Amid the human wreckage of the biggest housing market
collapse since the Great Depression, San Diego's Michael T. Pines has a lot of explaining to do. The stocky, 60-year-old real estate attorney had promised his hapless clients that he would do everything he could to reclaim their foreclosed homes. But disbarment from the legal profession, multiple jail stints, and having a judge question his mental stability were surely not among his goals.
"Being a crusader is in my DNA," Pines told me recently. "When I see injustice, I act. It's my biggest flaw because it's gotten me into nothing but trouble."
One of his most loyal supporters puts it another way: "He doesn't recognize when he is going off the track," says Moveon.org organizer Carolyn Zellander. "He has been in counseling and is learning that part of himself."
Pines also remains in personal bankruptcy after filing Chapter 7 in 2010. (In re Pines
, No. 10-296 (Bankr. v. S.D. Cal.
, filed Jan 11, 2010).) And at one point he was living with his mother and stepfather.
Pines has been arrested at least four times over the past three years, and he estimates that he's spent at least six months in jail. Most of his arrests stemmed from advising clients to hire locksmiths to break into the homes they had lived in until the banks took them over. Pines likens this to taking back a stolen car. "If somebody steals your car and they're trying to resell it with forged documents and you know where it is, I have an obligation to tell you to call the police, go there, get your car, and change the locks if you have to. So we started to do that."
It was only a matter of time before this strategy blew up in his face. But before it did, Pines managed to convince himself that by turning the house break-ins into media events, he could shame the government and banks into "doing the right thing." Or so he says.
"People say to me, 'You're really a funny criminal,' " he allows. " 'Every time you commit a crime, you call the press in to record it.' "
The State Bar judge who presided over one of Pines's disbarment hearings in April 2011 proved unsympathetic.
"In [Pines's] view, seemingly everyone associated with the present foreclosure matters, including the banks, the police, title companies, real estate agents, and even the Office of the Chief Trial Counsel of the State Bar of California, is involved in criminal conduct," wrote Judge Richard A. Honn.
"Throughout modern time," Honn continued, "attorneys have been at the forefront of the war against corruption and injustice. This battle, however, is waged in the courtroom and not in the streets. Attorneys are litigators, not vigilantes. Although [Pines] is a seasoned attorney, he seems to have lost his ability to distinguish between zealous advocacy and lawlessness." (In the Matter of Pines
, No. 11-TE-10948, order filed Apr. 28, 2011.)
The line is one that Pines has freely straddled, even when it's least served his interests. In 2011, for example, Pines was charged with stalking a purchaser of a house in Carlsbad that his clients lost in foreclosure. But that did not deter him from speaking out in court for most of an hour about a series of purported criminal conspiracies, as well as accusations that San Diego District Attorney Bonnie Dumanis was aiding and abetting banks in the theft of people's homes. "I don't want to insult you," the judge finally said to Pines, "but frankly ... in some areas, I think you are delusional." (Pines never proved any misfeasance on the part of Dumanis or the San Diego County DA's office, but he did plead guilty to criminal stalking, violating a temporary restraining order, and interfering with a police officer.)
To be sure, Pines is not the only lawyer in California who has faced disciplinary action after promising foreclosure relief. In fact, State Bar CEO Joe Dunn calls this practice area "the No. 1 disciplinary challenge" his organization faces. From February 2009 to December 2012, the State Bar processed roughly 12,000 complaints against lawyers who allegedly sold clients worthless foreclosure relief services of one sort or another. Of those, 396 cases resulted in disbarments, and at this writing another 284 matters were under active investigation by the Office of Chief Trial Counsel. "Most of our cases come from angry clients," says investigator Tom Layton, who worked on the State Bar's Mortgage Fraud Task Force before it was reorganized in September 2011. "We weren't ready for this kind of volume."
Many of these bad actors are shameless con artists taking advantage of people desperate to hang on to their houses. Others started out with good intentions but then made serious ethical mistakes along the way. A recently disbarred Marin County lawyer named Sharon Lapin appears to fall into the latter category. The sole practitioner got into hot water after answering a Craigslist ad seeking contract lawyers. "Join our cause fighting Predatory Lending Practices," read the ad, posted by a group called US Legal Advisors. Lapin signed on, but even when her disbarment was imminent she continued to insist that she was the real victim in this mess. "I feel terrible for all the homeowners losing their homes," she told me during a break in her State Bar trial in August, adding, "They had toxic loans to begin with."
And yet, for all the lawyers who have been drawn to this type of work, Michael Pines is in a league of his own. To talk with him, as I have many times, is to converse with an experienced and articulate attorney. And if you're willing to abandon all faith in the integrity of our courts and our banks, then Pines can actually start to make some sense. Even the State Bar's Dunn allows that Pines makes a good first impression. "I can understand, given his character and personality, why homeowners would follow him," says Dunn, who was curious enough about Pines to attend one of his disciplinary hearings.
A 1977 graduate of the University of San Diego School of Law, Pines was a fairly conventional real estate lawyer until the savings and loan crisis hit in the 1980s and several of his clients found themselves at odds with the Resolution Trust Corporation. It was during that period, he says, that he realized the fundamental corruption of the entire process of securitizing and reselling mortgages on Wall Street.
Two decades later, on the eve of a much larger financial crisis, Pines rebuffed an offer to do some consulting work for the Federal Reserve Bank of New York, and instead began counseling homeowners to break into their foreclosed homes.
As the real estate meltdown continued, community groups and nonprofits sprang up all over the state in an effort to help distressed homeowners. One of these, the San Diego Foreclosure Strategists Group, got its start in 2010 when Carolyn Zellander called a community meeting to "educate people on why this was happening." At the outset, she asked for a show of hands to determine how many were either in foreclosure themselves or knew someone who was. All 50 people in the room raised their hands.
Last March, both Zellander and Pines attended an event at a Lions Club where District Attorney Dumanis was to appear. Zellander and others planned to pepper Dumanis that night with pointed questions about why she wasn't standing up for distressed homeowners, but Pines pretty much stole the show by expressing himself at length.
Zellander found in Pines a fellow traveler. She also discovered that because of his notoriety he could be counted on to draw a crowd. "People would come [to Foreclosure Strategists Group meetings] because Michael Pines would be there," she attests. At present, the group has about 10 dues-paying members, and as many as 30 others regularly attend its weekly meetings at a branch library.
When I recently interviewed several of the group's members, however, we agreed to meet in a downtown hotel lobby. Among them was a young legal assistant named Margarita McDaniel who told me how distressed she was when two people, forced from their homes by the law firm she worked for, committed suicide within a span of two months. (After leaving that firm, McDaniel worked briefly for a trial lawyer named Raymundo Pacello Jr., who takes homeowner referrals from the Foreclosure Strategists Group and also represents Pines in some of his criminal proceedings.)
I also met Matthew Anderson, a former client of Pines who, after losing his home, sued Wells Fargo to challenge the foreclosure and stop the bank from reselling the house. "We are all being beleaguered by forces we cannot control," he told me. Anderson's lawsuit seeks $24 million in punitive damages. (Anderson v. Wells Fargo Bank
, No. 37-2012-79073 (San Diego Super. Ct. filed Oct. 24, 2012).)
When I asked Anderson whether he was at all concerned that the lawyer advising him was himself in so much trouble, his answer took me aback. "No," he responded. In fact, he added, Pines is trustworthy precisely because
he's gotten into trouble with a system that's so corrupt.
Before I left the hotel I got another chance, too, to talk to Pines, who at one point told me that he would not let disbarment stop him from urging foreclosed homeowners to break into their former homes - although he was careful to add that he would no longer do so for a fee.
"But even without charging anyone, wouldn't that violate the restrictions that the State Bar placed on you?" I asked. "Probably" he acknowledged. "They'd say I was practicing law without a license or advising people to engage in self-help." But if that's true, "then all the commentators on TV are practicing law without a license," he added.
I had concluded by then that Pines was more self-destructive
than dishonest. (As Zellander told me, "He kind of goes blind. He doesn't seem to be able to make a good judgment call.")
The same, however, cannot confidently be said of the hundreds of other lawyers who offered to help clients retain their homes but offered them little, if anything, of real value.
"People are vulnerable, desperate," says Diana Castillo, an attorney at Santa Clara County's Fair Housing Law Project. "They are relying on the professionalism of the legal profession."
To protect unsuspecting homeowners, the State Bar, the state Attorney General's office, the Department of Real Estate, various district attorneys and U.S. Attorneys' offices, and now the new federal Consumer Financial Protection Bureau have been stepping up enforcement efforts against foreclosure relief scams. Setting up task forces, issuing consumer warnings, and filing lawsuits, these various agencies have brought down operations across California. But as long as troubled homeowners have hopes of keeping a roof over their heads, unscrupulous people will try to profit from their distress.
"Lawyers are involved at some level in most of the scams," says the State Bar's Dunn.
Take the cases of two Southern California attorneys, Mitchell J. Stein (who also calls himself "The Doberman") and Philip A. Kramer. The pair presided over an operation that employed about 100 marketers to send millions of official-looking mailers to distressed homeowners, inviting them to become "named plaintiffs" in litigation that would result in either a big settlement or loan forgiveness. When the homeowners responded, the marketers would instead persuade them to participate in flimsy mass joinder lawsuits, charging them fees of $3,500 to $10,000 apiece.
All of this came to light in August 2011, when the state Attorney General's office, acting jointly with the State Bar, shut the operation down.
Since then Kramer, now disbarred, has admitted to collecting illegal fees, failing to return advance fees, and accepting employment in states where he is not admitted to practice law. Kramer also agreed to pay restitution of about $122,000 to 27 former clients. (In the Matter of Kramer
, No. 10-0-4002 (stipulation filed Apr. 13, 2012).) His colleague Stein, however, remains defiant, filing no fewer than six lawsuits against various branches of the state and federal government. Stein claims, among other things, that his civil rights were violated and that when Attorney General Kamala Harris acted against him she was merely doing the bidding of Bank of America. In late 2011 the State Bar placed him on involuntary inactive enrollment. (In the Matter of Stein
, No. 11-TR-18758, order filed Dec. 29, 2011.)
Another big scam that investigators zeroed in on was orchestrated by US Legal Advisors, the operation that Marin County attorney Sharon Lapin latched on to. After seeing US Legal's job posting, Lapin learned that the company's chief counsel was James Sandison, an old law school chum. She met with him in Sacramento and subsequently started working for him as an independent contractor in August 2009.
Within weeks of taking the job, Lapin, who worked out of her houseboat, had filed about 130 actions in federal courts around the state. Marketers would lure the clients using a new form of flim-flam called forensic loan audits (FLAs), which were packaged as home loan analyses to get around the Civil Code sections (2944.7 and 2945.4) that prohibited lawyers from charging up-front fees for loan modification or consulting services. These FLAs, though, were usually worthless documents spat out of computers operated by nonlawyers, used chiefly by marketers to up-sell homeowners into filing lawsuits.
Since the audits almost always found irregularities in the loans, Lapin had a lot of work filing lawsuits - so much, apparently, that she didn't have much time to communicate with the clients. But US Legal nevertheless charged them for her services (usually half of the monthly mortgage amount, which it auto-debited from their bank accounts each month). In turn, Lapin was paid $250 per client per month, for "costs," which over 14 months totaled about $177,000. She kept no time sheets or records to justify the reimbursements.
Soon enough, Lapin was inundated with motions to dismiss these cookie-cutter complaints. And by early 2010, she recalls, "it all hit the roof."
In November 2012, after Lapin had missed court filing deadlines in nearly 20 cases, the State Bar Court formally approved her disbarment. "She has no remorse and does not accept responsibility for her actions," Judge Lucy Armendariz wrote in her decision after an eleven-day disciplinary trial last summer. "She continued to make excuses and rationalized her fraud." (In the Matter of Lapin
, No 10-0-3758, order filed Nov. 7, 2012.)
Sandison, US Legal's chief counsel, has been disbarred as well. He insists that the company's biggest mistake was having too high a profile. "Instead of going to people and saying, 'Let us audit your loans,' and giving cases to attorneys, we should have stayed more in the background," he says.
Pines begs to differ.
He says the key mistake that foreclosure relief lawyers make is letting the loan auditors run the show. "You should never have the tail wagging the dog," he says. "The lawyer has to take the lead, and everyone has to work for the lawyer."
But for those who have been driven from their homes, Pines's guerrilla tactics don't appear to have been effective either. Consider the fate of Danielle Earl. She and her husband lived with a bevy of adopted and foster children until 2010, when they lost their Simi Valley home in foreclosure. They filed their own lawsuit against the lender but admitted that they had no idea what they were doing; in July of that year, the sheriff locked the Earls out. But by then Earl had consulted with Pines, who advised her that the loan paperwork was fraudulent and the house was still rightfully theirs.
As was his MO, Pines suggested that Earl hire a locksmith to break back into the house. What he didn't tell Earl, though, was that on the day of the break-in he intended to call a news conference right in front of the property. Of course, the family was soon forced out again. "I feel bad for Pines," says Earl, who to this day doesn't blame Pines at all for what happened. "I still believe the house is ours and that it was stolen from us."
Since then, Pines's situation has only gotten more complicated. In fact, last fall I learned that he had failed to appear at a sentencing hearing involving yet another criminal matter. (People v. Griffith
, No. SCN 308330, filed July 30, 2012.) According to prosecutors, he and a former client of his - ex-NFL safety Robert O. Griffith - tried to extort $1.25 million from the renter of Griffith's Rancho Santa Fe house. (Pines says the money was demanded in exchange for a "non-disparagement" agreement with the renter, who, he says, had failed to pay rent for a year and had been using illegal drugs on the property.) This time the court issued a no-bail warrant for Pines's arrest. In mid-October, Pines was arrested in Mexico and brought back to a San Diego jail, where according to Zellander he was put on a suicide watch. (Pines pleaded guilty to felony extortion, practicing law without a license, and trespass, and in late November he was released with a three-year suspended sentence.)
"He could have had a good life," Zellander laments. "All he had to do was play the game."
Of course, Pines was
playing a game of sorts. But it was a game he couldn't possibly win
Many lawyers have gotten into trouble for failing to deliver foreclosure relief to homeowners, but Michael T. Pines is in a league of his own.
Eric Berkowitz is a San Francisco-based attorney and author of
Sex and Punishment: Four Thousand Years of Judging Desire (Counterpoint, 2012).