February 19, 2013

By: Florida’s LPS Enters Into NPA To Settle Docx Mortgage Fraud Case — Will Pay $35 Million

DOJ has announced that Lender Processing Services Inc. (LPS) has agreed to pay $35 million in criminal penalties and forfeiture to address its participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents.  The settlement follows the November 2012 felony guilty plea by Lorraine Brown, the former CEO of wholly owned LPS subsidiary DocX LLC.  Brown admitted to her leadership role in the scheme.

The take home points from the LPS settlement ring familiar…Soon after discovering the misconduct at DocX, LPS conducted a thorough internal investigation, reported all of its findings to the government, cooperated with the government’s investigation and effectively remediated any problems it discovered.

The NPA requires the company to make the payment and meet a series of other conditions. The LPS deal demonstrates the value of companies taking a proactive approach when pursuing NPAs. The company has already taken a number of remedial actions to address the misconduct at DocX. According to DOJ, LPS has wound down all of DocX’s operations, re-executed and re-filed mortgage assignments as appropriate and terminated Brown and others. LPS has also demonstrated changes in its compliance, training and overall approach to ensuring its adherence to the law, and has retained an independent consultant to review and report on LPS’s document execution practices; assess related operational, compliance, legal and reputational risks; and establish a plan for reimbursing any financial injuries to mortgage servicers or borrowers.

According to the statement of facts accompanying the agreement, employees of DocX, at the direction of Brown and others, falsified signatures on mortgage related documents. Through this scheme and unbeknownst to the clients, Brown and subordinates at DocX directed authorized signers to allow other, unauthorized personnel to sign and to have documents notarized as if they were executed by authorized signers.

DOJ further indicated that Brown hired temporary workers to sign as authorized signers. These temporary employees would sign mortgage-related documents at a much lower cost and without the quality controls represented to clients. These documents were then falsely notarized by employees at DocX, allowing the fraud scheme to remain undetected. After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country.

The take home points from the LPS settlement ring familiar but are nonetheless instructive. DOJ announced that its decision to enter into the NPA was based on several factors. Soon after discovering the misconduct at DocX, LPS conducted a thorough internal investigation, reported all of its findings to the government, cooperated with the government’s investigation and effectively remediated any problems it discovered.