LAW MAKERS IN BED WITH FORECLOSURE MILLS
AG: Lawyer e-mails indicate collusion to control foreclosure billing
Colorado’s two biggest foreclosure law firms, Castle Law Group and Aronowitz & Mecklenburg, appear to have manipulated and influenced the foreclosure process — in practice and at the Capitol — in a way that guaranteed themselves millions of dollars in profits at the expense of homeowners and taxpayers, according to state investigators.
In a stunning court filing made public Thursday, Attorney General John Suthers’ office lays out a theory of conspiracy and price-fixing that investigators say the two firms allegedly engaged in to corner a lucrative piece of the state’s foreclosure market.
An attorney for Aronowitz denied Friday the firm colluded with Castle or influenced the legislative process. Attorneys for Castle would not comment.
Because the firms for years controlled the bulk of the foreclosure work in Colorado, they could profit handsomely and easily on a state law requiring legal notices to be posted on homeowners’ properties by steering that work to companies they owned or had a heavy interest in.
Starting in 2009, Aronowitz and Castle created or bought into process-service companies that would handle their workload just as the legislature was to pass a law requiring the first of what would be a pair of legal-notice postings in a foreclosure.
The law firms allegedly leveraged their stranglehold on the foreclosure market — estimates are that they control about 90 percent of the cases filed in Colorado — and conspired to fix the price to post those notices at $125, an amount five times more than what other companies charged for the same service, investigators said in court papers that included e-mail exchanges between the two firms.
Then, when their plan proved so successful — one of the posting companies made more than $2 million in the first year — at least one of the law firms worked tirelessly to persuade legislators to change state laws in a way that doubled their profits overnight by requiring a second notice, investigators said documents indicate.
The legislation requiring the postings, investigators say, was offered under the guise that consumers were getting better disclosure. But it was the law firms’ principals who ultimately profited, earning nearly $20 million in revenues in the next four years just for having the notices posted.
Castle relies on Absolute Posting & Process, which Suthers’ office says is 40 percent owned by principals at the law firm. The partners at Aronowitz — Robert Aronowitz, his daughter Stacey and his son-in-law Joel Mecklenburg — own Xceleron, which does all of Aronowitz’s posting.
“The firm unequivocally denies that it ‘set the minimum posting price’ as the AG alleges,” Aronowitz’s attorney, Jason Dunn of Brownstein Hyatt Farber Schreck, said in an e-mail Friday, “and believes that the AG’s reliance on the e-mails in support of its allegation is misplaced and out of context.”
Dunn also said Aronowitz “had no direct involvement” in legislation that required the postings, nor did it push for the law’s passage directly or through a lobbyist.
The investigation is ongoing, and no charges or lawsuits alleging wrongdoing have been filed against any law firm.
The two postings tell homeowners of their rights in the foreclosure process. The first tells them of the opportunity to seek a 90-day deferral in their foreclosure. The second tells them about a court hearing known as a Rule 120 that they can attend.
The deferment posting was required in 2009, and the legislation that created it was clarified in 2010. When the legislature took that up, the Rule 120 posting requirement was added as an amendment, according to the legislative histories of each bill.
E-mails provided by investigators in court records indicate the state legislators who pressed for the laws — current House Speaker Mark Ferrandino, D-Denver, and Sen. Morgan Carroll, D-Aurora — were unwitting accomplices who believed they were aiding consumers.
The e-mails were exchanges between Castle’s lobbyist, Thomas Hill, and the law firm. Hill worked for Ackerman Information, a lobbying firm that also represented the state’s public trustees.
“Sen. Carroll really liked the amendment requiring posting of the notice of Rule 120 hearing,” Hill wrote in an e-mail to the principals at Castle, including owner Larry Castle and his wife, Caren. “(Carroll) happily sold it to the committee as coming from ‘the coalition’ of parties who had worked so hard on the bill.”
He added: “I never mentioned to her or anyone else connected with this bill — except the (public trustees) — where the idea for the second posting came from.”
Ferrandino said Friday that Suthers’ revelations were “shocking.”
“The intent of the bill was to help consumers and neighborhoods,” he said from his home while celebrating his 36th birthday. “That there are always ways for someone to take advantage is unfortunate.”
Carroll said she was troubled that a law with good intent might have had another purpose.
“Using consumer protection laws to further injure consumers is pretty appalling to me,” she said in an e-mail Friday. A principal constructor of the legislation, Zachary Urban, said he feels “duped” after the revelations.
The conspiracy-and-price-fixing theory is part of a request by Suthers’ office for a judge to force Castle’s firm — once widely known as Castle Meinhold Stawiarski and then just Castle Stawiarski before it became Castle Law Group — to comply with an investigative subpoena seeking records about its foreclosure work.
Suthers is investigating alleged bill-padding by law firms that specialize in foreclosures, specifically the costs they charge for the posting of the legal notices.
Several law firms, Aronowitz and Castle among them, have refused to disclose certain documents they say are protected by attorney-client privilege. Each has asked a judge to review the documents privately to determine whether they are protected. It was in the documents that Castle provided to investigators where details of the alleged collusion emerged.
The investigation into bill-padding centers on the posting of legal notices on a homeowner’s property during the foreclosure process. The requirement for the first notice followed legislation intended to help homeowners find some relief.
Under House Bill 1276, the legislature required that homeowners be told about the opportunity to seek a 90-day delay in a foreclosure by calling a hotline number and speaking with counselors.
“Many borrowers just needed some time to get help,” said Urban, who was director of operations at the Colorado Division of Real Estate at the time he helped create the deferment program. Posting a notice on a homeowner’s property to advise them of the program was a key idea that, Urban said, came from Larry Castle.
“The two firms then embarked to set the minimum price for the posting for which they could be reimbursed as a ‘cost,’ ” Suthers said in a court brief. The attorneys directed the work of posting notices to their companies, “disguising excessive law firm profits as a cost item from a third-party vendor.”
“I just wanted our offices to try and get on the same page on what we are charging for all of this,” Stacey Aronowitz e-mailed Caren Castle in March 2009.
David Migoya: denverpost.com
AG: Lawyer e-mails indicate collusion to control foreclosure billing
Colorado’s two biggest foreclosure law firms, Castle Law Group and Aronowitz & Mecklenburg, appear to have manipulated and influenced the foreclosure process — in practice and at the Capitol — in a way that guaranteed themselves millions of dollars in profits at the expense of homeowners and taxpayers, according to state investigators.
In a stunning court filing made public Thursday, Attorney General John Suthers’ office lays out a theory of conspiracy and price-fixing that investigators say the two firms allegedly engaged in to corner a lucrative piece of the state’s foreclosure market.
An attorney for Aronowitz denied Friday the firm colluded with Castle or influenced the legislative process. Attorneys for Castle would not comment.
Because the firms for years controlled the bulk of the foreclosure work in Colorado, they could profit handsomely and easily on a state law requiring legal notices to be posted on homeowners’ properties by steering that work to companies they owned or had a heavy interest in.
Starting in 2009, Aronowitz and Castle created or bought into process-service companies that would handle their workload just as the legislature was to pass a law requiring the first of what would be a pair of legal-notice postings in a foreclosure.
The law firms allegedly leveraged their stranglehold on the foreclosure market — estimates are that they control about 90 percent of the cases filed in Colorado — and conspired to fix the price to post those notices at $125, an amount five times more than what other companies charged for the same service, investigators said in court papers that included e-mail exchanges between the two firms.
Then, when their plan proved so successful — one of the posting companies made more than $2 million in the first year — at least one of the law firms worked tirelessly to persuade legislators to change state laws in a way that doubled their profits overnight by requiring a second notice, investigators said documents indicate.
The legislation requiring the postings, investigators say, was offered under the guise that consumers were getting better disclosure. But it was the law firms’ principals who ultimately profited, earning nearly $20 million in revenues in the next four years just for having the notices posted.
Castle relies on Absolute Posting & Process, which Suthers’ office says is 40 percent owned by principals at the law firm. The partners at Aronowitz — Robert Aronowitz, his daughter Stacey and his son-in-law Joel Mecklenburg — own Xceleron, which does all of Aronowitz’s posting.
“The firm unequivocally denies that it ‘set the minimum posting price’ as the AG alleges,” Aronowitz’s attorney, Jason Dunn of Brownstein Hyatt Farber Schreck, said in an e-mail Friday, “and believes that the AG’s reliance on the e-mails in support of its allegation is misplaced and out of context.”
Dunn also said Aronowitz “had no direct involvement” in legislation that required the postings, nor did it push for the law’s passage directly or through a lobbyist.
The investigation is ongoing, and no charges or lawsuits alleging wrongdoing have been filed against any law firm.
The two postings tell homeowners of their rights in the foreclosure process. The first tells them of the opportunity to seek a 90-day deferral in their foreclosure. The second tells them about a court hearing known as a Rule 120 that they can attend.
The deferment posting was required in 2009, and the legislation that created it was clarified in 2010. When the legislature took that up, the Rule 120 posting requirement was added as an amendment, according to the legislative histories of each bill.
E-mails provided by investigators in court records indicate the state legislators who pressed for the laws — current House Speaker Mark Ferrandino, D-Denver, and Sen. Morgan Carroll, D-Aurora — were unwitting accomplices who believed they were aiding consumers.
The e-mails were exchanges between Castle’s lobbyist, Thomas Hill, and the law firm. Hill worked for Ackerman Information, a lobbying firm that also represented the state’s public trustees.
“Sen. Carroll really liked the amendment requiring posting of the notice of Rule 120 hearing,” Hill wrote in an e-mail to the principals at Castle, including owner Larry Castle and his wife, Caren. “(Carroll) happily sold it to the committee as coming from ‘the coalition’ of parties who had worked so hard on the bill.”
He added: “I never mentioned to her or anyone else connected with this bill — except the (public trustees) — where the idea for the second posting came from.”
Ferrandino said Friday that Suthers’ revelations were “shocking.”
“The intent of the bill was to help consumers and neighborhoods,” he said from his home while celebrating his 36th birthday. “That there are always ways for someone to take advantage is unfortunate.”
Carroll said she was troubled that a law with good intent might have had another purpose.
“Using consumer protection laws to further injure consumers is pretty appalling to me,” she said in an e-mail Friday. A principal constructor of the legislation, Zachary Urban, said he feels “duped” after the revelations.
The conspiracy-and-price-fixing theory is part of a request by Suthers’ office for a judge to force Castle’s firm — once widely known as Castle Meinhold Stawiarski and then just Castle Stawiarski before it became Castle Law Group — to comply with an investigative subpoena seeking records about its foreclosure work.
Suthers is investigating alleged bill-padding by law firms that specialize in foreclosures, specifically the costs they charge for the posting of the legal notices.
Several law firms, Aronowitz and Castle among them, have refused to disclose certain documents they say are protected by attorney-client privilege. Each has asked a judge to review the documents privately to determine whether they are protected. It was in the documents that Castle provided to investigators where details of the alleged collusion emerged.
The investigation into bill-padding centers on the posting of legal notices on a homeowner’s property during the foreclosure process. The requirement for the first notice followed legislation intended to help homeowners find some relief.
Under House Bill 1276, the legislature required that homeowners be told about the opportunity to seek a 90-day delay in a foreclosure by calling a hotline number and speaking with counselors.
“Many borrowers just needed some time to get help,” said Urban, who was director of operations at the Colorado Division of Real Estate at the time he helped create the deferment program. Posting a notice on a homeowner’s property to advise them of the program was a key idea that, Urban said, came from Larry Castle.
“The two firms then embarked to set the minimum price for the posting for which they could be reimbursed as a ‘cost,’ ” Suthers said in a court brief. The attorneys directed the work of posting notices to their companies, “disguising excessive law firm profits as a cost item from a third-party vendor.”
“I just wanted our offices to try and get on the same page on what we are charging for all of this,” Stacey Aronowitz e-mailed Caren Castle in March 2009.
David Migoya: denverpost.com