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Piggybankblog posted on 12/18/12
This is about the California State Bar Association’s handling of a law in California know as SB 94, especially since September of 2011. I outline as briefly as possible, 10 key points in the order I think is best, and provide links to supporting information in BLUE. (Picture of California State Bar Executive Director Joseph Dunn)
For the moment, take my word for it… it’s very likely that I know more about this subject than anyone else in the state or country, having written so many in-depth articles about the topic from so many perspectives that I can’t count them anymore… having interviewed 4,000 homeowners in the loan modification process… having spent the last 18 months inside services… and having interviewed many in government… I’m about as well rounded at one could get.
Plus, I think I did pretty well at keeping this brief and to the point without sacrificing important detail. There are links to other articles I’ve written at the bottom. You might want to click on the one that says the State Bar Lacks Fundamental Knowledge About Loan Modifications, as I make very clear what the plain reading of the statute should entail.
What has been allowed to happen here was no accident and is nothing short of scandalous. The State Bar’s executive director, whose portrait photo is seen above… I THINK SHOULD RESIGN.
What I believe the chronology of facts below will clearly show is that beginning in 2011, Joseph Dunn, executive director of the California State Bar, under pressure from the state legislature to quickly clean up the Bar’s backlog of discipline cases, came up with a scheme to strong-arm attorneys into accepting discipline without investigation or due process, based only on an unverified complaint, by threatening prosecution based solely on his “new interpretation” of state law, SB 94… an “interpretation” inconsistent with the legislative intent, entirely unsupported by a plain reading of the statute, and presented as not being the official position of the State Bar.
1) Three years ago, SB 94 was pushed through the legislature, compliments of the Senate Banking Committee, the Mortgage Bankers Association and the State Bar itself… it was a knee jerk reaction where bad facts and disingenuous motives made bad law.
(Sidebar: Why did the Mortgage Bankers Association (“MBA”) supply the political muscle to push for SB 94′s passage? Did the bankers care about homeowners being scammed and therefore wanted a law that barred advance fees in order to better protect consumers? Does that sound anything like the MBA? Of course not. The MBA has never backed a consumer protection bill.
What happened: The bankers heard the news of homeowners being scammed out of thousands of dollars by companies and/or lawyers promising to assist with loan modifications.
As industry insiders, only the MBA knew at the time that servicers weren’t doing loan modifications in 2009 (the rest of the country didn’t find that out until 2010), and therefore anyone offering to help homeowners get loans modified in 2009 a scam as far as the MBA was concerned. So, the MBA simply wanted the money scammers were getting to go to the banks to pay arrearages, trial payments and the like.
In other words, the MBA’s motivation to back SB 94 was so that consumers would pay the thousands to bankers for nothing… instead of paying lawyers or scammers for nothing.)
2) There is no evidence whatsoever that SB 94 has protected anyone in any way since becoming state law in October of 2009. Since then, the State Bar has disbarred only 22 lawyers, per their own most recently published numbers of just a couple of weeks ago. None of those were disbarred having anything to do with SB 94… and Jim Towery will tell you… SB 94 is not needed to arrest scammers whether lawyers or otherwise. Meanwhile, the number of complaints has remained a constant, and both the number and size of scams has increased significantly.
3) What did SB 94 accomplish? At this point it has chased almost all of the legitimate, experienced and ethical attorneys away from offering to help homeowners with loan modifications. Should the State Bar’s current position on SB 94 be allowed to stand, the situation will literally deteriorate to the point that if you need to get your mortgage modified in order to save it from foreclosure, the MOST dangerous thing one will do is try to find a lawyer. You will be ripped of for $5,000 – $10,000 without question… and many report having been ripped of for even more.
4) Although prompted for answers almost relentlessly, the State Bar’s only interpretation of SB 94 was published by the State Bar in late 2009. It said that lawyers could not accept advance fees for loan modification services even if placed in their trust accounts. Other than that, the State Bar remained entirely mute on the subject of SB 94… until September of 2011.
5) Timeline of Events (very important to understand).
November 2010: Then State Bar President Herbert was quoted by the Cal Bar Journal, in an article titled: “State Bar Task Force Moves to Address Legislative Criticism.” In that article Herbert said:
“The legislature perceived that the bar was putting the interests of lawyers ahead of the interests of the public. We can either take steps as the bar’s board of governors to retain control of the State Bar as an arm of the Supreme Court or the legislature is going to make those decisions for us.”
July 28, 2011: Joseph Dunn, the State Bar’s CEO, was “given marching orders” by the California legislature. From an article in the Daily Journal, on July 28, 2011: CLEARING BACKLOG WILL BE TOUGH SLOG – Agency’s Mandate is to Eliminate More than 1500 Discipline Cases.
“Three weeks ago, the State Bar’s executive director demanded that the agency’s persistent backlog of discipline cases be eliminated – by year’s end. That’s 1500-plus cases reduced to zero in less than six months. To fulfill that daunting mandate, each of the state’s 55 bar investigators will have to boost by 50 percent the number of cases he or she closes or moves on to prosecutors. In addition, each of the bar’s 60 lawyers, including supervisors, will have an average of two weeks to settle or prepare detailed formal charges per backlog case. That’s on top of the 200 to 500 new cases the team gets every month.”
September 15, 2011: Suzan Anderson, the State Bar’s “supervisor and special prosecutor of the Special Team on Loan Modification Fraud,” appears as a speaker at the bar’s annual meeting in Long Beach. Her message is that the State Bar would now be “interpreting” SB 94 very differently than in the past (although the first page of her slide show says that her opinions do not reflect those of the State Bar as they have not be adopted by the Board of Governors.)
January 6, 2012: THE RECORDER runs a story titled: Zero Hour for the State Bar. It begins as follows:
“Cut the California State Bar’s backlog of attorney discipline investigations. To zero. And do it in four months. Legislators in Sacramento were hounding the Bar about the backlog. State Bar Executive Director Joseph Dunn recruited Kim from the U.S. attorney’s office in Los Angeles to get results on the long-standing problem.”
6) The Reign of Terror Begins: Beginning in the fall of 2011, and increasing in speed and ferocity after January 1, 2012, the State Bar begins using its newly concocted interpretation of SB 94 as a hammer to threaten and strong-arm lawyers who have received a bar complaint into accepting discipline without the Bar investigating or having a trial, at which, they assure the attorney, they will win.
Because trials and investigations TAKE TIME. And that’s the one thing the Bar’s executive director does not have… TIME. Joe Dunn has been given his marching orders and by God he and his OCTC, Jayne Kim will have that backlog cleaned up by years’s end… even if they have to ignore the law and use tactics often depicted in movies about a corrupt police force.
The State Bar’s hastily concocted “new interpretation” of SB 94 shocks lawyers throughout the state who have been helping homeowners with loan modifications in what they believed to be a compliant manner under SB 94 for over two years without a peep from the State Bar… even though the State Bar was very aware of the assumptions under which the lawyers had been working.
The State Bar’s new interpretation is seriously and obviously flawed for the following reasons: A. Inconsistent with a plain reading of the statute (in fact, it entirely ignores one section of the statute). B. Is not supportive of the legislative intent as described in the legislative committee notes. C. And perhaps most incredibly… is completely inconsistent with the interpretation of California Attorney General Harris and Governor Brown, as clearly stated in their Motions to Dismiss and Reply Brief in the DUENAS CASE, filed with the United State District Court, Northern District of California: March 17, 2011.
BUT… since the State Bar was ALSO a Defendant in DUENAS… D. Their new “interpretation” also entirely contradicts their interpretation as clearly presented to the court in the Bar’s Motion to Dismiss also in the DUENAS CASE. Filed in the United State District Court, Northern District of California: March 17, 2011.
The judge in DUENAS, The Honorable Richard Seeborg, AGREED with the State Bar, AG and Governor and dismissed the case.
7) The State Bar’s tactics work quite well for a short time. With SB 94 being a criminal statute, no lawyers were willing to risk losing at trial in State Bar Court, as a conviction could mean the end of their law careers. So, one by one, they accepted the discipline offered by the State Bar, without any time consuming defense, with Joe Dunn checking off quick wins on the score card he’d show the legislature as proof of having cleared up the backlog as promised.
8. What the Bar’s Numbers Show and Don’t Show – The State Bar would not provide clear evidence of what was achieved. According to THE RECORDER in January 2012: “… it’s difficult to get a clear picture of what she’s (Kim) achieved. The Bar says the backlog is now at zero, but won’t provide a breakdown of how many of the resolved investigations actually led to disciplinary charges.”
“Consideration of formal charges?” Her numbers make any assessment of her effectiveness impossible. But, I don’t even care about that.
9. How does this relate to SB 94 and loan modification services? Kim’s numbers are very helpful when comparing them with the numbers of lawyers accused of some sort of violation related to SB 94 or providing loan modification related services. According to the State Bar, they have pursued disciplinary charges related to loan modification services involving 153 attorneys. Of those, ONLY 69 have been disciplined in some way, which could mean being required to attend an ethics class, or it could mean a temporary suspension.
A lawyer I know quite well, who has practiced for 35 years without a single blemish on his record, was hauled into the Bar’s interpretive web early in 2012 and like all the others, offered “a deal.” How did 3 years suspension sound? Not good… the answer was no. How about a year… no, again… this lawyer had done nothing wrong and wouldn’t take the deal. He told them he wanted to go to trial. So, they offered him the “attend the ethics class” option. And he took it.
From a three-year suspension, which I would argue could cost a lawyer $1 million, to… traffic school, basically.
10. Where I Enter the Picture, Why I Won’t Let This Go – I am an advocate for homeowners struggling to get through this economic downturn. For over four years now, I have written a widely read blog that covers the political, economic, social and legal aspects of the financial and foreclosure crisis. I have never charged a homeowner or a lawyer a nickel having anything to do with their foreclosure or potential foreclosure. I have written over 850 articles and my site has had 6.3 million unique visitors since I began in 2008.
The lawyer I referenced just above is one that I know very well… but I know many others as well, and none of them are willing to come forward and speak out against the State Bar, understandably for fear of reprisal, which could mean disbarment. Their only crime? Helping homeowners avoid foreclosure by getting their loans modified.
And that is entirely unacceptable to me. It should be deeply offensive to all attorneys in California and across the country. Those lawyers have saved homes, and saved lives, and the fact that the State Bar would question that is only a testament to their individual and institutional ignorance.
Facing foreclosure means weighing options: loan modification, short sale, Deed in Lieu, Chapter 13 Bankruptcy, litigation, default… and it means understanding the ramifications of each option… tax implications, deficiency judgments, impact to credit scores, the signing of new contractual agreements… what other type of person could one possibly rely on to address those topics if not an attorney licensed to practice law in your state?
SB 94 was never the right way to protect homeowners from scammers. To do that, you need to make legitimate assistance abundant, and SB 94 had the opposite effect, it made legitimate assistance nonexistent. If you truly want to protect homeowners from scammers, you need to direct them to where they can find help… you need to regulate… create a special registry of attorneys… impose continuing education requirements… it’s not impossible… all we have to do is care.
I’ve written about this topic on numerous occasions and much detail can be found in those articles. Here are a few to consider:
Through a Glass Darkly – The State Bar’s Lack of Transparency on Loan Mod Lawyers (Guest Post, David Cameron Carr, Esq.)
It’s quite possible that those that have been involved in this travesty think they’re protecting homeowners from scammers… they believe the lawyers involved in helping homeowners provide nothing of value…. what they know about getting a mortgage modified is so insignificant as to cause embarrassment, if they knew enough to be embarrassed.
Going on six years into the crisis, there’s just no excuse for our institutional knowledge to be at the same level it was four years ago… our institutions owe California’s homeowners more than that. The state’s total homeowners at risk of foreclosure now approaches one million, and with the damage caused by foreclosures unbelievably costly to the state itself, anyone considering our existing budget deficit should find apathy maddening.
It’s quite clear what’s happened here and both Executive Director Joseph Dunn and interim OCTC Jayne Kim should resign immediately. What they’ve done is unethical at the very least. In their positions, however, what they’ve done demonstrates that they are untrustworthy. And a person that cannot be trusted to uphold the highest ethical standards at all times cannot be allowed to lead the California State Bar Association.
My name is John Wright AND I AM FIGHTING BACK!
All Rise! .The Honorable Judge Wright has left The Courtroom of Public Opinion!
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