A former executive at a mortgage records company pleaded guilty on Tuesday to a scheme to file fraudulent documents used in foreclosures, a rare prosecution of a top-level employee following the so-called robo-signing scandal.
Lorraine Brown, 56, the former president of LPS Document Solutions, part of Lender Processing Services Inc LPS.N, pleaded guilty in U.S. District Court in Jacksonville, Florida, to conspiracy to commit mail and wire fraud from 2003 to 2009.
LPS was not charged with wrongdoing. It said in a statement that it fired Brown and shut down her unit's operations when it discovered the fraudulent practices in November 2009. It said it has fully cooperated with all government investigations into these matters.
The "robo-signing" scandal emerged in 2010 involving allegations that banks pursued faulty foreclosures by using defective or fraudulent documents. In February 2012, five big U.S. banks agreed to a $25 billion deal with 49 state attorneys general and the federal government to end an investigation into foreclosure practices including robo-signing.
"Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis," Assistant Attorney General Breuer said in a statement. "She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others."
Separately, Brown, of Alpharetta, Georgia, also has agreed to plead guilty to Missouri state charges of forgery, perjury and a misdemeanor count of making a false declaration, according to the office of Missouri Attorney General Chris Koster.
Mark Rosenblum, Brown's attorney, said in a statement that Tuesday was a "difficult day" for his client.
"By negotiating a settlement to her situation and entering her guilty plea, Lori has started the process of getting on with the rest of her life," he said.
Brown had been the president of DocX LLC, which was acquired by an LPS predecessor company and was later rebranded when LPS was formed as a stand-alone business in 2008.
According to Brown's plea agreement with the Justice Department, she and unnamed co-conspirators directed DocX employees to forge and falsify signatures on mortgage-related documents that were then filed with property recorders' offices and in courts.
The practice was known internally as "Facsimile Signature" and later "Surrogate Signing," according to the federal court documents.
According to the court papers, DocX charged mortgage services about $5 to $15 per document, and hired temporary workers to sign thousands per day. The firm grossed approximately $60 million between 2003 and 2009, the court papers said.
"Robo-signing has been lightly defined as employees of mortgage servicers signing too many documents too fast without reading them," said Lisa Epstein, a foreclosure activist in Florida.
The federal charges against Brown carry a maximum potential penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss from the crime. No sentencing date has been set. As part of the plea agreement, Brown agreed to cooperate with ongoing prosecutions of others in the case.
In the Missouri case, Brown will face a prison term of two to three years, according to the state's attorney general.