Lender Processing Services Inc. (LPS) has announced that it has entered into a Non-Prosecution Agreement with the U.S. Department of Justice (DOJ) that resolves inquiries made by the U.S. Attorney's office for the Middle District of Florida. Under terms of the settlement, 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 one million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States. The settlement, which follows a felony guilty plea from the chief executive officer of wholly owned LPS subsidiary DocX LLC, was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Middle District of Florida Robert E. O’Neill.
The settlement agreement includes a payment by LPS of $20 million to the United States Marshals Service and $15 million to the United States Treasury. As part of this agreement, LPS confirmed its ongoing commitment to compliance and internal controls. On Feb. 7, 2013, the company announced its fourth quarter 2012 financial results, including a legal reserve balance of $223 million covering this settlement and others announced previously.
“The conclusion of the Justice Department’s inquiry is another positive step for LPS,” said Hugh Harris, LPS president and CEO. “Coupled with recent settlements with multiple state attorneys general, as well as other litigation, LPS has effectively dealt with its legacy issues related to past business practices and is squarely focused on delivering leading technology-driven solutions to enable the mortgage industry to meet its new requirements.”
According to the statement of facts accompanying the agreement, before its wind-down, DocX was in the business of assisting residential mortgage servicers with creating and executing mortgage-related documents to be filed with property recorders’ offices throughout the United States. Employees of DocX, at the direction of Brown and others, falsified signatures on the 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. These signing practices were used at DocX from at least March 2003 until late 2009, and were implemented to increase profits.
Also to increase profits, 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, Lorraine Brown, the former CEO of DocX LLC who pleaded guilty on Nov. 20, 2012 in federal court to conspiracy to commit mail and wire fraud, authorized DocX employees to file and record them with local county property records offices across the country. Many of these documents—particularly mortgage assignments, lost note affidavits and lost assignment affidavits—were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions.