WEST PALM BEACH, Fla. – A federal judge has awarded the U.S. Consumer Financial Protection Bureau and the Florida attorney general a $27.7 million judgment against a law firm accused of scamming homeowners trying to fight foreclosure.
The agencies sued the Hoffman Law Group and its operators last year after dozens of the law firm's clients came forward claiming they were misled about loan modification services.
Federal investigators now believe nearly 2,000 homeowners may have been defrauded by the firm, records show.
A judge froze the firm's assets in July 2014. The $655,737 remaining after administrative costs, along with the proceeds from the auction of jewelry, watches and electronics, will be used to reimburse some of the fraud victims, according to the judgment.
The court order also forbids attorney Marc Hoffman and his business partners, Michael Harper and Benn Wilcox, from engaging in any mortgage or debt-relief business.
"These companies preyed on vulnerable consumers who were trying to save their homes from foreclosure," CFPD Director Richard Cordray said in a prepared statement. "The false promises made by these companies lured struggling homeowners into scams that led to greater financial hardship."
When Alvin Carr purchased a $276,000 home in Apopka six years ago, the retired civil servant thought he would live there a long time.
"This is what my wife always dreamed of," said Carr. "It was happiness."
But the couple soon fell behind on their mortgage payments, prompting their mortgage lender, Wells Fargo, to begin foreclosure proceedings.
The Carrs eventually sought help from the Hoffman Law Group, a North Palm Beach firm that specializes in "holding mortgage companies accountable," according to the firm's website.
"The understanding we had was that they were going to file all the necessary papers through the courts to prolong the foreclosure until we could get things right," said Kathy Carr. "They were going to save the home. They were going to stop the foreclosure."
Every month for six months, Hoffman Law Group deducted $1,200 from the Carrs' checking account.
On May 5, the law firm took out another $600. That very same day, Wells Fargo sold the Carrs' home at auction to an investor.
"I was shocked. And when I called the attorney, they acted like they weren't aware of it," said Alvin Carr, who claims he had no idea the foreclosure had been finalized until the new owner of the house knocked on his front door.
Within weeks, the couple were forced to move into a small motel room.
No attorneys from the Hoffman Law Group intervened in the Carrs' foreclosure case, according to Orange County Circuit Court records. That's likely because the law firm's retainer agreement does not promise to get involved with the foreclosure process.
Instead, the Hoffman Law Group files separate lawsuits against mortgage lenders in federal court. According to the company's website, "Our firm will demand a new mortgage loan to reflect positive equity, a lower fixed interest rate, a cash settlement for punitive damages, a reinstatement of credit rating, and a waiver of all delinquent payments/penalties/interest and other economic benefits for all plaintiffs."
"I believed it. And I communicated that to the clients. And they believed it. It sounded legitimate," said Michele Stephens, a lawyer who moved from Kentucky to Florida in 2013 to take a job at the Hoffman Law Group as a case management attorney.
Stephens said she quit less than a year later, believing the law firm was scamming clients.
"My heart bleeds for them," said Stephens, who began to cry as she described clients on the verge of losing their homes while giving what little money they had to Hoffman Law Group. "I prayed for clients every night when I came home."
According to Stephens, salespeople who work in a "boiler room" call center located in the law firm's North Palm Beach office building sign up clients and collect money; typically a $6,000 retainer fee followed by a $495 monthly charge.
"I know at one point there were 1,500 active clients," said Stephens.
Some of those clients' names would eventually end up on federal lawsuits alongside the names of numerous other plaintiffs on what are known as "mass joinder" lawsuits. That type of lawsuit is different from a class-action case because all plaintiffs must pay legal fees in advance.
The Federal Trade Commission cautions homeowners against taking part in mass joinder lawsuits for mortgage issues. The consumer protection agency warns that clients are often left in even worse financial shape.
"It's a scam. It's a money scam," said Stephens. "I don't know how people can sleep at night knowing that you're scamming them. And these people and their little kids are going to be out on the streets."
Records show one of Hoffman Law's clients was successful in saving their home. Four months after Nicholas D'Angelis was added to a mass joinder lawsuit, the New York man was dropped from the case because the bank gave him a permanent loan modification. However, D'Angelis's wife told Local 6 the Hoffman Law Group had little to do with their victory.
"They got me in touch with the right people, but I had to do all the paperwork myself," said Ruth D'Angelis, who believes she could have arranged the mortgage modification without paying around $10,000 for an attorney. "I probably wouldn't use them again."
Attorney Marc Hoffman, who opened the West Palm Beach firm in 2012, agreed to give up his law license as part of the judgment against him. He had been practicing in Florida since 1974.
"Mr. Hoffman was just a name on a door," said Stephens.
The former employee claims the law firm was actually run by Michael Harper, who is not licensed to practice law in Florida. State records show Harper managed a marketing company located in the same West Palm Beach office building as the law firm.
Days after Alvin Carr contacted the Florida attorney general's office last year to complain about Hoffman, the law firm mailed him a check for $3,000.
Carr, who has since moved into a rental home in Apopka, claims he still wasted nearly $5,000 in the hopes that Hoffman Law Group would be able to help him. Besides losing his home to foreclosure, Carr's name was never added to one of Hoffman's mass joinder lawsuits during the six months he was paying the firm.