did the dysfunction. One by one, the megabanks started to withdraw their cases from Stern’s firm. Fannie fired Stern on Oct. 22. Stern’s staff of 1,200 has dwindled to 200. DJSP’s stock, worth as much as $13 in April, now trades for pennies. Meanwhile, Stern’s payment on a $12 million line of credit with Bank of America is late. So is the rent on his headquarters. He’s now in default.
aggressive about being the low-price leader. Instead, the company slashed prices only on select products, and the deals were temporary. The idea was to draw customers into stores for the bargains and hope they would also pick up other, more profitable items. Walmart’s mistakes have had a lasting sting. Shoppers are no longer confident that they can “take care of their shopping list on one trip and get rock bottom prices,â€? says Robert Buchanan, an independent retail stock analyst. While Walmart has lost shoppers, competitors have gained. • Dollar stores are win-
ning over customers with convenience. Their parking lots and stores are less than a tenth the size of those at most Walmarts. They stock eggs and milk in coolers up front near the registers. Bread is on a nearby shelf. That makes it easier for shoppers to get in and out. They’re carrying more major brands. Shoppers spend about the same as they did a year ago at Family Dollar — about $10 a trip on average — but they’re coming in more often, the company says. Combined, Family Dollar and Dollar General took in about $20 billion in the last fiscal year, just 5 percent of Walmart’s $408 billion in rev-
enue. But together they have thousands more stores than Walmart, and their revenue is growing. • Target scored a win against Walmart with its 5 percent discount for purchases paid with a Target credit or debit card. The incentive, launched in October, applies to everything sold in its stores. Walmart won’t match the discount, though it’s losing customers like Tomacinia Carter. She lives closer to the Walmart in Saddle Brook, but chose to shop a Target in Paramus because of the discount. She saved $4.60 on a recent trip. “It does add up.â€? “That is hammering Walmart,â€? says Craig Johnson,
who runs the consulting firm Customer Growth Partners. Target is Walmart’s largest rival, though its revenue of $65 billion for its last fiscal year was only one-sixth of Walmart’s. Target has maintained its reputation for stylish clothes at low prices. It’s also added fresh fruits and vegetables to an expanded grocery section. Walmart hopes the holiday season ended the declining revenue. Analysts surveyed by Thomson Reuters expect Walmart to report a 0.9 percent increase in revenue for the November through January quarter. Walmart will release its quarterly and year-end results Feb. 22. It’s a start.
Walmart Continued from Page B8. counted on Walmart to stock, such as handkerchiefs. Walmart got rid of 20 percent of its groceries, about 10,000 items in that area of the store, says Burt Flickinger, who runs the consulting firm Strategy Resource Group. Shoppers began complaining. Revenue began to decline. “We cleaned the stores up, but we cleaned them up too much,� says Duke, who had become CEO just months before, in February 2009. Walmart’s next mistake was pricing. Over the past year, it strayed from its “everyday low prices� slogan, the bedrock philosophy of founder and namesake Sam Walton. Walmart was less
casino tax revenue Vicksburg’s five casinos pay a 3.2 percent revenue tax to the State of Mississippi that is divided — with 10 percent going to schools, 25 percent to Warren County and 65 percent to the city. A second revenue tax is a 0.8 percent share of the state’s 8.8 percent revenue tax. It is split based on population proportions between Vicksburg and Warren County. Each casino is also required to pay $150 for each gaming device annually to the city. To date, two casinos have paid the gaming device fee. These are the latest receipts: December 2010 December 2009 City...................................$404,244 City...................................$413,086 County............................$190,925 County............................$192,069 Schools..............................$51,754 Schools..............................$52,883
Fiscal year 2010-11 to date City............................... $1,372,072 County............................$596,768 Schools...........................$162,254
Fiscal year 2009-10 to date City............................... $1,417,092 County............................$635,636 Schools...........................$172,603
sales tax revenue The City of Vicksburg receives 18.5 percent of all sales taxes collected by businesses in the city limits. Revenues to the city lag actual sales tax collections by two months, that is, receipts for April reflect sales taxes collected on sales in February. Here are the latest monthly receipts:
November 2010........$563,786 Fiscal year to date................... $1,132,403
November 2009........$585,293 2009 fiscal year to date $1,122,274
land transfers The following commercial land transfers were recorded in the Chancery Clerk’s Office for the week ending Feb. 11, 2011: The following commercial land transfers were recorded in the Chancery Clerk’s Office for the week ending Feb. 11, 2011: • Horne Development LP to Horne Development-Vicks-
burg LLC; Section 2, Township 15N, Range 3E; 2182 Iowa Blvd; Dollar Tree. • Anita T. Brunson to Ashrock Metals LLC; Section 23, Township 16N, Range 4E; 610 U.S. 80.
Huffington Continued from Page B8. week to introduce herself to about 300 employees. They greeted her with a standing ovation, according to Howard Fineman, a Huffington Post employee who accompanied his boss. “She’s the one who had them in the palm of her hand, explaining the mission and telling jokes,� said Fineman, who first met Huffington in 1994 while he was at Newsweek magazine writing a story about her. Although she was already well-known as author and commentator with frequent appearances on TV and radio, Huffington didn’t become a really hot commodity until she started the Huffington Post in 2005 with former AOL executive Kenneth Lerer. Backed by just $1 million from her initial investors, Huffington thought there was a place for a site
featuring the opinions of her celebrity pals, who would write for free. The concept was initially ridiculed, but it struck a chord and became more popular as it started to repackage and comment on the top stories from other sites. By the time AOL came courting, Huffington Post had more than 6,000 unpaid bloggers and a payroll of 210 people who occasionally score their own scoops. It is among the Internet’s top 10 destinations for cultural and global news with an 25 million visitors per month. The site’s success stamped Huffington as the 28th most powerful woman in the world in an October 2010 list compiled by Forbes magazine. She ranked right behind Microsoft Corp. co-founder Bill Gates’ wife, Melinda, who just contributed a piece about vaccines to Huffington Post last month. (First lady Michelle Obama topped that Forbes list). Long before she became a mover and shaker in her own right, Huffington had developed a knack for find-
ing her way into influential circles. When she married Texas oil scion Michael Huffington in 1987, philanthropist Ann Getty footed the bill, TV news personality Barbara Walters was a bridesmaid and the guest list included former U.S. Secretary of State Henry Kissinger. When her 2006 book “On Becoming Fearless� came out in 2006, Silicon Valley billionaire Larry Ellison hosted a reception at his home. Huffington was born in Athens in 1950 as Arianna Stassinopoulos. She embraced the conservative views of her husband, Michael, who was elected as a California congressman representing the Santa Barbara area in 1992. Her politics began to lean to the left following her 1997 divorce from Michael Huffington, who later made even more news by revealing he was bisexual. The Huffingtons have two daughters, Christina, now 21, and Isabella, 19. They both attend Yale University.
portfolio
from staff reports
Three at ERDC named to top posts Three have been named to various leadership positions with the U.S. Army Engineer Research and Development Center. Dr. Elizabeth Ferguson was named technical director of Military Environmental Engineering and Sciences in ERDC’s Environmental Dr. Elizabeth Laboratory. Ferguson Ferguson will jointly direct programs in ERDC’s environmental quality and installations business area with technical directors from other ERDC laboratories and represent the Army on the Strategic Environmental Research and Development Program Environmental Restoration and Munitions Response panels. She holds bachelor’s degrees in chemistry and psychology, a master’s in nuclear chemistry and a doctorate in fish physiology and aquatic toxicology, all from the University of Kentucky, and she completed post-doctoral work with the U.S. Geological Survey. Warren Lorentz was named chief of the Environmental Processes and Engineering Division, a post that oversees daily operations, strategic planning and technical quality control over the division, which includes the Warren EnvironmenLorentz tal Chemistry, Environmental Engineering, Environmental Processes, Environmental Risk Assessment, and Water Quality and Contaminant Modeling branches. Lorentz holds a bachelor’s degree in biology from the State University of New York at Oswego and a master’s in environmental sciences, with a concentration in environmental toxicology, from Louisiana State University. He managed Louisiana’s Natural Resource Damage Assessment Program in the state’s Oil Spill Coordinator’s Office and had a similar role with the U.S. Fish and Wildlife Service in Louisiana and Alabama. Kenneth Cook was named director of the Directorate of Public Works after three months as acting director. Cook is responsible for managing the center’s facilities, including scale-model construction, fabrication of test devices, operating and maintaining facilities, master planKenneth ning, facility Cook design/ construction, quality assurance and military housing. Cook also served as chief of the Tri-Service CAD/BIM Technology Center for Facilities, Infrastructure and Environment in ERDC’s Information Technology Laboratory. He earned a bachelor’s in architecture from Mississippi State University and a master’s in urban and regional planning from Jackson State University. He is currently pursuing a master’s in green building from the San Francisco Institute of Architecture.
Ă•ĂƒĂŒÂœÂ“iÀÊ-iĂ€Ă›ÂˆVi # .ORTH &RONTAGE 2OAD ƒ 6ICKSBURG 0HONE SPEEDIPRINT CGDSL NET