Monday, April 18, 2016

False Promises In Ads, Other Misconduct, Get Attorney Disbarred

A justice of the Massachusetts Supreme Judicial Court has disbarred an attorney admitted in 2006 for a wide array of ethics violations in his loan modification practice.

The misconduct involved splitting fees, false and misleading print, radio and web advertising, charging illegal and excessive fees and other violations.

According to the Board of Bar Overseers, the attorney had

"systematically extracted illegal and excessive fees from numerous vulnerable and desperate clients with · deceptive advertisements/ misleading contractual arrangements/ and deceptive and useless services such as 'the 'lender benefit analysis' and the 'forensic loan audit.' In addition he engaged in unlawful fee--splitting to provide his partner and his employees with the financial incentive to use these machinations to enhance his personal financial interest at the expense of his  clients."

Justice Lenk rejected the attorney's more benign explanations regarding his business-getting approach

The advertisements also contained other intentional, significant, and serious omissions that made them highly misleading. Listeners were not told that none of their money would be refunded, even if they did not meet the prequalification. requirements, the respondent never filed· a loan modification application on their behalf, or the lender declined to offer a modification or offered one on terms  the client found unacceptable. Listeners also were not told that they were statutorily entitled to a full refund if.the respondent did not obtain an acceptable loan modification offer. Nor were they informed that the particular results described by clients featured in the ads were unusual, that their situation might differ, or that the lender alone had the authority. to make a loan modification offer, on terms the lender chose. The radio advertisements also did not confirm to various requirements in the rules of professional conduct in Massachusetts'· Rhode Island, New York, and Virginia, regarding providing notification of the content of the advertisements to the proper entities (e.g., such as boards of bar overseers or attorneys general),· and retaining copies of the content for specified periods.

The justice also rejected the attorney 's proposed sanction of reprimand, noting that the misconduct spread over a lengthy period

The respondent has expressed not one iota of remorse for the harm he caused, and has engaged in no effort whatsoever to make restitution...

The respondent also apparently lacks any understanding of the seriousness of his misconduct with respect to the radio advertisements, promising that the respondent is the only lawyer who can guarantee a permanent loan modification, on impossibly unrealistic terms, and that he has relationships with well known, highly experienced attorneys in this specialized field. These advertisements, aired across the country, are not, as he claims "mere puffery" or inadvertent and sloppy use of language. As the board found they are deliberate falsehoods concerning the nature of the respondent 's essentially sole practitioner firm (otherwise staffed by nonattorneys  apparently working on a commission basis), and the results the respondent would be able to achieve given the best possible outcome.

The State Attorney General had this report on sanctions imposed on the attorney last year

A Revere attorney and his two businesses have been ordered to pay more than $625,000 for targeting homeowners with deceptive advertisements and demanding thousands in illegal advance fees for mortgage modification and foreclosure relief services they failed to deliver, Attorney General Maura Healey announced today.

“At a time when homeowners were struggling to afford their mortgages, this attorney abused his clients’ trust and deliberately exploited their financial circumstances by demanding exorbitant fees based on false promises, leaving these homeowners even more vulnerable,” AG Healey said. “This judgment puts an end to these deceptive and unfair practices and confirms that those who seek to capitalize on the foreclosure crisis will be held accountable.” 

The final judgment links to PDF file, issued by Suffolk Superior Court Judge Paul Wilson against David Zak and his businesses Zak Law Offices, P.C., and Loan Modification Group, Inc., finds defendants liable under the state’s Consumer Protection Act. The court found that the defendants preyed upon at-risk homeowners throughout Massachusetts who were facing the imminent loss of their homes, took unlawful advance fees based on deceptive guarantees that mortgage loans could be modified to prevent foreclosures.

The judgment requires the defendants to pay more than $625,000, including $400,000 in civil penalties, more than $68,000 in attorney’s fees and costs, and $157,000 in consumer restitution for approximately 65 former clients who complained to the AG’s Office about the deceptive practices and unlawful advance fees.

As found by the Superior Court, the defendants targeted Spanish and Portuguese-speaking homeowners with misleading radio advertisements guaranteeing dramatic loan modifications and legal representation to avoid foreclosure. The defendants failed to disclose in the advertisements that there was no guarantee of success, when in fact they had failed to obtain the promised modifications for most of their clients. 

On the basis of these false promises, and in violation of Massachusetts law, the defendants demanded non-refundable advance fees of $5,000 or more from distressed homeowners – when foreclosure relief services were available for free elsewhere – only to fail to deliver on their promises, leaving homeowners even more at risk of foreclosure. 

Under the terms of the judgment, Zak and his companies are enjoined from engaging in deceptive advertising or soliciting, arranging or accepting advance fees for mortgage assistance or foreclosure-relief services.

In 2007, the AG’s Office issued regulations that prohibit soliciting or accepting an advance fee in connection with foreclosure-related services – with certain limited exceptions for licensed attorneys preparing bankruptcy filings or court proceedings to avoid foreclosure – or advertising services without disclosing exactly what is offered to avoid foreclosure, among other unfair practices.

This discussion of the above findings om MFI- Miami 

Hearing Officer Betty Waxman determined that Zak specifically targeted Latinos with deceptive advertisements for mortgage modification services and misled Spanish and Portuguese-speaking clients with unrealistic and often false guarantees about securing dramatic loan modifications. Evidence introduced in the case showed that Zak opened an office in Revere, Mass. because he believed its Latino community would be “easy targets” and gullible.

Zak used radio and written advertisements in Spanish and Portuguese to contact Latino homeowners having difficulty making mortgage payments, falsely claiming to have saved hundreds of Latinos from foreclosure, promising to cut their mortgage payments in half, asserting that he was the only attorney in Massachusetts who knew how to do loan modifications, and boasting that he had a “secret formula” and “magic numbers” unknown to others for obtaining loan modifications.

Atty. Zak even hired a “Coordinator of the Latino Market”, who was charged with leveraging her extensive network of contacts in the Latino community to recruit agents and clients.

Waxman found that Zak charged Latino clients inflated and duplicative fees for services that were available elsewhere for free, encouraged them to intentionally fall behind on mortgage  payments, failed to adequately translate documents, misrepresented the status of clients’ cases, performed minimal, substandard work—often failing to secure promised mortgage modifications, refused to provide appropriate refunds, and engaged in threats, intimidation, and demeaning conduct.

(Mike Frisch)

Bar Discipline & Process | Permalink


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