Calif. State Bar Probers Have Hands Full With Loan Mod Ripoff Complaints; 1200 Probes Pending; Attorney Scams Begin To Drain Client Security Fund

In Northern California, The Fresno Bee reports:

• [A]mid the real estate free-fall and shady loan-modification programs that sprang from it, some lawyers saw an easy way to make money. The State Bar is investigating more than 300 California lawyers involved in loan-modification rip-offs. Typically, homeowners facing foreclosure complain that they paid attorneys who then did nothing to help them keep their homes.

• The loss to the public from loan-modification cases is in the millions of dollars, State Bar officials say. Most of the attorneys under investigation are from Southern California, but many of the victims live in the central San Joaquin Valley, enticed by loan-modification companies that advertised on the Internet. "It's the most disturbing thing I've seen in the legal profession practicing for more than half a century," said Howard Miller, president of the California State Bar.

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• The State Bar is investigating 1,200 loan-modification cases. As of mid-January, it had resignations from 13 lawyers, and three trials were pending at the State Bar Court, [one Bar investigator] said. Settlements have been reached with lawyers in five cases to accept discipline, he said. There was hope that loan-modification complaints would dwindle when Gov. Arnold Schwarzenegger signed legislation in October that prohibits lawyers from taking advance payments from homeowners. But complaints from people keep coming. "My answering machine is full every day," [he] said.

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• The glut of discipline cases involving loan modifications is "really sort of impacting the bar and the fund specifically," said Lori Meloch, senior counsel for the Client Security Fund.(1) Miller, the State Bar president, said his office is aggressively pursuing cases against lawyers. What has occurred is a "violation of every responsibility that lawyers owe their clients," he said. "This is a tough economy for lawyers, as it is a very tough economy for everyone," he said. But when it comes to the actions of lawyers who prey on clients, Miller said, "there's no excuse or explanation."

For more, see Valley lawyers turn to crime in tough times.

(1) The California State Bar's Client Security Fund compensates people who have been victims of acts of theft by a California attorney. According to the story, in 2008, the Client Security Fund paid more than $4.6 million on 479 claims. A client can receive up to $100,000 in compensation. The fund is supported by fees from lawyers. A bill to authorize collection of the fees for this year is on the governor's desk. He has until Monday to sign it. It typically takes about a year for a client to be compensated by the bar for a lawyer's theft. This year the wait could be longer.

For those ripped off by dishonest attorneys in other states and Canada, see:

• United States: Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• United States: Check the USA Client Protection Funds Map;
• Canada: Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.