Certified Forensic Loan Auditors, LLC, Andrew Lehman, and Michael Carrigan
Documents in this case
- Complaint · · 20 p.
- Stipulation · · 17 p.
- Amended complaint · · 21 p.
- Stipulation · · 18 p.
Case summary
On September 6, 2019, the Consumer Financial Protection Bureau (Bureau) filed a complaint in federal court in the Central District of California against Certified Forensic Loan Auditors, LLC (CFLA), Andrew Lehman (Lehman), and Michael Carrigan (Carrigan). CFLA is a foreclosure relief services company incorporated in California and Texas and headquartered near Houston, Texas. Lehman is CFLA’s president and CEO, and Carrigan was the Company’s sole auditor. The complaint, which the Bureau amended in November 2019, alleged that CFLA and Lehman engaged in deceptive and abusive acts and practices in violation of the Consumer Financial Protection Act and charged unlawful advance fees in connection with the marketing and sale of financial advisory and mortgage assistance relief services to consumers in violation of Regulation O and the CFPA. The amended complaint further alleged that Carrigan provided substantial assistance to CFLA and Lehman.
Concurrent with the filing of the initial complaint, the Bureau and Carrigan filed a proposed stipulated final judgment and order to resolve the Bureau’s claim against Carrigan, which the court entered on October 29, 2019. It bans Carrigan from providing mortgage assistance relief services or consumer financial products and services and imposes a $493,000 civil money penalty, all but $5,000 of which is suspended based on his limited ability to pay more based on sworn financial statements. On July 20, 2020, the Court entered a stipulated final judgment resolving the Bureau’s claims against the remaining defendants, CFLA and Lehman. Under the order, CFLA and Lehman are permanently banned from providing mortgage assistance relief services or financial advisory services. The order imposes a suspended judgment against CFLA and Lehman for redress of $3 million and imposes a civil money penalty of $40,000.
Complaint ()
PDF of this document (20 pages)
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COMPLAINT
BENJAMIN VAUGHN, DC Bar #999347 E-mail: [email protected] Phone: (202) 435-7964 GABRIEL HOPKINS, NY Bar #5242300 Email: [email protected] Phone: (202) 435-7842 1700 G Street, NW Washington, DC 20552 Fax: (202) 435-7722
LEANNE E. HARTMANN, CA Bar #264787 - Local Counsel E-mail: [email protected] 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Fax: (415) 844-9788
Attorneys for Plaintiff Bureau of Consumer Financial Protection
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
Bureau of Consumer Financial Protection,
Plaintiff,
vs.
Certified Forensic Loan Auditors, LLC; Andrew Lehman; and Michael Carrigan,
Defendants.
) ) ) ) ) ) ) ) ) ) )
Case No.:
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
Introduction 1.
The Bureau of Consumer Financial Protection (Bureau) brings this action under §§ 1031, 1036(a), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, and under § 626 of the Omnibus Appropriations Act, 2009 (as amended by § 1097 of the CFPA), 12 U.S.C. § 5538, and its implementing regulation, the Mortgage Assistance Relief Services Rule (Regulation O), 12 C.F.R. pt. 1015. This Court has subject-matter Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 1 of 20 Page ID #:1
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COMPLAINT jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. 2.
The Bureau brings this action against Defendants Certified Forensic Loan Auditors, LLC (CFLA) and Andrew Lehman in connection with their offering, advertising, marketing, and selling of purported financial-advisory and mortgageassistance-relief services, and against Defendant Michael Carrigan in connection with his substantial assistance in furtherance of CFLA’s and Lehman’s unlawful conduct.
Venue 3.
Venue is proper in this district because Defendants are located, reside, or do business in this district. 12 U.S.C. § 5564(f).
Parties 4.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer-financial products or services under “Federal consumer financial law,” including the CFPA and Regulation O. 12 U.S.C. §§ 5481(12)(Q), 5481(14), 5491(a), 5531, 5538. 5.
The Bureau is authorized to initiate proceedings, by its own attorneys, to enjoin violations of the CFPA and Regulation O and to secure such relief as may be appropriate in each case. 12 U.S.C. §§ 5564(a)-(b), 5565. This includes the rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, payment of damages or other monetary relief, and civil money penalties. Id. § 5565(a)(2). 6.
At all times relevant to this Complaint, CFLA was a limited-liability company incorporated under the laws of the State of California, with business Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 2 of 20 Page ID #:2
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COMPLAINT locations at 13101 W. Washington Blvd., Suite 444, Los Angeles, CA 90066 and 2600 South Shore Blvd., Suite 300, League City, TX 77573. CFLA offered or sold financial-advisory or mortgage-assistance-relief services to consumers nationwide, including within the State of California. CFLA is currently not in good standing and has been suspended by the California Franchise Tax Board for failing to meet its state tax obligations.
7.
At all times relevant to this Complaint, Lehman was CFLA’s president and sole owner. Lehman had managerial responsibility for CFLA and directed every facet of its business, including participating in the development, marketing, and sale of CFLA’s financial-advisory and mortgage-assistance-relief services. Lehman also set fees and oversaw ongoing interactions with consumers after financial-advisory and mortgage-assistance-relief services were sold, including managing payment collections from consumers, responding to regulatory and commercial inquiries (including from the Better Business Bureau), managing and responding to consumer complaints, and managing requests for refunds.
8.
Lehman co-mingled his finances with CFLA, including by withdrawing all excess funds from the company for personal use instead of taking a salary, and by filing combined tax returns on behalf of himself and CFLA. Under Lehman’s direction, CFLA ignored corporate formalities. Lehman failed to keep accurate financial records for CFLA. And Lehman failed to meet CFLA’s state tax requirements.
9.
At all times relevant to this Complaint, Carrigan was CFLA’s sole auditor. Carrigan is a resident of the State of California and performed work for CFLA while residing in this district.
10.
CFLA and Lehman, each acting alone or in concert with others, offer, provide, or arrange for others to provide “mortgage assistance relief services,” as defined in Regulation O, 12 C.F.R. § 1015.2, and provide “financial advisory Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 3 of 20 Page ID #:3
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COMPLAINT services” within the meaning of the CFPA, 12 U.S.C. § 5481(15)(A)(viii), including but not limited to providing or offering to provide loan modification and foreclosure relief services.
11.
Carrigan, in his role as an auditor working on CFLA’s behalf, provided substantial assistance regarding the activities described in paragraph 10, within the meaning of Regulation O, 12 C.F.R. § 1015.6, and within the meaning of the CFPA, 12 U.S.C. § 5536(a)(3).
CFLA’s Business Practices 12.
Since at least 2014, CFLA and Lehman have marketed and sold purported financial-advisory and mortgage-assistance-relief services to consumers. These services include what Defendants refer to as “Securitization Audits” (Audits) and litigation documents, which CFLA marketed together as a “Quiet Title Package.” CFLA and Lehman claimed that these services would help consumers avoid foreclosures or negotiate loan modifications. 13.
CFLA’s Audits are reports that purport to summarize information about a borrower’s mortgage, mortgage lender, mortgage servicer, and an asset-backed securitization trust that may have acquired the borrower’s mortgage. The Audits are constituted largely of template materials and contain legal conclusions and recommendations. While there is some variation in the recommendations across the Audits, a set of core legal conclusions about mortgage securitization and its impacts on foreclosure are reproduced essentially verbatim in all of the Audits. 14.
CFLA’s litigation documents are templates of pleadings that CFLA and Lehman claim can be filed in connection with a homeowner’s response to a foreclosure proceeding. They include a civil complaint, lis pendens, and temporary restraining order.
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COMPLAINT 15.
CFLA and Lehman charge and collect $1,495 from consumers before producing and delivering an Audit and its litigation documents, and before CFLA or Lehman obtain any mortgage-assistance-relief for consumers. 16.
Since 2014, CFLA and Lehman sold, either directly or through intermediaries, more than 2,000 Audits to consumers. 17.
On its website, in marketing emails, and on marketing telephone calls, CFLA and Lehman tell consumers that the Audits and litigation documents will provide them an effective defense to a foreclosure action brought by their lenders or help them obtain loan modifications from their lenders. 18.
On its website, in marketing emails, and on marketing telephone calls, CFLA and Lehman tell consumers that the Audits and litigation documents will contain certain specific categories of cutting-edge, advanced analyses. CFLA and Lehman also tell consumers that the Audits will uncover information that will find defects in the assignment of a consumer’s mortgage or in the securitization of the consumer’s mortgage.
19.
Testimonials on CFLA’s website tout the effectiveness of the Audits, including claims that consumers were able to “beat the bank in court to save house [sic] and prevent eviction.”
20.
Statements CFLA and Lehman have made regarding its Audits and litigation documents include representations that: a. the Audits and litigation documents are a “Complete turn-key lawsuit to sue your lender for damages”;
b. the Audits will stop foreclosure;
c. the Audits will keep homeowners in their homes; d. the Audits and litigation documents are a “Complete system” that “works with Pre-Foreclosure, During Foreclosure, or Post-Foreclosure”; Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 5 of 20 Page ID #:5
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COMPLAINT e. the Audits and litigation documents “prevent foreclosure [and] is [sic] a powerful and successful legal means of bringing suit against your mortgage lender”;
f. “90%” of CFLA’s customers ended up obtaining favorable settlements with their lenders, which could involve delaying foreclosure, modifying the customer’s mortgage, and even getting the property free and clear; g. the Audits are “advanced,” “cutting edge,” and tailored to each consumer;
h. “Quiet Title Audits stop foreclosure and keep homeowners in their homes”;
i. the Audits contain “trade secrets”; and j. the Audits are “the most advanced Audit Report on Residential Mortgages in Existence.”
21.
These representations are misleading or false. 22.
Reasonable consumers facing the prospect of losing their homes to foreclosure are likely to be misled by these representations. 23.
These representations are material to consumers facing the prospect of losing their homes to foreclosure.
24.
CFLA and Lehman made these or similar representations from at least July 2014 through the present.
25.
Before August 2017, CFLA and Lehman made no effort to determine whether the Audits or litigation documents lead to their advertised outcomes. 26.
Defendants make no effort to determine whether their Audits could help a consumer prevent foreclosure or obtain a favorable settlement either based on the consumer’s jurisdiction or based on the consumer’s circumstances. The form, structure, and content of each Audit and package of litigation documents are substantially similar to all others. Defendants make relatively minor changes to Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 6 of 20 Page ID #:6
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COMPLAINT particularize each Audit and package of litigation documents to each borrower such as the borrower’s name, address, and specific mortgage lenders and servicers. 27.
CFLA and Lehman knew the Audits were meritless and Lehman called some conclusions contained in the Audits “boilerplate” and “garbage.” 28.
Carrigan prepared the Audits from pre-drafted templates provided by CFLA, and he did not always read Audits in full before completing them. 29.
Carrigan does not understand whether his conclusions are relevant to foreclosure, and he is generally unfamiliar with much of the content of the Audits. The conclusions contained in the Audits have no apparent support in current case law, which has led courts to excoriate CFLA’s Audits. 30.
CFLA and Lehman, through the website, on marketing calls, and in emails with consumers, make misleading claims, in various formulations, that the Audits and litigation documents are prepared by multiple experts with significant and particularized experience in the residential-mortgage industry. 31.
Statements CFLA and Lehman made regarding the qualifications of CFLA’s experts while marketing the Audits and litigation documents include claims that:
a. the Quiet Title Package is prepared by the “Nation’s Most Well Respected Attorneys in the Foreclosure Defense industry”; b. CFLA has multiple experts on staff, and that Carrigan manages a team of 25 auditors;
c. Carrigan is a “leading” expert in the residential-mortgage industry, with eight different licenses and certifications; d. CFLA is attorney-owned and operated;
e. “CFLA is a subscriber of Bloomberg and uses the latest search”; f. attorneys are involved in preparing the Audits and litigation documents;
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COMPLAINT g. “CFLA Auditors have been admitted as Experts in nearly every jurisdiction nationwide”;
h. CFLA Auditors have “a minimum of 10 years of industry related experience [and] 40 Hours of Classroom Training on Mortgage Securitization”; and i. CFLA’s Auditors have been “certified through the Nationally Recognized Mortgage Securitization Auditor Training Certification Class.”
32.
These representations are misleading or false. 33.
Reasonable consumers facing the prospect of losing their homes to foreclosure are likely to be misled by these representations. 34.
These representations are material to consumers facing the prospect of losing their homes to foreclosure.
35.
Defendants made these or similar representations from at least July 2014 through the present.
36.
CFLA does not have multiple experts performing Audits. At all times relevant to this Complaint, Carrigan has been CFLA’s sole auditor. 37.
CFLA is not a subscriber of Bloomberg, and does not have a subscription to a Bloomberg terminal.
38.
Attorneys are not involved in the preparation of the Audits and litigation documents.
39.
CFLA is not attorney-owned and operated.
40.
Carrigan does not have any specialized and particularized experience in the residential-mortgage industry.
41.
CFLA and Lehman concealed material facts regarding the Audits and litigation documents from consumers and misrepresented the effectiveness of the Audits and the qualifications of the individual that performed them in order to Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 8 of 20 Page ID #:8
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COMPLAINT convince consumers to purchase CFLA’s services.
Regulation O 42.
Regulation O defines “mortgage assistance relief service” as “any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer with . . . [s]topping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession … [or] [n]egotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees.” 12 C.F.R. § 1015.2. 43.
Regulation O defines “mortgage assistance relief service provider” as “any person that provides, offers to provide, or arranges for others to provide, any mortgage assistance relief service,” other than the dwelling loan holder, the servicer of a dwelling loan, or any agent or contractor of such individual or entity. 12 C.F.R. § 1015.2.
44.
Throughout the relevant period, Lehman controlled and participated in CFLA’s acts and practices.
45.
CFLA and Lehman are “mortgage assistance relief provider[s]” engaged in the provision of “mortgage assistance relief services” as those terms are defined in Regulation O. 12 C.F.R. § 1015.2. Lehman either personally provided Audits to consumers, or he arranged for CFLA to do so. 46.
Carrigan provides substantial assistance, as that term is defined in Regulation O, 12 C.F.R. § 1015.6, to “mortgage assistance relief provider[s]” CFLA and Lehman.
47.
Regulation O is a “Federal consumer financial law,” as that term is Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 9 of 20 Page ID #:9
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COMPLAINT defined in the CFPA. 12 U.S.C. § 5481(12)(Q), (14). 48.
Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful . . . for any covered person or service provider . . . to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
49.
A violation of Regulation O by a “covered person,” as that term is defined in § 1002(6) of the CFPA, also constitutes a violation of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. §§ 5481(6), 5536(a)(1)(A).
The CFPA 50.
Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531, 5536(a)(1)(B), prohibit “covered person[s]” from engaging in any “unfair, deceptive, or abusive act or practice.” Section 1036(a)(1)(A) also prohibits “covered person[s]” from “offer[ing] or provid[ing] to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit[ting] any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
51.
CFLA is a “covered person” within the meaning of the CFPA because it offers or provides consumer-financial products or services, including financialadvisory services, such as providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure. 12 U.S.C. § 5481(5), (6), (15)(A)(viii). 52.
Section 1002(25) of the CFPA defines the term “related person” to mean “any director, officer, or employee charged with managerial responsibility for, or controlling shareholder of,” or “any shareholder . . . or other person . . . who materially participates in the conduct of the affairs of” a non-bank provider of a Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 10 of 20 Page ID #:10
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COMPLAINT consumer-financial product or service. 12 U.S.C. § 5481(25)(C). Section 1002(25) further provides that a “related person” shall be “deemed to mean a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B).
53.
Lehman is a “related person” and a “covered person” within the meaning of the CFPA because he is CFLA’s president and sole owner and has managerial responsibility for CFLA. 12 U.S.C. § 5481(6), (25)(B). 54.
Section 1036(a)(3) of the CFPA prohibits any person from “knowingly or recklessly provid[ing] substantial assistance to a covered person or service provider in violation of the provisions of section 1031” and that “the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided.” 12 U.S.C. § 5536(a)(3).
55.
Carrigan provides substantial assistance, as that term is defined in § 1036(a)(3) of the CFPA, to covered persons CFLA and Lehman. 12 U.S.C. § 5536(a)(3).
Count I Advance Fees in Violation of Regulation O (Defendants CFLA and Lehman) 56.
The allegations in paragraph 1 through 55 are incorporated here by reference.
57.
Regulation O prohibits any provider of mortgage-assistance-relief services from requesting or receiving payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer’s loan holder or servicer that incorporates the offer that the provider obtained from the loan holder or servicer. 12 C.F.R. § 1015.5(a). Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 11 of 20 Page ID #:11
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COMPLAINT 58.
In the course of providing, offering to provide, or arranging for others to provide mortgage-assistance-relief services, CFLA and Lehman requested or received payment from consumers before those consumers executed a written agreement with their loan holder or servicer that incorporated any offer of mortgageassistance-relief that CFLA or Lehman obtained from the loan holder or servicer, in violation of Regulation O. 12 C.F.R. § 1015.5(a).
Count II Prohibited Representations in Violation of Regulation O (Defendants CFLA and Lehman) 59.
The allegations in paragraph 1 through 55 are incorporated here by reference.
60.
Regulation O prohibits any provider of mortgage-assistance-relief services from misrepresenting, expressly or by implication: “the likelihood of negotiating, obtaining, or arranging any represented service or result.” 12 C.F.R. § 1015.3(b)(1).
61.
Regulation O also prohibits making a representation about, among other things, the benefits, performance, or efficacy of any mortgage-assistance-relief service unless, at the time such representation is made, the provider “possesses and relies upon competent and reliable evidence that substantiates that the representation is true.” 12 C.F.R. § 1015.3(c).
62.
In the course of providing, offering to provide, or arranging for others to provide mortgage-assistance-relief services, CFLA and Lehman misrepresented, expressly or by implication, material aspects of their services, including but not limited to the likelihood of obtaining mortgage-loan modifications, the likelihood of successfully defending against foreclosure actions, and the likelihood of successfully bringing an affirmative action against mortgage lenders. Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 12 of 20 Page ID #:12
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COMPLAINT 63.
When CFLA and Lehman made those representations they were not in possession of, nor did they rely upon, competent and reliable evidence that substantiated that the representations were true. 64.
CFLA’s and Lehman’s representations, as set forth above, are prohibited representations in violation of Regulation O. 12 C.F.R. §§ 1015.3(b)(1), 1015.3(c).
Count III Deceptive Acts or Practices in Violation of the CFPA (Defendants CFLA and Lehman) 65.
The allegations in paragraph 1 through 55 are incorporated here by reference.
66.
The CFPA prohibits deceptive acts or practices in connection with the offering of consumer-financial products or services. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
67.
A representation or omission is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and the information is material to consumers.
68.
In numerous instances in connection with offering or providing mortgage-assistance-relief services, CFLA and Lehman have represented, expressly or by implication, that:
a. the Audits and litigation documents will help consumers avoid foreclosure, obtain settlements to foreclosure proceedings, remain in their homes, or negotiate loan modifications; and b. the Audits are prepared by experts.
69.
In fact, CFLA’s Audits and litigation documents are not prepared by experts and are not an effective means to avoid foreclosure, obtain settlements to Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 13 of 20 Page ID #:13
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COMPLAINT foreclosure proceedings, to negotiate loan modifications, or for consumers to otherwise remain in their homes.
70.
These representations are material and likely to mislead consumers acting reasonably under the circumstances.
71.
CFLA’s and Lehman’s representations, as set forth above, constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536.
Count IV Abusive Acts or Practices in Violation of the CFPA (Defendants CFLA and Lehman) 72.
The allegations in paragraph 1 through 55 are incorporated here by reference.
73.
The CFPA prohibits abusive acts or practices, including taking unreasonable advantage of a consumer’s “lack of understanding . . . of the material risks, costs, or conditions of the product or service.” 12 U.S.C. §§ 5531(d)(2)(A), 5536.
74.
CFLA’s consumers generally did not understand all of their rights and obligations under relevant foreclosure law and other laws implicating residential mortgages.
75.
Consumers generally did not understand the complexities of the residential-mortgage industry and foreclosure-defense law. 76.
Consumers generally lacked the expertise to determine the effectiveness of CFLA’s Audits and litigation documents, or otherwise evaluate the Audit’s value, or utility, or the risks associated with purchasing or using the Audit. 77.
Consumers generally did not understand and were not in a position to evaluate the accuracy of CFLA’s and Lehman’s marketing representations or the quality of the mortgage-assistance-relief services that CFLA and Lehman sold. Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 14 of 20 Page ID #:14
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COMPLAINT 78.
CFLA and Lehman promised consumers, expressly and by implication, a solution to their mortgage problems.
79.
By marketing and selling Audits and litigation documents that were not effective and did not contain the information described, CFLA and Lehman took unreasonable advantage of consumers’ inability to understand the material risks, costs, and conditions of the services CFLA and Lehman were selling. 80.
A reasonable consumer with an understanding of issues relevant to foreclosure would not purchase a CFLA Audit. CFLA and Lehman concealed material facts regarding the Audits and litigation documents from consumers and misrepresented the effectiveness of the Audits and the qualifications of the individual that performed them in order to convince consumers to purchase CFLA’s services. 81.
Consumers did not have the opportunity to detect that concealment because they paid for the Audits and litigation documents before they were delivered.
82.
Even then, the Audits appeared, on their face, to be legitimate documents with comprehensive legal analyses of mortgages and the mortgage industry.
83.
Ultimately, CFLA and Lehman were able to sell the Audits to consumers because consumers lacked the ability to parse the conclusions and analysis in the Audits and discover their lack of merit. 84.
CFLA’s and Lehman’s marketing, production and sale of Audits and litigation documents took unreasonable advantage of consumers’ lack of understanding of the material risks, costs, and conditions of the Audits and supporting litigation documents, in violation of the CFPA’s prohibition on abusive acts or practices. 12 U.S.C. §§ 5531(d)(2)(A), 5536.
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COMPLAINT Count V Violations of the CFPA Arising from Regulation O Violations (Defendants CFLA and Lehman) 85.
The allegations in paragraph 1 through 55 are incorporated here by reference.
86.
Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful . . . for any covered person or service provider . . . to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
87.
Because CFLA and Lehman are “covered persons” who violated Regulation O, they also violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
Count VI Substantial Assistance of CFLA’s and Lehman’s Deceptive and Abusive Acts or Practices (Defendant Carrigan) 88.
The allegations in paragraph 1 through 55 are incorporated here by reference.
89.
Section 1036(a)(3) of the CFPA prohibits any person from “knowingly or recklessly provid[ing] substantial assistance to a covered person or service provider in violation of the provisions of section 1031” and that “the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided.” 12 U.S.C. § 5536(a)(3).
90.
As CFLA’s sole auditor and individual responsible for producing the Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 16 of 20 Page ID #:16
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COMPLAINT Audits, Carrigan provided substantial assistance to CFLA and Lehman in their deceptive and abusive acts or practices.
91.
Carrigan knew or recklessly avoided knowing that the Audits were not an effective defense in foreclosure.
92.
Carrigan knew or recklessly avoided knowing that CFLA and Lehman were engaged in making deceptive representations to consumers regarding the effectiveness, content, and expertise of the individuals engaged in the preparation of the Audits.
93.
To the extent Carrigan was not actually aware of the marketing methods CFLA and Lehman used to sell the Audits, he recklessly avoided knowing what those marketing methods were, including by failing to review CFLA’s website. 94.
Carrigan knew or recklessly avoided knowing that the conclusions in the Audits lacked merit.
95.
Carrigan knew or recklessly avoided knowing that the Audits contained factual inaccuracies.
96.
Carrigan knew or recklessly avoided knowing that the Audits were created from templates and only minimally tailored to an individual borrower’s circumstances.
97.
To the extent Carrigan was not actually aware of the contents of the Audits he produced, he recklessly avoided knowing their contents, including by: a. not systematically reviewing the Audits; b. failing to review the Audits for accuracy; c. failing to review his affidavits for accuracy; d. failing to assess the appropriateness or correctness of the conclusions in the Audits; and e. failing to review descriptions of the Audits on CFLA’s website. 98.
Carrigan knew or recklessly avoided knowing that he was not an Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 17 of 20 Page ID #:17
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COMPLAINT expert in the residential mortgage industry or in foreclosure defenses. 99.
Carrigan provided substantial assistance to CFLA and Lehman in their deceptive and abusive acts or practices, in violation of § 1036(a)(3) of the CFPA. 12 U.S.C. § 5536(a)(3).
Count VII Substantial Assistance of CFLA and Lehman’s Prohibited Representations (Defendant Carrigan) 100.
The allegations in paragraph 1 through 55 are incorporated here by reference.
101.
Regulation O provides that it is a violation “for a person to provide substantial assistance or support to any mortgage-assistance-relief service provider when that person knows or consciously avoids knowing that the provider is engaged in any act or practice that violates” the rule. 12 C.F.R. § 1015.6. 102.
Carrigan knew or consciously avoided knowing that CFLA and Lehman were engaged in making deceptive representations to consumers regarding the effectiveness, content, and expertise of the individuals engaged in the preparation of the Audits.
103.
To the extent Carrigan was not actually aware of the marketing methods CFLA and Lehman used to sell the Audits, he consciously avoided knowing what those marketing methods were, including by failing to review CFLA’s website. 104.
Carrigan knew or consciously avoided knowing that the Audits were not a legitimate or effective source of foreclosure defenses. 105.
Carrigan knew or consciously avoided knowing that CFLA’s customers were generally homeowners in foreclosure. 106.
Carrigan knew or consciously avoided knowing that CFLA used deceptive representations to sell the Audits to homeowners in foreclosure. Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 18 of 20 Page ID #:18
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COMPLAINT 107.
To the extent Carrigan was not actually aware of the contents of the Audits he produced, he consciously avoided knowing their contents, including by: f. not systematically reviewing the Audits; g. failing to review the Audits for accuracy; h. failing to review his affidavits for accuracy; i. failing to assess the appropriateness or correctness of the conclusions in the Audits; and j. failing to review descriptions of the Audits on CFLA’s website. 108.
Carrigan provided substantial assistance or support to CFLA and Lehman when Carrigan knew or consciously avoided knowing that CFLA and Lehman were engaged in prohibited representations in violation of Regulation O. 12 C.F.R. § 1015.6.
Prayer for Relief WHEREFORE, the Bureau requests that the Court: a. permanently enjoin Defendants from committing future violations of Regulation O and the CFPA and enter such other injunctive relief as appropriate;
b. award restitution, jointly and severally, against Defendants in the amount of all unlawfully collected fees; c. order disgorgement of ill-gotten revenues against Defendants or compensation for unjust enrichment;
d. assess civil money penalties against Defendants; e. order the rescission or reformation of contracts where necessary to redress injury to consumers;
f. order payment of damages or other monetary relief; g. order limits on the activities or functions of Defendants; h. award costs against Defendants; and Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 19 of 20 Page ID #:19
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COMPLAINT i. award additional relief as the Court may determine to be just and proper.
Dated September 6, 2019 Respectfully Submitted,
/s/ Leanne E. Hartmann
Leanne E. Hartmann
Benjamin Vaughn (pro hac pending) Gabriel Hopkins (pro hac pending)
Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552
Attorneys for Plaintiff
Bureau of Consumer Financial Protection Case 2:19-cv-07722 Document 1 Filed 09/06/19 Page 20 of 20 Page ID #:20
Stipulation ()
PDF of this document (17 pages)
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
Bureau of Consumer Financial Protection,
Plaintiff,
vs.
Certified Forensic Loan Auditors, LLC;
Andrew Lehman; and Michael Carrigan,
Defendants.
) ) ) ) ) ) ) ) ) ) )
Case No.: 2:19-cv-07722-ODW (JEMx)
STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN
The Bureau of Consumer Financial Protection (“Bureau”) commenced this civil action on September 5, 2019 to obtain injunctive relief, restitution, and civil penalties from Certified Forensic Loan Auditors, LLC (CFLA), Andrew Lehman, and Michael Carrigan. The Complaint alleges violations of sections 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531(a), 5536(a)(1)(A), and Regulation O, 12 C.F.R. §§ 1015.3(c) and 1015.5(a) (2011) against CFLA and Lehman in connection with their offering, advertising, marketing, and selling of purported financial-advisory and mortgage-assistance-relief services, and against Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 1 of 17 Page ID #:114
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN Defendant Michael Carrigan in connection with his substantial assistance in furtherance of CFLA’s and Lehman’s unlawful conduct.
The Bureau and Defendant Carrigan, agree to entry of this Stipulated Final Judgment and Order (“Order”), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
THEREFORE, it is ORDERED:
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).
2.
The Complaint alleges claims upon which relief may be granted. 3.
The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565. 4.
Defendant Carrigan waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim he may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
5.
Defendant Carrigan neither admits nor denies any allegations in the Complaint, except as specified in this Order. For purposes of this Order, Defendant Carrigan admits the facts necessary to establish the Court's jurisdiction over Defendant Carrigan and the subject matter of this action. 6.
Entry of this Order is in the public interest.
DEFINITIONS Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 2 of 17 Page ID #:115
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN 7.
The following definitions apply to this Order: a. “Affected Consumers” includes any consumer who, since July 1, 2014, purchased a Securitization Audit and/or a Quiet Title Package from CFLA.
b. “Assisting Others” means helping, aiding, training, or providing support to others, including but not limited to:
i. consulting in any form whatsoever;
ii. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including, but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication;
iii. providing names of, or contributing to the generation of, potential customers; and iv. participating in or providing services related to the offering, sale, or servicing of a product, or the collection of payments for a product.
c. “CFLA” means Certified Forensic Loan Auditors, LLC, and its successors and assigns.
d. “Defendant Carrigan” means Michael Carrigan, and any other names by which he might be known;
e. “Defendant Lehman” means Andrew Lehman, and any other names by which he might be known;
f. “Effective Date” means the date on which the Order is entered by the Court.
Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 3 of 17 Page ID #:116
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN g. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate.
h. “Financial Product or Service” is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in Section 1002(15) of the Consumer Financial Protection Act, 12 U.S.C. § 5481(15), and, subject to applicable limitations on the Bureau’s enforcement authority, includes, but is not limited to: i. providing financial advisory services to consumers on individual financial matters or relating to proprietary financial products or services;
ii. providing credit counseling to any consumer; iii. providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure; and iv. auditing, reviewing, or analyzing the origination, transfer, or securitization of residential mortgages.
i. “Mortgage Assistance Relief Service” is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in Regulation O, 12 C.F.R. 1015.2, and includes, but is not limited to: i. Any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following:
1. Stopping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 4 of 17 Page ID #:117
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession; 2. Negotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees; and ii. Obtaining any forbearance or modification in the timing of payments from any dwelling loan holder or servicer on any dwelling loan.
j. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. k. “Relevant Period” includes the period from July 1, 2014 to the Effective Date.
l. “Securitization Audit” means the audits of residential mortgages that CFLA marketed and sold from July 1, 2014 to the Effective Date. m. “Quiet Title Package” means the package of Securitization Audit and supporting litigation documents that CFLA marketed and sold from July 1, 2014 to the effective date.
ORDER CONDUCT RELIEF I.
Permanent Ban on Offering or Providing Mortgage Assistance Relief Services and Consumer Financial Products or Services Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 5 of 17 Page ID #:118
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN IT IS ORDERED that:
8.
Defendant Carrigan, whether acting directly or indirectly, is permanently restrained from:
a. providing, advertising, marketing, promoting, offering for sale, selling, or producing any Mortgage Assistance Relief Service or Financial Product or Service; and b. Assisting Others in, or receiving any remuneration or other consideration from, the provision, advertising, marketing, promoting, offering for sale, sale or production of any Mortgage Assistance Relief Service or Financial Product or Service.
Nothing in this Order shall be read as an exception to this Paragraph with the sole exception that Defendant Carrigan is not restrained from engaging in activities as a person that performs income tax preparation activities for consumers as defined by 12 U.S.C. § 5481(23), or from providing state or local income tax preparation services to consumers.
II.
Customer Information IT IS FURTHER ORDERED that:
9.
Defendant Carrigan whether acting directly or indirectly, may not: a. disclose, use, or benefit from customer information, including the name, address, telephone number, email address, Social Security number, other identifying information, or any data that enables access to a customer’s account (including a credit card, bank account, or other financial account), that Defendant Carrigan obtained before the Effective Date in Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 6 of 17 Page ID #:119
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN connection with providing Mortgage Assistance Relief Services and Financial Products or Services;
b. attempt to collect, sell, assign, or otherwise transfer any right to collect payment from any consumer who purchased or agreed to purchase Mortgage Assistance Relief Services or Financial Products or Services from Defendants.
However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order.
MONETARY PROVISIONS III.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
10.
Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant Carrigan must pay a civil money penalty of $493,403.04 to the Bureau; however, full payment of this civil money penalty will be suspended upon satisfaction of the obligations in this Section, and Section V, Additional Monetary Provisions; and subject to Section IV, Effect of Misrepresentation or Omission of Financial Condition, of this Order. 11.
Within 10 days of the Effective Date, Defendant Carrigan must pay a civil money penalty in the amount of $5,000 by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions, in partial satisfaction of the civil money penalty referenced in Paragraph 10 of this Section. Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 7 of 17 Page ID #:120
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN 12.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
13.
Defendant Carrigan must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendant Carrigan may not: a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
Defendant Carrigan agrees that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, as to Carrigan, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).
IV.
Effect of Misrepresentation or Omission Regarding Financial Condition IT IS FURTHER ORDERED that:
14.
The suspension of the civil money penalty in Section III of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendant Carrigan’s affirmed financial statements and supporting documents submitted to the Bureau on or about June 2, 2019, which Defendant Carrigan asserts are truthful, accurate, and complete, and which include:
Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 8 of 17 Page ID #:121
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN a. Financial Statements of Defendant Carrigan, including the attachments, signed on June 2, 2019 and submitted to the Bureau on or about June 2, 2019;
b. Defendant Carrigan’s oral testimony provided on January 8, 2019. 15.
If upon motion by the Bureau, the Court determines that Defendant Carrigan has failed to disclose any material asset or that any of his financial statements or oral testimony contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the civil money penalty entered in Section III and, without further adjudication, shall reinstate the civil money penalty entered in Section III and the full civil money penalty of $493,403.04 shall be immediately due and payable, less any amounts paid to the Bureau under Section III of this Order.
16.
If the Court terminates the suspension of the civil money penalty under this Section, the Bureau will be entitled to interest on the civil money penalty, computed from the date of entry of this Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid.
17.
Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. V.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
18.
In the event of any default on Defendant Carrigan’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 9 of 17 Page ID #:122
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. 19.
Defendant Carrigan relinquishes all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant Carrigan.
20.
The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau in a proceeding to enforce its rights to any payment or monetary judgment under this Order. 21.
The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendants’ capacity as debtor-in-possession. 22.
Under 31 U.S.C. § 7701, Defendant Carrigan, unless he already has done so, must furnish to the Bureau his taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 23.
Within 30 days of the entry of a final judgment, Order, or settlement in a Related Consumer Action, Defendant Carrigan must notify the Enforcement Director of the final judgment, Order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant Carrigan paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
24.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant Carrigan may not argue that he is entitled to, nor may Defendant Carrigan benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 10 of 17 Page ID #:123
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant Carrigan based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant Carrigan must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.
25.
Under Section 604(a)(I) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), any consumer reporting agency may furnish a consumer report concerning any Defendant to the Bureau, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
COMPLIANCE PROVISIONS VI.
Reporting Requirements IT IS FURTHER ORDERED that:
26.
Defendant Carrigan must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, the filing of any bankruptcy or insolvency proceeding by or against Defendant Carrigan; or a change in Defendant Carrigan’s name or address. Defendant Carrigan must provide this notice at least 30 days before the development or as soon as practicable after the learning about the development, whichever is sooner.
27.
Within 7 days of the Effective Date, Defendant Carrigan must: Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 11 of 17 Page ID #:124
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN a. Designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with Defendant Carrigan;
b. Identify all businesses for which Defendant Carrigan is the majority owner, or that Defendant Carrigan directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses;
c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales. d. Identify Defendant Carrigan’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; e. Describe in detail Defendant Carrigan’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including Defendant Carrigan’s title, role, responsibilities, participation, authority, control, and ownership. 28.
Defendant Carrigan must report any change in the information required to be submitted under Paragraph 27 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 29.
Within 90 days of the Effective Date, and again one year after the Effective Date, Defendant Carrigan must submit to the Enforcement Director an accurate written compliance progress report affirmed under penalty of perjury (Compliance Report), which, at a minimum:
a. Lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which Defendant Carrigan has complied with each such paragraph and subparagraph of this Order; Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 12 of 17 Page ID #:125
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN b. Attaches a copy of each Order Acknowledgment obtained under Section VII, unless previously submitted to the Bureau.
After the one-year period, Defendant Carrigan must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau.
VII.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that, 30.
Within 7 days of the Effective Date, Defendant Carrigan must submit to the Enforcement Director an acknowledgment of receipt of this Order, affirmed under penalty of perjury.
31.
For 5 years from the Effective Date, Defendant Carrigan, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VI, Reporting Requirements, any future board members and executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 32.
Defendant Carrigan must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Order under this Section.
VIII.
Recordkeeping Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 13 of 17 Page ID #:126
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN
IT IS FURTHER ORDERED that 33.
Defendant Carrigan, for any business for which Defendant Carrigan is a majority owner or which he directly or indirectly controls, must create, for at least ten (10) years from the Effective Date, the following business records: all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau.
34.
Defendant Carrigan must retain these documents for at least ten (10) years after creation and make them available to the Bureau upon the Bureau’s request.
IX.
Notices IT IS FURTHER ORDERED that:
35.
Unless otherwise directed in writing by the Bureau, Defendant Carrigan must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Certified Forensic Loan Auditors, LLC, et al., Case No. [Docket #],” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]:
Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 14 of 17 Page ID #:127
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN
X.
Cooperation with the Bureau
IT IS FURTHER ORDERED that:
36.
Defendant Carrigan must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendant Carrigan must provide such information in his or his agents’ possession or control within 14 days of receiving a written request from the Bureau. 37.
Defendant Carrigan must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint, including the identification of CFLA’s current and former employees and contractors and current and former customers. Defendant Carrigan must provide truthful and complete information, evidence, and testimony. Defendant Carrigan must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process.
XI.
Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Defendant Carrigan’s compliance with this Order, including the financial representations upon which part of the civil money penalty was suspended:
38. Within 14 days of receipt of a written request from the Bureau, Defendant Carrigan must submit additional compliance reports or other requested non-privileged information, related to requirements of this Order, which must be affirmed under penalty Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 15 of 17 Page ID #:128
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN of perjury; provide testimony related to requirements of this Order and Defendant Carrigan’s compliance with those requirements, which must be affirmed under penalty; or produce non-privileged documents related to requirements of this Order and Defendant Carrigan’s compliance with those requirements.
39.
For purposes of this Section, the Bureau may communicate directly with Defendant Carrigan, unless Defendant Carrigan or counsel he retains notifies the Bureau that he has retained counsel related to these communications. 40.
Defendant Carrigan must permit Bureau representatives to interview about the requirements of this Order and Defendant Carrigan’s compliance with those requirements any employee or other person affiliated with Defendant Carrigan who has agreed to such an interview. The person interviewed may have counsel present. 41.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6.
XII.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
42.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 16 of 17 Page ID #:129
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STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT MICHAEL CARRIGAN XIII.
Service IT IS FURTHER ORDERED that:
43.
This Order may be served upon Defendant Carrigan by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any representative or agent of the Bureau.
IT IS SO ORDERED.
October 29, 2019
_________________________________
Otis D. Wright, II United States District Judge
Case 2:19-cv-07722-ODW-JEM Document 25 Filed 10/29/19 Page 17 of 17 Page ID #:130
Amended complaint ()
PDF of this document (21 pages)
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AMENDED COMPLAINT
BENJAMIN VAUGHN, DC Bar #999347 E-mail: [email protected] Phone: (202) 435-7964 GABRIEL HOPKINS, NY Bar #5242300 Email: [email protected] Phone: (202) 435-7842 1700 G Street, NW Washington, DC 20552 Fax: (202) 435-7722
LEANNE E. HARTMANN, CA Bar #264787 - Local Counsel E-mail: [email protected] 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Fax: (415) 844-9788
Attorneys for Plaintiff Bureau of Consumer Financial Protection
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
Bureau of Consumer Financial Protection,
Plaintiff, vs.
Certified Forensic Loan Auditors, LLC (CA); Certified Forensic Loan Auditors, LLC (TX); Andrew Lehman; and Michael Carrigan,
Defendants.
) ) ) ) ) ) ) ) ) ) ) Case No.: 2:19−cv−07722 ODW (JEMx) AMENDED COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
Introduction 1.
The Bureau of Consumer Financial Protection (Bureau) brings this action under §§ 1031, 1036(a), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, and under § 626 of the Omnibus Appropriations Act, 2009 (as amended by § 1097 of the CFPA), 12 U.S.C. § 5538, and its implementing regulation, the Mortgage Assistance Relief Services Rule (Regulation O), 12 C.F.R. pt. 1015. This Court has subject-matter Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 1 of 21 Page ID #:194
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AMENDED COMPLAINT jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. 2.
The Bureau brings this action against Defendants Certified Forensic Loan Auditors, LLC (California), Certified Forensic Loan Auditors, LLC (Texas) (collectively, “CFLA”), and Andrew Lehman in connection with their offering, advertising, marketing, and selling of purported financial-advisory and mortgageassistance-relief services, and against Defendant Michael Carrigan in connection with his substantial assistance in furtherance of CFLA’s and Lehman’s unlawful conduct.
Venue 3.
Venue is proper in this district because Defendants are located, reside, or do business in this district. 12 U.S.C. § 5564(f).
Parties 4.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer-financial products or services under “Federal consumer financial law,” including the CFPA and Regulation O. 12 U.S.C. §§ 5481(12)(Q), 5481(14), 5491(a), 5531, 5538. 5.
The Bureau is authorized to initiate proceedings, by its own attorneys, to enjoin violations of the CFPA and Regulation O and to secure such relief as may be appropriate in each case. 12 U.S.C. §§ 5564(a)-(b), 5565. This includes the rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, payment of damages or other monetary relief, and civil money penalties. Id. § 5565(a)(2). Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 2 of 21 Page ID #:195
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AMENDED COMPLAINT 6.
At all times relevant to this Complaint, CFLA was operated through a limited-liability company incorporated under the laws of the State of California and a limited-liability company incorporated under the laws of the State of Texas, with business locations at 13101 W. Washington Blvd., Suite 444, Los Angeles, CA 90066 and 2600 South Shore Blvd., Suite 300, League City, TX 77573. CFLA offered or sold financial-advisory or mortgage-assistance-relief services to consumers nationwide over the internet, including to residents of the State of California. Certified Forensic Loan Auditors, LLC (California) is currently not in good standing and has been suspended by the California Franchise Tax Board for failing to meet its state tax obligations. CFLA marketed itself to consumers using both its California and Texas addresses.
7.
At all times relevant to this Complaint, Lehman was the president and sole owner of Certified Forensic Loan Auditors, LLC (California) and Certified Forensic Loan Auditors, LLC (Texas). Lehman had managerial responsibility for CFLA and directed every facet of its business, including participating in the development, marketing, and sale of CFLA’s financial-advisory and mortgageassistance-relief services. Lehman also set fees and oversaw ongoing interactions with consumers after financial-advisory and mortgage-assistance-relief services were sold, including managing payment collections from consumers, responding to regulatory and commercial inquiries (including from the Better Business Bureau), managing and responding to consumer complaints, and managing requests for refunds.
8.
For at least part of the relevant period covered by this complaint, Lehman’s primary residence was in the state of California. 9.
Lehman co-mingled his finances with CFLA, including by withdrawing all excess funds from the business for personal use instead of taking a salary, and by filing combined tax returns on behalf of himself and CFLA. Under Lehman’s Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 3 of 21 Page ID #:196
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AMENDED COMPLAINT direction, CFLA ignored corporate formalities. Lehman failed to keep accurate financial records for CFLA. And Lehman failed to meet CFLA’s California state-tax requirements.
10.
Since at least 2014, CFLA’s website has listed addresses for the company in both California and Texas. California and Texas addresses were also listed on documents provided to consumers as part of CFLA’s financial-advisory and mortgage-assistance-relief services.
11.
At all times relevant to this Complaint, Carrigan was CFLA’s sole auditor. Carrigan is a resident of the State of California and performed work for CFLA while residing in this district.
12.
CFLA and Lehman, each acting alone or in concert with others, offer, provide, or arrange for others to provide “mortgage assistance relief services,” as defined in Regulation O, 12 C.F.R. § 1015.2, and provide “financial advisory services” within the meaning of the CFPA, 12 U.S.C. § 5481(15)(A)(viii), including but not limited to providing or offering to provide loan modification and foreclosure relief services.
13.
Carrigan, in his role as an auditor working on CFLA’s behalf, provided substantial assistance regarding the activities described in paragraph 12, within the meaning of Regulation O, 12 C.F.R. § 1015.6, and within the meaning of the CFPA, 12 U.S.C. § 5536(a)(3).
CFLA’s Business Practices 14.
Since at least 2014, CFLA and Lehman have marketed and sold purported financial-advisory and mortgage-assistance-relief services to consumers. These services include what Defendants refer to as “Securitization Audits” (Audits) and litigation documents, which CFLA marketed together as a “Quiet Title Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 4 of 21 Page ID #:197
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AMENDED COMPLAINT Package.” CFLA and Lehman claimed that these services would help consumers avoid foreclosures or negotiate loan modifications. 15.
CFLA’s Audits are reports that purport to summarize information about a borrower’s mortgage, mortgage lender, mortgage servicer, and an asset-backed securitization trust that may have acquired the borrower’s mortgage. The Audits are constituted largely of template materials and also contain legal conclusions and recommendations to the borrower. While there is some variation in the recommendations across the Audits, a set of core legal conclusions about mortgage securitization and its impacts on foreclosure are reproduced essentially verbatim in all of the Audits.
16.
CFLA holds itself out in marketing materials as “The Nation’s Leading Experts in Foreclosure Defense.” On its website, in marketing emails, and on marketing telephone calls, CFLA and Lehman tell consumers that in addition to the written report, a purchase of an Audit includes the services of Carrigan as an “expert witness” to testify in consumers’ foreclosure proceedings or related litigation. 17.
CFLA’s litigation documents are templates of pleadings that CFLA and Lehman claim can be filed in connection with a homeowner’s response to a foreclosure proceeding. They include a civil complaint, lis pendens, and temporary restraining order.
18.
CFLA and Lehman charge and collect $1,495 from consumers before producing and delivering an Audit and its litigation documents, and before CFLA or Lehman obtain any mortgage-assistance-relief for consumers. 19.
All sales of Audits and litigation documents were routed through CFLA’s website, where consumers could fill out and submit a “retail services agreement” and provide payment information.
20.
Since 2014, CFLA and Lehman sold, either directly or through intermediaries, more than 2,000 Audits to consumers. Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 5 of 21 Page ID #:198
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AMENDED COMPLAINT 21.
On its website, in marketing emails, and on marketing telephone calls, CFLA and Lehman tell consumers that the Audits and litigation documents will provide them an effective defense to a foreclosure action brought by their lenders or help them obtain loan modifications from their lenders. 22.
On its website, in marketing emails, and on marketing telephone calls, CFLA and Lehman tell consumers that the Audits and litigation documents will contain certain specific categories of cutting-edge, advanced analyses. CFLA and Lehman also tell consumers that the Audits will uncover information that will find defects in the assignment of a consumer’s mortgage or in the securitization of the consumer’s mortgage.
23.
Testimonials on CFLA’s website tout the effectiveness of the Audits, including claims that consumers were able to “beat the bank in court to save house [sic] and prevent eviction.”
24.
Statements CFLA and Lehman have made regarding its Audits and litigation documents include representations that: a. the Audits and litigation documents are a “Complete turn-key lawsuit to sue your lender for damages”;
b. the Audits will stop foreclosure;
c. the Audits will keep homeowners in their homes; d. the Audits and litigation documents are a “Complete system” that “works with Pre-Foreclosure, During Foreclosure, or Post-Foreclosure”; e. the Audits and litigation documents “prevent foreclosure [and] is [sic] a powerful and successful legal means of bringing suit against your mortgage lender”;
f. “90%” of CFLA’s customers ended up obtaining favorable settlements with their lenders, which could involve delaying foreclosure, modifying the customer’s mortgage, and even getting the property free and clear; Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 6 of 21 Page ID #:199
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AMENDED COMPLAINT g. the Audits are “advanced,” “cutting edge,” and tailored to each consumer;
h. “Quiet Title Audits stop foreclosure and keep homeowners in their homes”;
i. the Audits contain “trade secrets”; and j. the Audits are “the most advanced Audit Report on Residential Mortgages in Existence.”
25.
These representations are misleading or false. 26.
Reasonable consumers facing the prospect of losing their homes to foreclosure are likely to be misled by these representations. 27.
These representations are material to consumers facing the prospect of losing their homes to foreclosure.
28.
CFLA and Lehman made these or similar representations from at least July 2014 through the present.
29.
Before August 2017, CFLA and Lehman made no effort to determine whether the Audits or litigation documents lead to their advertised outcomes. 30.
Defendants make no effort to determine whether their Audits could help a consumer prevent foreclosure or obtain a favorable settlement either based on the consumer’s jurisdiction or based on the consumer’s circumstances. The form, structure, and content of each Audit and package of litigation documents are substantially similar to all others. Defendants make relatively minor changes to particularize each Audit and package of litigation documents to each borrower such as the borrower’s name, address, and specific mortgage lenders and servicers. 31.
CFLA and Lehman knew the Audits were meritless and Lehman called some conclusions contained in the Audits “boilerplate” and “garbage.” 32.
Carrigan prepared the Audits from pre-drafted templates provided by CFLA, and he did not always read Audits in full before completing them. Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 7 of 21 Page ID #:200
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AMENDED COMPLAINT 33.
Carrigan does not understand whether his conclusions are relevant to foreclosure, and he is generally unfamiliar with much of the content of the Audits. The conclusions contained in the Audits have no apparent support in current case law, which has led courts to excoriate CFLA’s Audits. 34.
CFLA and Lehman, through the website, on marketing calls, and in emails with consumers, make misleading claims, in various formulations, that the Audits and litigation documents are prepared by multiple experts with significant and particularized experience in the residential-mortgage industry. 35.
Statements CFLA and Lehman made regarding the qualifications of CFLA’s experts while marketing the Audits and litigation documents include claims that:
a. the Quiet Title Package is prepared by the “Nation’s Most Well Respected Attorneys in the Foreclosure Defense industry”; b. CFLA has multiple experts on staff, and that Carrigan manages a team of 25 auditors;
c. Carrigan is a “leading” expert in the residential-mortgage industry, with eight different licenses and certifications; d. CFLA is attorney-owned and operated;
e. “CFLA is a subscriber of Bloomberg and uses the latest search”; f. attorneys are involved in preparing the Audits and litigation documents;
g. “CFLA Auditors have been admitted as Experts in nearly every jurisdiction nationwide”;
h. CFLA Auditors have “a minimum of 10 years of industry related experience [and] 40 Hours of Classroom Training on Mortgage Securitization”; and Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 8 of 21 Page ID #:201
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AMENDED COMPLAINT i. CFLA’s Auditors have been “certified through the Nationally Recognized Mortgage Securitization Auditor Training Certification Class.”
36.
These representations are misleading or false. 37.
Reasonable consumers facing the prospect of losing their homes to foreclosure are likely to be misled by these representations. 38.
These representations are material to consumers facing the prospect of losing their homes to foreclosure.
39.
Defendants made these or similar representations from at least July 2014 through the present.
40.
CFLA does not have multiple experts performing Audits. At all times relevant to this Complaint, Carrigan has been CFLA’s sole auditor. 41.
CFLA is not a subscriber of Bloomberg, and does not have a subscription to a Bloomberg terminal.
42.
Attorneys are not involved in the preparation of the Audits and litigation documents.
43.
CFLA is not attorney-owned and operated.
44.
Carrigan does not have any specialized and particularized experience in the residential-mortgage industry.
45.
CFLA and Lehman concealed material facts regarding the Audits and litigation documents from consumers and misrepresented the effectiveness of the Audits and the qualifications of the individual that performed them in order to convince consumers to purchase CFLA’s services.
Regulation O 46.
Regulation O defines “mortgage assistance relief service” as “any service, plan, or program, offered or provided to the consumer in exchange for Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 9 of 21 Page ID #:202
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AMENDED COMPLAINT consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer with . . . [s]topping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession … [or] [n]egotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees.” 12 C.F.R. § 1015.2. 47.
Regulation O defines “mortgage assistance relief service provider” as “any person that provides, offers to provide, or arranges for others to provide, any mortgage assistance relief service,” other than the dwelling loan holder, the servicer of a dwelling loan, or any agent or contractor of such individual or entity. 12 C.F.R. § 1015.2.
48.
Throughout the relevant period, Lehman controlled and participated in CFLA’s acts and practices.
49.
CFLA and Lehman are “mortgage assistance relief service provider[s]” engaged in the provision of “mortgage assistance relief services” as those terms are defined in Regulation O. 12 C.F.R. § 1015.2. Lehman either personally provided Audits to consumers, or he arranged for CFLA to do so. 50.
Carrigan provides substantial assistance, as that term is defined in Regulation O, 12 C.F.R. § 1015.6, to “mortgage assistance relief service provider[s]” CFLA and Lehman.
51.
Regulation O is a “Federal consumer financial law,” as that term is defined in the CFPA. 12 U.S.C. § 5481(12)(Q), (14).
52.
Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful . . . for any covered person or service provider . . . to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 10 of 21 Page ID #:203
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AMENDED COMPLAINT law.” 12 U.S.C. § 5536(a)(1)(A).
53.
A violation of Regulation O by a “covered person,” as that term is defined in § 1002(6) of the CFPA, also constitutes a violation of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. §§ 5481(6), 5536(a)(1)(A).
The CFPA 54.
Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531, 5536(a)(1)(B), prohibit “covered person[s]” from engaging in any “unfair, deceptive, or abusive act or practice.” Section 1036(a)(1)(A) also prohibits “covered person[s]” from “offer[ing] or provid[ing] to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit[ting] any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
55.
CFLA is a “covered person” within the meaning of the CFPA because it offers or provides consumer-financial products or services, including financialadvisory services, such as providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure. 12 U.S.C. § 5481(5), (6), (15)(A)(viii). 56.
Section 1002(25) of the CFPA defines the term “related person” to mean “any director, officer, or employee charged with managerial responsibility for, or controlling shareholder of,” or “any shareholder . . . or other person . . . who materially participates in the conduct of the affairs of” a non-bank provider of a consumer-financial product or service. 12 U.S.C. § 5481(25)(C). Section 1002(25) further provides that a “related person” shall be “deemed to mean a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B).
57.
Lehman is a “related person” and a “covered person” within the Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 11 of 21 Page ID #:204
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AMENDED COMPLAINT meaning of the CFPA because he is CFLA’s president and sole owner and has managerial responsibility for CFLA. 12 U.S.C. § 5481(6), (25)(B). 58.
Section 1036(a)(3) of the CFPA prohibits any person from “knowingly or recklessly provid[ing] substantial assistance to a covered person or service provider in violation of the provisions of section 1031” and that “the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided.” 12 U.S.C. § 5536(a)(3).
59.
Carrigan provides substantial assistance, as that term is defined in § 1036(a)(3) of the CFPA, to covered persons CFLA and Lehman. 12 U.S.C. § 5536(a)(3).
Count I Advance Fees in Violation of Regulation O (Defendants CFLA and Lehman) 60.
The allegations in paragraph 1 through 59 are incorporated here by reference.
61.
Regulation O prohibits any provider of mortgage-assistance-relief services from requesting or receiving payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer’s loan holder or servicer that incorporates the offer that the provider obtained from the loan holder or servicer. 12 C.F.R. § 1015.5(a). 62.
In the course of providing, offering to provide, or arranging for others to provide mortgage-assistance-relief services, CFLA and Lehman requested or received payment from consumers before those consumers executed a written agreement with their loan holder or servicer that incorporated any offer of mortgageassistance-relief that CFLA or Lehman obtained from the loan holder or servicer, in Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 12 of 21 Page ID #:205
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AMENDED COMPLAINT violation of Regulation O. 12 C.F.R. § 1015.5(a).
Count II Prohibited Representations in Violation of Regulation O (Defendants CFLA and Lehman) 63.
The allegations in paragraph 1 through 59 are incorporated here by reference.
64.
Regulation O prohibits any provider of mortgage-assistance-relief services from misrepresenting, expressly or by implication: “the likelihood of negotiating, obtaining, or arranging any represented service or result.” 12 C.F.R. § 1015.3(b)(1).
65.
Regulation O also prohibits making a representation about, among other things, the benefits, performance, or efficacy of any mortgage-assistance-relief service unless, at the time such representation is made, the provider “possesses and relies upon competent and reliable evidence that substantiates that the representation is true.” 12 C.F.R. § 1015.3(c).
66.
In the course of providing, offering to provide, or arranging for others to provide mortgage-assistance-relief services, CFLA and Lehman misrepresented, expressly or by implication, material aspects of their services, including but not limited to the likelihood of obtaining mortgage-loan modifications, the likelihood of successfully defending against foreclosure actions, and the likelihood of successfully bringing an affirmative action against mortgage lenders. 67.
When CFLA and Lehman made those representations they were not in possession of, nor did they rely upon, competent and reliable evidence that substantiated that the representations were true. 68.
CFLA’s and Lehman’s representations, as set forth above, are prohibited representations in violation of Regulation O. 12 C.F.R. §§ 1015.3(b)(1), Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 13 of 21 Page ID #:206
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AMENDED COMPLAINT 1015.3(c).
Count III Deceptive Acts or Practices in Violation of the CFPA (Defendants CFLA and Lehman) 69.
The allegations in paragraph 1 through 59 are incorporated here by reference.
70.
The CFPA prohibits deceptive acts or practices in connection with the offering of consumer-financial products or services. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
71.
A representation or omission is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and the information is material to consumers.
72.
In numerous instances in connection with offering or providing mortgage-assistance-relief services, CFLA and Lehman have represented, expressly or by implication, that:
a. the Audits and litigation documents will help consumers avoid foreclosure, obtain settlements to foreclosure proceedings, remain in their homes, or negotiate loan modifications; and b. the Audits are prepared by experts.
73.
In fact, CFLA’s Audits and litigation documents are not prepared by experts and are not an effective means to avoid foreclosure, obtain settlements to foreclosure proceedings, to negotiate loan modifications, or for consumers to otherwise remain in their homes.
74.
These representations are material and likely to mislead consumers acting reasonably under the circumstances. 75.
CFLA’s and Lehman’s representations, as set forth above, constitute Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 14 of 21 Page ID #:207
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AMENDED COMPLAINT deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536.
Count IV Abusive Acts or Practices in Violation of the CFPA (Defendants CFLA and Lehman) 76.
The allegations in paragraph 1 through 59 are incorporated here by reference.
77.
The CFPA prohibits abusive acts or practices, including taking unreasonable advantage of a consumer’s “lack of understanding . . . of the material risks, costs, or conditions of the product or service.” 12 U.S.C. §§ 5531(d)(2)(A), 5536.
78.
CFLA’s consumers generally did not understand all of their rights and obligations under relevant foreclosure law and other laws implicating residential mortgages.
79.
Consumers generally did not understand the complexities of the residential-mortgage industry and foreclosure-defense law. 80.
Consumers generally lacked the expertise to determine the effectiveness of CFLA’s Audits and litigation documents, or otherwise evaluate the Audit’s value, or utility, or the risks associated with purchasing or using the Audit. 81.
Consumers generally did not understand and were not in a position to evaluate the accuracy of CFLA’s and Lehman’s marketing representations or the quality of the mortgage-assistance-relief services that CFLA and Lehman sold. 82.
CFLA and Lehman promised consumers, expressly and by implication, a solution to their mortgage problems.
83.
By marketing and selling Audits and litigation documents that were not effective and did not contain the information described, CFLA and Lehman took unreasonable advantage of consumers’ inability to understand the material risks, Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 15 of 21 Page ID #:208
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AMENDED COMPLAINT costs, and conditions of the services CFLA and Lehman were selling. 84.
A reasonable consumer with an understanding of issues relevant to foreclosure would not purchase a CFLA Audit. CFLA and Lehman concealed material facts regarding the Audits and litigation documents from consumers and misrepresented the effectiveness of the Audits and the qualifications of the individual that performed them in order to convince consumers to purchase CFLA’s services. 85.
Consumers did not have the opportunity to detect that concealment because they paid for the Audits and litigation documents before they were delivered.
86.
Even then, the Audits appeared, on their face, to be legitimate documents with comprehensive legal analyses of mortgages and the mortgage industry.
87.
Ultimately, CFLA and Lehman were able to sell the Audits to consumers because consumers lacked the ability to parse the conclusions and analysis in the Audits and discover their lack of merit. 88.
CFLA’s and Lehman’s marketing, production and sale of Audits and litigation documents took unreasonable advantage of consumers’ lack of understanding of the material risks, costs, and conditions of the Audits and supporting litigation documents, in violation of the CFPA’s prohibition on abusive acts or practices. 12 U.S.C. §§ 5531(d)(2)(A), 5536.
Count V Violations of the CFPA Arising from Regulation O Violations (Defendants CFLA and Lehman) 89.
The allegations in paragraph 1 through 59 are incorporated here by reference.
90.
Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful . . . for Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 16 of 21 Page ID #:209
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AMENDED COMPLAINT any covered person or service provider . . . to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
91.
Because CFLA and Lehman are “covered persons” who violated Regulation O, they also violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
Count VI Substantial Assistance of CFLA’s and Lehman’s Deceptive and Abusive Acts or Practices (Defendant Carrigan) 92.
The allegations in paragraph 1 through 59 are incorporated here by reference.
93.
Section 1036(a)(3) of the CFPA prohibits any person from “knowingly or recklessly provid[ing] substantial assistance to a covered person or service provider in violation of the provisions of section 1031” and that “the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided.” 12 U.S.C. § 5536(a)(3).
94.
As CFLA’s sole auditor and individual responsible for producing the Audits, Carrigan provided substantial assistance to CFLA and Lehman in their deceptive and abusive acts or practices.
95.
Carrigan knew or recklessly avoided knowing that the Audits were not an effective defense in foreclosure.
96.
Carrigan knew or recklessly avoided knowing that CFLA and Lehman were engaged in making deceptive representations to consumers regarding the Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 17 of 21 Page ID #:210
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AMENDED COMPLAINT effectiveness, content, and expertise of the individuals engaged in the preparation of the Audits.
97.
To the extent Carrigan was not actually aware of the marketing methods CFLA and Lehman used to sell the Audits, he recklessly avoided knowing what those marketing methods were, including by failing to review CFLA’s website. 98.
Carrigan knew or recklessly avoided knowing that the conclusions in the Audits lacked merit.
99.
Carrigan knew or recklessly avoided knowing that the Audits contained factual inaccuracies.
100.
Carrigan knew or recklessly avoided knowing that the Audits were created from templates and only minimally tailored to an individual borrower’s circumstances.
101.
To the extent Carrigan was not actually aware of the contents of the Audits he produced, he recklessly avoided knowing their contents, including by: a. not systematically reviewing the Audits; b. failing to review the Audits for accuracy; c. failing to review his affidavits for accuracy; d. failing to assess the appropriateness or correctness of the conclusions in the Audits; and e. failing to review descriptions of the Audits on CFLA’s website. 102.
Carrigan knew or recklessly avoided knowing that he was not an expert in the residential mortgage industry or in foreclosure defenses. 103.
Carrigan provided substantial assistance to CFLA and Lehman in their deceptive and abusive acts or practices, in violation of § 1036(a)(3) of the CFPA. 12 U.S.C. § 5536(a)(3).
104.
This Count has been resolved by the Stipulated Final Judgment and Order entered by the Court on October 31, 2019 pursuant to the original Complaint. Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 18 of 21 Page ID #:211
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AMENDED COMPLAINT See Dkt. 25.
Count VII Substantial Assistance of CFLA and Lehman’s Prohibited Representations (Defendant Carrigan) 105.
The allegations in paragraph 1 through 59 are incorporated here by reference.
106.
Regulation O provides that it is a violation “for a person to provide substantial assistance or support to any mortgage-assistance-relief service provider when that person knows or consciously avoids knowing that the provider is engaged in any act or practice that violates” the rule. 12 C.F.R. § 1015.6. 107.
Carrigan knew or consciously avoided knowing that CFLA and Lehman were engaged in making deceptive representations to consumers regarding the effectiveness, content, and expertise of the individuals engaged in the preparation of the Audits.
108.
To the extent Carrigan was not actually aware of the marketing methods CFLA and Lehman used to sell the Audits, he consciously avoided knowing what those marketing methods were, including by failing to review CFLA’s website. 109.
Carrigan knew or consciously avoided knowing that the Audits were not a legitimate or effective source of foreclosure defenses. 110.
Carrigan knew or consciously avoided knowing that CFLA’s customers were generally homeowners in foreclosure. 111.
Carrigan knew or consciously avoided knowing that CFLA used deceptive representations to sell the Audits to homeowners in foreclosure. 112.
To the extent Carrigan was not actually aware of the contents of the Audits he produced, he consciously avoided knowing their contents, including by: a. not systematically reviewing the Audits; Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 19 of 21 Page ID #:212
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AMENDED COMPLAINT b. failing to review the Audits for accuracy; c. failing to review his affidavits for accuracy; d. failing to assess the appropriateness or correctness of the conclusions in the Audits; and e. failing to review descriptions of the Audits on CFLA’s website. 113.
Carrigan provided substantial assistance or support to CFLA and Lehman when Carrigan knew or consciously avoided knowing that CFLA and Lehman were engaged in prohibited representations in violation of Regulation O. 12 C.F.R. § 1015.6.
114.
This Count has been resolved by the Stipulated Final Judgment and Order entered by the Court on October 31, 2019 pursuant to the original Complaint. See Dkt. 25.
Prayer for Relief WHEREFORE, the Bureau requests that the Court: a. permanently enjoin Defendants from committing future violations of Regulation O and the CFPA and enter such other injunctive relief as appropriate;
b. award restitution, jointly and severally, against Defendants in the amount of all unlawfully collected fees; c. order disgorgement of ill-gotten revenues against Defendants or compensation for unjust enrichment;
d. assess civil money penalties against Defendants; e. order the rescission or reformation of contracts where necessary to redress injury to consumers;
f. order payment of damages or other monetary relief; g. order limits on the activities or functions of Defendants; h. award costs against Defendants; and Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 20 of 21 Page ID #:213
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AMENDED COMPLAINT i. award additional relief as the Court may determine to be just and proper.
Dated November 13, 2019
Respectfully Submitted,
/s/ Benjamin Vaughn
Leanne E. Hartmann
Benjamin Vaughn (pro hac vice) Gabriel Hopkins (pro hac vice)
Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552
Attorneys for Plaintiff
Bureau of Consumer Financial Protection Case 2:19-cv-07722-ODW-JEM Document 29 Filed 11/13/19 Page 21 of 21 Page ID #:214
Stipulation ()
PDF of this document (18 pages)
Page 60
JS-6
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA
Bureau of Consumer Financial Protection, Plaintiff,
v.
Certified Forensic Loan Auditors, LLC, (CA); Certified Forensic Loan Auditors, LLC (TX); Andrew P.
Lehman; and Michael Carrigan,
Defendants.
Case No. CV 19-07722-ODW (JEMx)
STIPULATED FINAL JUDGMENT AND ORDER AS TO CERTIFIED FORENSIC LOAN AUDITORS, LLC (CA), CERTIFIED FORENSIC LOAN AUDITORS (TX) AND ANDREW P. LEHMAN
The Bureau of Consumer Financial Protection (“Bureau”) commenced this civil action on September 6, 2019 and filed an Amended Complaint on November 13, 2019 to obtain injunctive relief, restitution, and civil penalties from Certified Forensic Loan Auditors, LLC (CA), Certified Forensic Loan Auditors, LLC (TX) (collectively “CFLA”), Andrew P. Lehman, and Michael Carrigan. The Amended Complaint alleges violations of sections 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531(a) and 5536(a)(1)(A), and Regulation O, 12 C.F.R. Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 1 of 18 Page ID #:3876
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§§ 1015.3(c) and 1015.5(a) (2011), against CFLA and Lehman in connection with their offering, advertising, marketing, and selling of purported financial-advisory and mortgage-assistance-relief services, and against Defendant Michael Carrigan in connection with his substantial assistance in furtherance of CFLA’s and Lehman’s unlawful conduct.
The Bureau and Defendants CFLA and Lehman, agree to entry of this Stipulated Final Judgment and Order (“Order”), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Amended Complaint.
THEREFORE, it is ORDERED:
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).
2.
The Amended Complaint alleges claims upon which relief may be granted. 3.
The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565. 4.
Defendants CFLA and Lehman waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
5.
Defendants CFLA and Lehman neither admit nor deny any allegations in the Amended Complaint, except as specified in this Order. For purposes of this Order, Defendants CFLA and Lehman admit the facts necessary to establish the Court's jurisdiction over Defendant CFLA and Lehman and the subject matter of this action. Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 2 of 18 Page ID #:3877
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6.
Entry of this Order is in the public interest. DEFINITIONS 7.
The following definitions apply to this Order: a. “Affected Consumers” includes any consumer who, since July 1, 2014, purchased a Securitization Audit and/or a Quiet Title Package from CFLA.
b. “Assisting Others” means helping, aiding, training, or providing support to others, including but not limited to:
i. consulting in any form whatsoever;
ii. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including, but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication;
iii. providing names of, or contributing to the generation of, potential customers; and iv. participating in or providing services related to the offering, sale, or servicing of a product, or the collection of payments for a product.
c. “CFLA” means Certified Forensic Loan Auditors, LLC, and its successors and assigns.
d. “Defendant Carrigan” means Michael Carrigan, and any other names by which he might be known;
e. “Defendant Lehman” means Andrew P. Lehman, and any other names by which he might be known;
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f. “Effective Date” means the date on which the Order is entered by the Court.
g. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate.
h. “Financial Advisory Service” includes the meaning of the term “financial advisory services,” as of the Effective Date, in Section 1002(15)(viii) of the Consumer Financial Protection Act, 12 U.S.C. § 5481(15)(viii), and, subject to applicable limitations on the Bureau’s enforcement authority, includes, but is not limited to: i. providing financial advisory services to consumers on individual financial matters or relating to proprietary financial products or services;
ii. providing credit counseling to any consumer; iii. providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure; and iv. auditing, reviewing, or analyzing the origination, transfer, or securitization of residential mortgages.
i. “Mortgage Assistance Relief Services” is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in Regulation O, 12 C.F.R. 1015.2, and, subject to applicable limitations on the Bureau’s enforcement authority, includes, but is not limited to: i. Any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 4 of 18 Page ID #:3879
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implication, to assist or attempt to assist the consumer with any of the following:
1. Stopping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession; 2. Negotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees; and ii. Obtaining any forbearance or modification in the timing of payments from any dwelling loan holder or servicer on any dwelling loan.
j. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in the Complaint. k. “Relevant Period” includes the period from July 1, 2014 to the Effective Date.
l. “Securitization Audit” means the audits of residential mortgages that CFLA marketed and sold from July 1, 2014 to the Effective Date. For purposes of this Order a “Securitization Audit” is a “Financial Advisory Service” as that term is defined in subparagraph (h), and a “Mortgage Assistance Relief Service” as that term is defined in subparagraph (i). m. “Quiet Title Package” means the package of Securitization Audit and supporting litigation documents that CFLA marketed and sold from July Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 5 of 18 Page ID #:3880
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1, 2014 to the effective date. For purposes of this Order a “Quiet Title Package” is a “Financial Advisory Service” as that term is defined in subparagraph (h), and a “Mortgage Assistance Relief Service” as that term is defined in subparagraph (i).
ORDER CONDUCT RELIEF I.
Permanent Ban on Offering or Providing Mortgage Assistance Relief Services and Financial Advisory Services IT IS ORDERED that:
8.
Defendants CFLA and Lehman, whether acting directly or indirectly, are permanently restrained from:
a. providing, advertising, marketing, promoting, offering for sale, selling, or producing any Mortgage Assistance Relief Services or Financial Advisory Services; and b. Assisting Others in, or receiving any remuneration or other consideration from, the provision, advertising, marketing, promoting, offering for sale, sale or production of any Mortgage Assistance Relief Services or Financial Advisory Services.
Nothing in this Order shall be read as an exception to this Paragraph. II.
Customer Information IT IS FURTHER ORDERED that:
9.
Defendants CFLA and Lehman whether acting directly or indirectly, may not:
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a. disclose, use, or benefit from customer information, including the name, address, telephone number, email address, Social Security number, other identifying information, or any data that enables access to a customer’s account (including a credit card, bank account, or other financial account), that Defendant CFLA or Lehman obtained before the Effective Date in connection with providing Mortgage Assistance Relief Services and Financial Advisory Services;
b. attempt to collect, sell, assign, or otherwise transfer any right to collect payment from any consumer who purchased or agreed to purchase Mortgage Assistance Relief Services or Financial Advisory Services from CFLA or Lehman.
However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order. MONETARY PROVISIONS III.
Order to Pay Redress 10.
A judgment for monetary relief is entered in favor of the Bureau and against Defendants CFLA and Lehman, jointly and severally, in the amount of $3 million for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Section VI, Additional Monetary Provisions; and subject to Section V, Effect of Misrepresentation or Omission of Financial Condition, of this Order.
11.
With regard to any redress that Defendant CFLA or Lehman pays under this Section, if Defendant CFLA or Lehman receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendant CFLA or Lehman secures a tax Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 7 of 18 Page ID #:3882
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deduction or tax credit with regard to any federal, state, or local tax, the relevant defendant must: (a) immediately notify the Enforcement Director in writing, and (b) within ten (10) days of receiving the funds or monetary benefit, the relevant defendant must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions.
12.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured consumers, including, but not limited to, refund of moneys, restitution, damages or other monetary relief, and for any attendant expenses for the administration of any such redress.
13.
If the Bureau determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury as disgorgement. Defendants CFLA and Lehman will have no right to challenge the Bureau’s choice of remedies under this Section and will have no right to contest the manner of distribution chosen by the Bureau.
14.
Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. IV.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
15.
Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Amended Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendants CFLA Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 8 of 18 Page ID #:3883
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and Lehman, jointly and severally, must pay a civil money penalty of $40,000 to the Bureau. The Bureau may exercise immediately any post-judgment remedies available to it to collect this civil money penalty from Defendants CFLA and Lehman. 16.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
17.
Defendants CFLA and Lehman must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants CFLA and Lehman may not: a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
18.
Defendants CFLA and Lehman agree that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, as to CFLA and Lehman, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7). V.
Effect of Misrepresentation or Omission Regarding Financial Condition IT IS FURTHER ORDERED that:
19.
The suspensions of the order to pay redress in Section III is expressly premised on the truthfulness, accuracy, and completeness of Defendants CFLA’s and Lehman’s sworn financial statements and supporting documents submitted to the Bureau on or about June 30, 2019 and supplemented on August 12 and 19, 2019, and on June 4, Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 9 of 18 Page ID #:3884
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2020 and supplement on June 8, 2020 and June 19, 2020, which Defendants CFLA and Lehman assert are truthful, accurate, and complete, and which include: a.
Financial Statements of Defendants CFLA and Lehman, including the attachments, signed on June 30, 2019 and submitted to the Bureau on or about June 30, 2019;
b.
Defendant Lehman’s oral testimony provided on or about November 13 and 14, 2018.
c.
CFLA’s payroll records provided on or about August 12, 2019. d.
Bank statements provided on or about August 19, 2019. e.
Financial Statements of Defendants CFLA and Lehman, including the attachments, signed on June 2, 2020 and submitted to the Bureau on or about June 4, 2020, and which were then supplemented with tax re3turns for 2017, 2018 and 2019 on June 8, 2020 and supplemented with additional account statements on June 19, 2020. 20.
If upon motion by the Bureau, the Court determines that Defendant CFLA or Lehman has failed to disclose any material asset or that any of their financial statements or oral testimony contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the order to pay redress entered in Section III and, without further adjudication, shall reinstate the order to pay redress entered in Section III and the full order to pay redress of $3,000,000 shall be immediately due and payable, less any amounts paid to the Bureau under Section III of this Order.
21.
If the Court terminates the suspension of the order to pay redress under this Section, the Bureau will be entitled to interest on the order to pay redress computed from the date of entry of this Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid.
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22.
Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. VI.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
23.
In the event of any default on Defendants CFLA’s or Lehman’s obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. 24.
Defendants CFLA and Lehman relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants CFLA or Lehman. 25.
The facts alleged in the Amended Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case. 26.
The facts alleged in the Amended Complaint establish all elements necessary to sustain an action by the Bureau under Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendant’s capacity as debtor-in-possession.
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27.
Under 31 U.S.C. § 7701, Defendants CFLA and Lehman, unless they already have done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
28.
Within 30 days of the entry of a final judgment, Order, or settlement in a Related Consumer Action, the affected defendant must notify the Enforcement Director of the final judgment, Order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants CFLA or Lehman paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
29.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, neither Defendant CFLA nor Lehman may argue that they are entitled to, nor may either Defendant CLFA or Lehman benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the redress or civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against either Defendants CLFA or Lehman based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, either Defendant CFLA or Lehman, as applicable, must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.
30.
Under Section 604(a)(I) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), any consumer reporting agency may furnish a consumer report concerning any Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 12 of 18 Page ID #:3887
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Defendant to the Bureau, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. COMPLIANCE PROVISIONS VII.
Reporting Requirements IT IS FURTHER ORDERED that:
31.
Defendant CFLA or Lehman or both, as applicable, must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, the filing of any bankruptcy or insolvency proceeding by or against Defendant CFLA or Lehman; or a change in Defendant CFLA or Lehman’s name or address. Defendant CFLA or Lehman or both, as applicable, must provide this notice at least 30 days before the development or as soon as practicable after the learning about the development, whichever is sooner.
32.
Within 7 days of the Effective Date, both Defendants CFLA and Lehman must each:
a. Designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with Defendants CFLA and Lehman;
b. Identify all businesses for which Defendant CFLA or Lehman is the majority owner, or that Defendant CFLA or Lehman directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses;
c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales. d. Identify Defendants CFLA and Lehman’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 13 of 18 Page ID #:3888
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e. Describe in detail Defendant CFLA’s or Lehman’s involvement in any business for which either performs services in any capacity or which either wholly or partially owns, including Defendant CFLA’s or Lehman’s title, role, responsibilities, participation, authority, control, and ownership.
33.
Defendants CFLA and Lehman must report any change in the information required to be submitted under Paragraph 31 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 34.
Within 90 days of the Effective Date, and again one year after the Effective Date, both Defendant CFLA and Lehman must each submit to the Enforcement Director an accurate written compliance progress report sworn to under penalty of perjury (Compliance Report), which, at a minimum:
a. Lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which each Defendant has complied with each such paragraph and subparagraph of this Order; b. Attaches a copy of each Order Acknowledgment obtained under Section VIII, unless previously submitted to the Bureau. After the one-year period, both Defendant CFLA and Lehman must each submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau.
VIII.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that, 35.
Within 7 days of the Effective Date, Defendants CFLA and Lehman must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
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36.
For 5 years from the Effective Date, both Defendant CFLA and Lehman, for any business for which either is the majority owner or which either directly or indirectly controls, must each deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VII, Reporting Requirements, any future board members and executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 37.
Both Defendant CFLA and Lehman must each secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Order under this Section.
IX.
Recordkeeping IT IS FURTHER ORDERED that 38.
Both Defendant CFLA and Lehman, for any business for which either is a majority owner or which either directly or indirectly controls, must each create, for at least 5 years from the Effective Date, the following business records: All documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau.
39.
Both Defendant CFLA and Lehman must each retain these documents for at least 5 years after creation and make them available to the Bureau upon the Bureau’s request.
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X.
Notices IT IS FURTHER ORDERED that:
40.
Unless otherwise directed in writing by the Bureau, Defendants CFLA and Lehman must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Certified Forensic Loan Auditors, et al., Case No. CV 19-07722,” and send them by overnight courier or firstclass mail to the below address and contemporaneously by email to [email protected]:
Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 XI.
Cooperation with the Bureau IT IS FURTHER ORDERED that:
41.
Defendants CFLA and Lehman must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants CFLA and Lehman must provide such information in its or its agents’ possession or control within 14 days of receiving a written request from the Bureau.
42.
Defendants CFLA and Lehman must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Amended Complaint, including the identification of CFLA’s current and former employees and contractors and current and former customers. Defendants CFLA and Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 16 of 18 Page ID #:3891
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Lehman must provide truthful and complete information, evidence, and testimony. Defendants CFLA and Lehman must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process.
XII.
Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Defendants CFLA’s and Lehman’s compliance with this Order, including the financial representations upon which the order to pay redress and part of the civil money penalty was suspended: 43. Within 14 days of receipt of a written request from the Bureau, either Defendant CFLA, Lehman or both, as applicable, must submit additional compliance reports or other requested non-privileged information, related to requirements of this Order, which must be sworn under penalty of perjury; provide sworn testimony related to requirements of this Order and Defendants CFLA’s and Lehman’s compliance with those requirements; or produce non-privileged documents related to requirements of this Order and Defendants CFLA’s and Lehman’s compliance with those requirements. 44.
For purposes of this Section, the Bureau may communicate directly with Defendants CFLA and Lehman, unless Defendants CFLA or Lehman or counsel they retain notifies the Bureau that they have retained counsel related to these communications.
45.
Defendants CFLA and Lehman must permit Bureau representatives to interview about the requirements of this Order and Defendants CFLA’s and Lehman’s compliance with those requirements any employee or other person affiliated with Defendants CFLA or Lehman who has agreed to such an interview. The person interviewed may have counsel present.
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46.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6.
XIII.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
47.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
XIV.
Pending Motions 48.
All pending motions are hereby denied as moot. XV.
Service IT IS FURTHER ORDERED that:
49.
This Order may be served upon Defendants CFLA and Lehman by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any representative or agent of the Bureau.
IT IS SO ORDERED.
DATED this 20th day of July, 2020.
____________________________
Otis D. Wright, II United States District Judge Case 2:19-cv-07722-ODW-JEM Document 93 Filed 07/20/20 Page 18 of 18 Page ID #:3893