“Gardner said the case hit a potential challenge in November 2012, when Lorraine Brown, a former chief executive of Lender Processing’s DocX LLC subsidiary, pleaded guilty to engaging in a scheme to file fraudulent documents in foreclosures.
As part of her plea, Brown admitted taking steps to conceal the actions of herself and others from, among others, Lender Processing headquarters. That made it an “extreme challenge to trace knowledge up to senior LPS executives,” Gardner said.”
NEW YORK (Reuters) – Mortgage servicing company Lender Processing Services Inc has agreed to pay $14 million to settle claims the company misled investors about improper practices underlying its business model, including the “robo-signing” documents, in connection with foreclosures.
The company’s settlement, disclosed in papers filed last week in U.S. District Court in Jacksonville, Florida, marked the latest securities class action settlement to spill out of the U.S. housing market crash and subsequent financial crisis.
Filed in 2010, the lawsuit accused Lender Processing and several executives of making false or misleading statements related to an alleged practice of improper “fee splitting” and of engaging in illegal document-filing practices related to foreclosures.
Following a series of disclosures about its allegedly improper business practice, Lender Processing’s stock fell 18 percent from April 2009 to October 2010.
The settlement, disclosed May 6, represents a “decent chunk of estimated damage in the case,” said lead plaintiffs’ counsel Jonathan Gardner of Labaton Sucharow, though he declined to say how much that totaled.
“We think it’s a good recovery,” he said.
Neither Lender Processing counsel Lyle Roberts of Cooley nor a company spokeswoman responded to requests for comment on Friday.
The settlement will add to the sums Lender Processing has already agreed to pay in order to put behind it a variety of enforcement and legal matters related to allegations it fraudulently signed and notarized mortgage documents throughout the United States.
In January, the company said it would pay $127 million as part of a multistate settlement with attorneys general in 46 states and the District of Columbia.
In February, Lender Processing entered into a non-prosecution agreement with the U.S. Justice Department and paid $35 million to settle an investigation into its mortgage document signing practices.
In the securities class action, Gardner said the plaintiffs saw an opportunity to settle the case in January, when Lender Processing began trying to put many of its legal liabilities behind it.
At the time of the $127 million accord, the company said it had reserved $14 million for a securities fraud settlement as part of a $48 million increase in its legal reserves.
Before then, the lawsuit had faced challenges. In March 2012, U.S. District Judge Timothy Corrigan dismissed the case without prejudice. While the judge said statements at issue made by the defendants “could be found to be false or misleading,” it had not adequately alleged they made the misleading statements deliberately.
The plaintiffs, led by the Baltimore County Employees’ Retirement System, filed an amended complaint in May 2012. Motions to dismiss had been fully briefed by the time the settlement was reached.
Gardner said the case hit a potential challenge in November 2012, when Lorraine Brown, a former chief executive of Lender Processing’s DocX LLC subsidiary, pleaded guilty to engaging in a scheme to file fraudulent documents in foreclosures.
As part of her plea, Brown admitted taking steps to conceal the actions of herself and others from, among others, Lender Processing headquarters. That made it an “extreme challenge to trace knowledge up to senior LPS executives,” Gardner said.
The case is City of St. Clair Shores General Employees’ Retirement System v. Lender Processing Services, Inc., U.S. District Court, Middle District of Florida, No. 10-01073.
For the plaintiffs: Jonathan Gardner of Labaton Sucharow.
For Lender Processing Services: Lyle Roberts of Cooley and Charles Pillans and Patrick Coll of Bendell, Dittmar, Devault, Pillans & Coxe.
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