Friday, October 15, 2010

Blumenthal, Affidavits And Court Fraud

Attorney General Richard Blumenthal’s latest media release announcing his plans to lead an investigation into “allegedly defective legal documents filed by banks in thousands of foreclosures nationwide” is written, as usual, in the heroic mode.

Although the legal documents are “allegedly” defective, the banks, according to Mr. Blumenthal, “broke the law, papering the courts with defective documents to railroad consumers into fast, possibly fraudulent foreclosures.” Mr. Blumenthal’s summary judgment – the banks broke the law – precedes a careful investigation that may or may not support his prejudgment.

According to the press release, Mr. Blumenthal’s “powerful multi-state investigation will hold big banks accountable, determining how and why they broke the law.”

There is a certain dissonance in Mr. Blumenthal’s media releases that those in the media who receive them – this one was sent to over 40 recipients and media outlets – have grown used to over the years. If the investigation into “allegedly defective legal documents” is yet pending, it cannot be possible for Mr. Blumenthal to have determined so far in advance of his “powerful multi-state investigation” that the banks “broke the law, papering the courts with defective documents to railroad consumers into fast, possibly fraudulent foreclosures (emphasis mine).”

At the center of Mr. Blumenthal’s pending investigation are “robo-signers” at some banks “who allegedly failed to verify the accuracy of foreclosure affidavits and have documents properly notarized, as required by law.” In his media release, Blumenthal warned that “Filing defective foreclosure documents is potentially a fraud on the court, which can result in dismissal of foreclosure cases and underlying mortgages.”

Some of Mr. Blumenthal’s business targets might find the attorney general’s concern for accurate affidavits – filed by others – particularly touching. In the New England Pellet (NEP) case, Mr. Blumenthal’s “investigator,” since retired for medical reasons, supplied to a judge an affidavit in which he swore under oath he had reason to believe that the principles of New England Pellet either had or were about to fraudulently transfer assets. On the strength of that sworn assertion alone, the judge, in an ex parte proceeding – one in which the party accused in the affidavit is not present before the judge to answer the charge – authorized Mr. Blumenthal to impound NEP’s business assets. Such impoundments have two immediate effects: First, the business is effectively shut down, leaving in its wake all customers the business can no longer service; and second, the targets of prosecution are deprived of the means of obtaining an adequate defense to challenge the untried charges in court.

From Mr. Blumenthal’s point of view, the greater the number of dissatisfied customers a targeted company leaves behind as it disappears beneath seemingly endless waves of litigation the better. Complainants are worth thousands of dollars per head in fines that Mr. Blumenthal is able to collect, enabling him to boast that his office pays for itself through its prosecutorial zeal.

"If you are a small business owner,” NEP lawyer Jim Oliver told a reporter for the Connecticut Post, “and he [Mr. Blumenthal] sues you for $70,000, and wants $1 million in penalties, life as you know it is over. Your bank accounts are seized. Liens are placed on property and assets. Even if you win, the state will appeal and you will wait another year. You are out if business. You are dead.”

In the NEP case, one of the principals in the business was in such distress that he attempted suicide. NEP’s lawyer deposed the then retired “investigator” who admitted in his sworn deposition that he was unfamiliar with Connecticut’s Fraudulent Transfer Act; that he had not check bank records to verify the charge made in his sworn affidavit that NEP’s principals either had or were about to fraudulently transfer assets; and finally, the retired investigator acknowledged that he never had sufficient reason to believe that the principals of the business either had or were about to fraudulently transfer assets when he signed his affidavit. The assertions made in the sworn deposition under oath strongly suggested perjury. But before the perjury issue could go to trial, Mr. Blumenthal settled the then two year old case.

In the now notorious Computer Plus Center of East Hartford case, the principal of the company Mr. Blumenthal drove out of business, Gina Malapanis, was arrested at her home and led off in handcuffs. A jury that got a gander at one of Mr. Blumenthal’s affidavits in that case, awarded Malapanis $18 million, later reduced by an understanding trial court judge to $1.83 million. If Malapanis wants to rest contentedly in the assurance that justice had been served in a case she had won months ago, she’ll just have to wait in line. Mr. Blumenthal is appealing the ruling.

One of the Assistant Attorneys General who lost the Malapanis case is now the campaign director for Democratic attorney general nominee George Jepsen, formerly a campaign chairman of the Democratic Party. In two debates with Republican attorney general nominee Martha Dean, Jepsen allowed that Mr. Blumenthal had done a marvelous job as attorney general, and he cited the usual big marquee cases. But it is the little guy who is crushed under the wheels of Mr. Blumenthal’s litigatory juggernaut – not Big Tobacco or Big Banking or Big Business. Large business entities can easily afford gold plated lawyers to support their interests or, when appropriate, make cash settlements they pass on to their customers in the form of higher prices. When large suit-proof companies targeted by Mr. Blumenthal continue in business, the costs of such settlements come from the pockets of customers whose consumer interests Mr. Blumenthal purportedly represents.

Concerning the inaccurate affidavits the banks are said to have used, Mr. Blumenthal writes sternly in his press release, doffing his hat to the rule of law: “Bankers routinely invoke the rule of law to demand repayment of predatory mortgages they peddled to consumers. The rule of law – requiring proper legal procedure and documentation -- must apply equally to bankers. Bankers created this monstrous mess, threatening to unfairly force consumers from their homes and undermine their property rights. We will demand accountability and corrective action to resolve this injustice.”

In the interest of reforming possible frauds on courts in his own office, Mr. Blumenthal should copy to his assistant attorneys general the sharp reproofs in his press release.

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