ATTORNEYS IN LOAN MODIFICATION SCAM FACING DISCIPLINE

Media Contact: Laura Ernde                           415-538-2028                         laura.ernde@calbar.ca.gov

San Francisco, April 13, 2012 – Two Southern California attorneys are facing disbarment and a third faces a disciplinary trial after a joint investigation by the State Bar’s Office of Chief Trial Counsel and the Attorney General’s Office into a loan modification scam that targeted distressed homeowners, the State Bar of California announced today.

The proposed discipline is the result of a coordinated effort in August 2011, when the State Bar and the Attorney General’s Office shut down law firms and marketing companies suspected of running a so-called “mass joinder” scam.

  • Philip A. Kramer (bar number 113969), 52 of Calabasas, has agreed to be disbarred. In a stipulation accepted Friday by the State Bar Court, Kramer admitted to numerous counts of misconduct including his collection of illegal fees, failure to return advanced fees, and accepting employment in states where he was not licensed to practice law. Kramer also agreed to pay $122,000 in restitution to 27 former clients as part of the stipulation.

  • Paul W. Petersen (bar number 170922), 51, of Irvine, is facing disbarment by default after he failed to appear in State Bar Court for a March 27 trial on various counts of misconduct including allegations of improper solicitation, unlawful collection of advance fees, failure to refund fees, and failure to perform services competently. Under the State Bar’s Rules of Procedure, unless the default is set aside, the State Bar Court will recommend Petersen’s disbarment to the California Supreme Court.

  • Anthony J. Kassas (bar number 227647), 35, of Diamond Bar, faces trial on 285 counts of disciplinary charges. The formal charges, filed April 6 by the Office of Chief Trial Counsel, include allegations that Kassas improperly solicited clients, collected unlawful advance fees, failed to provide proper accounting of funds and aided the unauthorized practice of law by non-lawyers.

Disbarment and the imposition of discipline are effective only upon written order by the state Supreme Court, but all three attorneys are precluded from practicing law under orders of involuntary inactive enrollment by the State Bar Court.

Acting Chief Trial Counsel Jayne Kim said she is pleased with the progress in holding these attorneys responsible for their misconduct.

“As the leading watchdog of the legal profession, the State Bar does not tolerate unethical behavior by attorneys,” Kim said. “This disbarment recommendation brings victims of Kramer’s malfeasance one step closer to justice and exemplifies the State Bar’s commitment to public protection.”

The State Bar and the Department of Justice acted swiftly last year in obtaining court orders to put a stop to the alleged attorney misconduct. According to papers filed in Los Angeles County and Orange County superior courts, the attorneys involved had contacted homeowners through deceptive mailers that looked like official documents from mortgage lenders. The mailers contained language such as “Litigation Settlement Notification” that caused homeowners to think they were potential plaintiffs in a “national litigation settlement.” Directing homeowners to a toll-free number for assistance, the mailers contained exaggerated promises. They stated that by joining a “mass joinder” lawsuit, foreclosures would be stayed, loan balances would be reduced and the homeowners would receive monetary benefits or their homes free and clear of their mortgage. Homeowners often paid retainer fees ranging from $3,500 to $10,000 but were never contacted by an attorney or included in a mass joinder lawsuit.

The mass joinder scheme was the latest in a series of loan modification scams targeting financially strapped borrowers. The State Bar formed a task force in 2009 to pursue disciplinary charges related to loan modification services. Since February 2009, the Office of Chief Trial Counsel has pursued disciplinary charges related to loan modification services in approximately 1,186 cases involving about 153 licensed California attorneys. Of those, approximately 581 cases have resulted in discipline (involving 69 attorneys) and 18 cases have resulted in disbarment. Approximately 720 cases are still pending before the State Bar Court, with another 291 matters under active investigation.

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The State Bar of California is an administrative arm of the California Supreme Court, serving the public and seeking to improve the justice system for more than 80 years. All lawyers practicing law in California must be members of the State Bar. By April 2012, membership reached 237,000.