Chase Accused of Brazen Bankruptcy Fraud
LOS ANGELES (CN) - JPMorgan Chase routinely fabricated documents to deceive bankruptcy judges, going so far as to Photoshop documents to "create the illusion" of standing "in tens of thousands of bankruptcy cases," according to a federal class action.
Lead plaintiff Ernest Michael Bakenie claims that Chase's "pattern and practice of playing 'hide-and-seek' with debtors, judges and other bankruptcy players" bore rich fruit: that Chase secured motions for relief of stay and proofs of claim in 95 percent of its cases.
"Through the use of fabricated assignments, endorsements and affidavits that purport to transfer deeds of trust, notes and the rights to all monies due under the terms of tens of thousands of non-negotiable promissory notes (the 'MLNs'); Chase has demonstrated a pattern and practice of playing 'hide-and-seek' with debtors, judges and other bankruptcy players," the complaint states.
"Chase intentionally conceals the identity of the true parties in interest entitled to enforce the tens of tens of thousands of residential non-negotiable promissory notes (the 'MLNs') for its own financial benefit, at the expense of the class and to the detriment of the integrity of the bankruptcy system."
Bakenie says Chase used a network of attorneys to file more than 7,000 motions for relief from automatic stay in bankruptcy cases in the Central District of California, "wherein they falsely claim to be the party entitled to monies due under the terms of MLNs."
Chase rewards attorneys based on how quickly they can secure the stays, and uses fabricated documents to establish chain of title on loans, according to the complaint.
"Rather than incur the cost of 'proving up' its own standing or the standing of its principal Mortgage Backed Security Trust, Chase systemically misrepresents Chase or a designated MBST to be a creditor in tens of thousands of bankruptcy cases by utilizing manufactured documents," the complaint states.
Bakenie claims: "That said practice is utilized for all mortgage loans originated by Chase, and other loan originators, including insolvent Washington Mutual Bank, whose assets were purchased by Chase.
"That said manufactured documents are fabrications intended to create the illusion of a valid transfers MLNs and support the assertion of standing in tens of thousands of bankruptcy cases. ...
"That the aforementioned fabricated evidence is 'photo-shopped' and is highly persuasive and authentic in appearance so as to ensure legal victory in the bankruptcy courts.
"That said manufactured evidence is systemically utilized to deceive bankruptcy players and increase the profits of Chase, its agents and its principals through massive cost savings and the imposition of attorney fees upon class borrowers.
"As a direct result of this practice, over 95 percent of Chase's motions for relief of stay and proofs of claim are granted without objection.
"That the use of the fabricated evidence has a chilling effect on class debtors and their attorneys. Said business practices discourages bankruptcy players from offering objections or from questioning the validity of Chase's false claims based on standing."
Bakenie adds: "That said practice allows Chase to dump defaulted loans that were never properly securitized by WAMU and other originators acquired by Chase into private mortgage backed security trusts by creating the illusion of a valid transfer.
"Said practice shifts the liability of defaulted loans not properly securitized by WAMU, from Chase to private mortgage backed security trusts. The practice allows Chase to effectively mitigate the millions of dollars in liability of the WAMU acquisition, where WAMU failed to transfer MLNs of its portfolio before its demise. Said practice shifts losses from WAMU to MBST bond investors.
"That after a non-judicial foreclosure sale, class members remain indebted to the true beneficiary for the unsecured note but without credit for the loss of the collateral to Chase's designated assignee.
"Most egregiously, the network attorneys utilize the inducing documents to obtain attorney fees awards from by the bankruptcy judges ranging from $600-$1,000 for each successful motion for relief of stay."
Bakenie concludes that "degradation of the integrity of our bankruptcy court system cannot be justified in the name of Chase's cost savings and unjust enrichment."
Bakenie seeks class certification, disgorgement, compensatory, statutory and punitive damages for unfair and deceptive trade, and "an order vacating all bankruptcy orders, claims and awards granted based on Chase's misrepresentation and deceptive business practices".
He is represented by Joseph Arthur Roberts of Newport Beach.