A grand jury in Nevada yesterday indicted two title officers, Gary Trafford and Gerri Sheppard, on 606 counts of robo-signing between 2005 and 2008, a scheme that resulted in the fraudulent filing of tens of thousands of other documents with the Clark County register of deeds. This has the potential to be a groundbreaking case; it’s the first I can think of which actually indicts a robo-signer on criminal charges for fraud. And by going after the title officers, the Attorney General of Nevada, Catherine Cortez Masto, appears to be laying out a strategy to go up the chain and hollow out the entire industry and their illegal document fraud.
According to the Wall Street Journal, the two defendants were employed by Lender Processing Services, the leading foreclosure document processing company in the country, and one under a near-constant state of controversy over the past few years of the foreclosure crisis. In the indictment, Trafford and Sheppard are accused of directing fraudulent notarization and filing of foreclosure documents. This included having their employees forge Trafford and Sheppard’s names on the documents, typically Notices of Default, and then having them notarized. So in addition to a robo-signing scheme, where the notaries and affiants have no underlying knowledge of the documents, this was a forgery scheme. And banks filed these fraudulent documents with the country register of deeds, in violation of existing statutes under Nevada law. These are category C and D felonies, in addition to gross misdemeanors. One woman who worked with Trafford and Sheppard says she signed 25,000 Notices of Default this way.
Understand what was going on. In the interest of speed – and certainly not accuracy – Trafford and Sheppard had other people sign their name on legal documents, notarize them (attesting that the signature was legitimate and the content of which they had no knowledge was legitimate as well), and file them with the register. These are the documents that would be used to kick people out of their homes in Clark County, Nevada, where as many people have been foreclosed upon as anywhere in the country.
The district court judge in the case, Jennifer Togliatti,
posted set $500,000 bail for each defendant. Trafford and Sheppard have not yet been arrested, however, according to Masto’s office. A different judge, Carolyn Ellsworth, will hear the case.
LPS hasn’t been indicted, but you can see where this is going. We know enough now to know that this casual forgery and document fraud was official policy for the company. Indictments of Trafford and Sheppard will almost certainly not end there. Everyone who worked for LPS in Nevada will be culpable. Yves Smith writes that busting the low-level managers has ripple effects:
On the one hand, this indictment is not as gratifying, say, as busting Angelo Mozilo. On the other hand, if low level supervisors in bank frauds face the risk of serving time, you are going to find a ton fewer people willing to take that job. Those higher up on the food chain might also have to be a lot more careful and pay the people involved more money, which in turn undermines the basic logic of these abuses, which is cost savings.
In addition, as mob prosecutions have shown again and again, you start by going after the foot soldiers in the hope that they roll people higher up on the food chain.
And at a minimum, this action says that the law and due process matter, and violations, particularly large scale, systematic violations, can and will be punished.
The fact that they are LPS employees also suggests this is just a first step. This could be a way to get at the software that LPS uses to create documents, which would prove pattern and practice. LPS was central to the entire robo-signing scheme across foreclosure mill law firms and mortgage servicers. And they consistently maintain that they worked at the direction of the servicers and with their full knowledge. So that ropes in the servicers as well.
This is a very important indictment, and it shows how methodical Masto has been about going after widespread industry abuse. It’s only just beginning, but bravo for her.
The full indictment is here.