Kings County Judge Orders Bank CEO to Appear at Foreclosure Sanctions Hearing

Judge Arthur Schack is in the news again (some older news again and on video). In HSBC v. Taher, Judge Schack took issue with HSBC’s foreclosure paperwork including finding that the affidavit submitted by HSBC’s lawyers that the papers were in order and not “robo-signed” was false.

Initially, Judge Schack found that HSBC had no standing to commence the foreclosure action because the assignment by which HSBC claimed standing was defective. Judge Schack stated:

Mr. Cassara’s affirmation, affirmed “under the penalties of perjury,” that to the best of Mr. Cassara’s “knowledge, information, and belief, the Summons and Complaint, and other papers filed or submitted to the Court in this matter contain no false statements of fact or law,” is patently false. Moreover, the Court is troubled that: the alleged representative of plaintiff HSBC, Christina Carter, who according to Mr. Cassara, “confirmed the factual accuracy and allegations set forth in the Complaint and any supporting affirmations filed with the Court, as well as the accuracy of the notarizations contained in the supporting documents filed therewith, is not an employee of HSBC, but a robosigner employed by OCWEN LOAN SERVICING, LLC [OCWEN], whose signature on legal documents has at least three variations; the MERS to plaintiff HSBC assignment of the subject mortgage and note was executed by Scott W. Anderson, a known robosigner and OCWEN employee, whose signature is reported to have appeared in at least four different variations on mortgage assignments; and, the instant affidavit of merit was executed by Margery Rotundo, another robosigner, OCWEN employee and self-alleged employee of various other banking entities.

Finding that HSBC has been a repeat offender of this issue, Judge Schack set down a hearing to determine why HSBC and its counsel should not be sanctioned.

But all of this was in just the introduction to the Judge’s decision; he was just warming up.

After navigating the background of the loan transaction and borrower’s default, Judge Schack described how the Court searched the recorded documents for the loan being foreclosed by HSBC, and other courts’ decisions, and determined that Scott W. Anderson, the individual signing for the loan processing company (that was to service the loan), Ocwen, had also signed on behalf of MERS, and had seemed to have some relationship with the lender, Delta Funding Corporation. Remarkably, Judge Schack’s decision goes through a handwriting analysis of Mr. Anderson’s signature, which appear only as his initials (“[t]he Court concludes that it must be a herculean task for Mr. Anderson to sign ‘Scott Anderson’ or ‘Scott W. Anderson’ in full”). After analyzing five samples, Judge Schack is not only unimpressed by the lack of consistency in the signatures, but is “perplexed that in response to my order for Mr. Anderson to submit an affidavit with respect to his employment, Mr. Anderson was unable to sign either ‘Scott Anderson’ or ‘Scott W. Anderson.’ Instead, there is a fifth variation of scrawled initials. There is a big loop for the cursive letter ‘S,’ which contains within it something that looks like the cursive letter ‘M’ going into lines that look like the cursive letter ‘V, with a wiggly line going to the right of the page.”

Judge Schack then reviewed the background of another signatory to documents related to this foreclosure, Margery Rotundo. Seemingly familiar with Ms. Rotundo from prior foreclosures, Judge Schack states that she has, “in prior foreclosure cases before me, a history of alleging to be the Senior Vice President of various entities, including plaintiff HSBC, Nomura Credit & Capital, Inc. and an unnamed servicing agent for HSBC. In the instant action she claims to be the Senior Vice President of Residential Loss Mitigation of OCWEN, HSBC’s servicing agent.” After dissecting these representations, Judge Schack turns to the purported positions of other officials which signed documents supporting the foreclosure, including further handwriting analysis. Needless to say, Judge Schack was not impressed with anyone involved.

Judge Schack then details his finding that HSBC’s failure to provide an assignment document means that it has no standing to foreclose, and dismisses the action. Not satisfied with just dismissing the case but allowing HSBC to refile with the proper documents, Judge Schack dismiss the action with prejudice, precluding HSBC from refiling.

We then arrive at the part of the decision which really caught the public’s attention, the setting of the sanctions hearing. If one thought Judge Schack was giving HSBC and its lawyers a hard time before, well, they were in for much more.

For the full affect, Judge Schack’s words in discussing sanctions:

However, plaintiff HSBC did not have standing to bring the instant action and its complaint is replete with false statements. For example, ¶ 1 alleges that HSBC has an office at “1661 Worthington Road, Suite 100, P.O. Box 24737, West Palm Beach, FL 33415.” This is actually OCWEN’s office. OCWEN’s zip code is 33409, not 33415. Also, how big is P.O. Box 24737? Is it big enough to contain an HSBC office? Further, ¶ 6 alleges that HSBC is the owner of the note, which it is not. MERS had no authority to assign the note owned by DELTA to HSBC. MERS was DELTA’s nominee for recording the TAHER-consolidated mortgage but it never possessed the underlying note. (See Bank of New York v Silverberg at * 4-5). Three robosigners – Scott Anderson, Margery Rotundo and Christina Carter – are involved in this matter. Scott Anderson, who wears many corporate hats and has at least five variations of his initials scrawled on documents filed in this Court, is the alleged assignor of the subject mortgage and note to HSBC, despite lacking authority from DELTA. Both alleged assignor. MERS and alleged assignee HSBC have the same address – 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409. The milliner’s delight Margery Rotundo executed the affidavit of merit for OCWEN. Then, Mr. Cassara relied upon Christina Carter as the representative of HSBC to confirm the accuracy of HSBC’s documents and their notarizations. However, she is not employed by HSBC. Is Mr. Cassara aware of the robosigning history of Mr. Anderson, Ms. Rotundo and Ms. Carter?

Putting aside HSBC’s lack of standing, MERS allegedly assigned the TAHER consolidated mortgage and note to HSBC 169 days after defendant TAHER allegedly defaulted in her payments. If HSBC has a duty to make money for its stockholders, why is it purchasing nonperforming loans, and then wasting the Court’s time with defective paperwork and the use of robosigners? The Courts have limited resources, even more so in light of the recent cuts in the budget for fiscal year 2012 and the layoff of several hundred court employees by the Office of Court Administration. The Courts cannot allow itself, as Chief Judge Lippman said in OCA’s October 20, 2010 press release, “to stand by idly and be party to what we know is a deeply flawed process, especially when that process involves basic human needs – such as a family home – during this period of economic crisis.”

Judge Schack continues with a discussion of the history and applicability of sanctions. He then goes after HSBC’s President and CEO, Irene M. Dorner.

In the instant action, plaintiff HSBC’s President and Chief Executive Officer (CEO) bears a measure of responsibility for plaintiff’s actions, as well as plaintiff’s counsel. In Sakow at 943, the Court observed that “[a]n attorney cannot safely delegate all duties to others.” Irene M. Dorner, President and CEO of HSBC, is HSBC’s “captain of the ship.” She should not only take credit for the fruits of HSBC’s victories but must bear some responsibility for its defeats and mistakes. According to HSBC’s 2010 Form 10-K, dated December 31, 2010, and filed with the U.S. Securities and Exchange Commission on February 28, 2011, at p. 255, “Ms. Dorner’s insight and particular knowledge of HSBC USA’s operations are critical to an effective Board of Directors” and Ms. Dorner “has many years of experience in leadership positions with HSBC and extensive global experience with HSBC, which is highly relevant as we seek to operate our core businesses in support of HSBC’s global strategy.” HSBC needs to have a “global strategy” of filing truthful documents and not wasting the very limited resources of the Courts. For her responsibility she earns a handsome compensation package. According to the 2010 Form 10-k, at pp. 276-277, she earned in 2010 total compensation of $2,306,723. This included, among other things: a base salary of $566,346; a discretionary bonus of $760,417; and, other compensation such as $560 for financial planning and executive tax services; $40,637 for executive travel allowance, $24,195 for housing and furniture allowance, $39,399 for relocation expenses and $3,754 for executive physical and medical expenses.

Judge Schack then set a hearing to determine what sanctions if any he should assess. Seems like a pretty good bet that he will not let anyone off without inflicting pain. HSBC’s lawyers asked the Appellate Division for a stay of the hearing, which seems to have been denied.

This is not the first time judges, particularly in Kings and Suffolk counties, have dismissed foreclosure actions with prejudice to refile because of paperwork irregularities or a bank’s refusal to negotiate (some are discussed below). While taking a bank to task in these situations is a good thing, allowing judges free reign to fashion draconian measures may backfire. At least one of those decisions was reversed and another resulted in a settlement while the appeal was pending. Its probably time for one or more of the Appellate Division courts to issue firm guidelines for dismissal with prejudice of a foreclosure action.

Update: Ms. Dorner did not appear at the hearing. When Judge Schack asked for her, he was told that she was out of the country and appearing through counsel. HSBC tried to appear in its corporate capacity, but the judge refused to allow that. Judge Schack did not issue a decision on sanctions but promising that the bank would hear from him “eventually.”

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