Matt Weidner – Fighting For The American People

Posts Tagged ‘david j stern enterprises’

WITHOUT WAITING FOR THE END, MY BIG QUESTION IS WHAT DOES THIS MEAN FOR THE HUNDREDS OF THOUSANDS OF CONSUMERS THAT WERE VICTIMIZED BY ALL OF THIS?

Just today a massive lawsuit was filed in Broward County that has extraordinarily significant national implications.  Now, first things, first.  Allegations in lawsuits are not facts…not until a finder of fact confirms that the allegations alleged are true.  But having said that, many of the base factual statements in this lawsuit regarding the underlying transaction wherein a lawyer in Florida sold the essential parts of an operation whose purpose was to throw Floridians out into the street are facts that are already part of many filings with the Securities and Exchange Commission.  For more about those statements, read what I wrote more than a year ago about it here.

So I read the prospectus a long, long time ago and realized this was bad, bad news.  I screamed loud and hard about it.  But no one listened.  I read the prospectus over and over and it just blew my mind….I recognized that this was not going to end well for my profession or for the court system that I took an oath to defend and protect.

Now, I could care less about investors….my interest was then and is now, the protection of Floridians who were victims of this operation and importantly, I was terribly concerned about the long-term implications for this state’s court system and the dramatically negative impact this transaction was going to have on the profession of law.  The public already held lawyers in low regard and this entire operation was set up to give my profession a much bigger black eye than it already had.

I screamed and argued in my cases, and to the credit of a great many good judges…most of them here in the Tampa Bay area, they caught on real quickly….they listened…and my clients were protected.  But too many other people would not listen.  Who was I after all….just some street fighting consumer lawyer that had developed a passion for sticking up for the little guy.  And since then, “our” court system has been choked by the chaos I warned about so long ago.

But enough about then and what should have been.  Read carefully the allegations that are being made from the insiders in the transaction where a lawyer essentially sold a law office to a group of investors.  But before you do, remember:

1) This lawyer had been the target of a major class action lawsuit filed in Federal Court in 1999.

2) Fannie Mae and Freddie Mac are taxpayer dependent organizations.

3) Fannie Mae and Fredie Mac were aware of the problems with David J. Stern.

4) Fannie/Freddie are misleading the public about how much their malfeasance will cost.

5) Every man, woman and child in the entire USA will pay dearly for Fannie and Freddie’s malfeasance.

So this is all very much every one of our business….after all, we’re all going to be paying for it for our entire lifetimes.  And this is not just a Florida problem….every single taxpayer in America will be paying for this so you’re bought into this problem.  So the questions we all need to be asking as taxpayers, as voters, as the people who are picking up the tab for all of this are….who knew about all of these allegations and how long did they know about them?

And now for the allegations, taken directly from the complaint:

The instant action arises from fraudulent misrepresentations and omissions made by Defendants, Stern, DSI, PTA andDS Law (the “Seller Defendants”) to induce DJSP to purchase the non-legal mortgage foreclosure processing and support serviceoperations of DS Law

After the real estate market crashed in 2008, the Seller Defendants’ law business boomed with DS Law’s mortgageforeclosure caseload rising from 15,000 in 2006 to 70,400 in 2009. In 2009, DS Law handled approximately 20% of all repossessionsin the State of Florida. The Seller Defendants’ largest clients included Fannie Mae, Freddie Mac, Citibank, Bank of America, GoldmanSachs, GMAC and Wells Fargo. Indeed, the Seller Defendants’ clients included all of the top 10, and 17 of the top 20, mortgageservicers in the U.S

The associated Target Business also enjoyed exponential growth as a result of the real estate market crash, and, in2009, the Target Business reportedly brought in a purported $260 million in revenues. However, as more fully explained below, theSeller Defendants fraudulently and artificially inflated the revenues of the Target Business and concealed material information regardingthe unlawful foreclosure practices of DS Law to induce DJSP and DAL into purchasing the Target Business

The Seller Defendants fraudulently induced Plaintiffs DAL and DJSP into entering into the Transaction by fraudulentlyand artificially inflating the Target Business’ actual revenues, by intentionally failing to disclose that the Target Business and DS Lawwere not, in fact, operating in accordance with all applicable laws, and by concealing that DS Law was in jeopardy of losing its largestclients due to DS Law’s unlawful conduct. Indeed, before entering into the Transaction, the Seller Defendants knew that DS Law and theTarget Business had been systematically falsifying and/or back-dating pertinent legal documents, submitting such documents to thecourts, routinely misplacing and losing original key documents, filing foreclosures with inaccurate and/or incomplete documents,prosecuting foreclosure cases without obtaining proper service of process, and were in jeopardy of losing the Seller Defendants’ largestforeclosure clients due to such conduct.

By cutting corners in the foreclosure process without following the rule of law, the Defendants artificially reduced theexpenses of the Target Business which falsely inflated the profitability of the Target Business.

To summarize, the Seller Defendants failed to disclose to DJSP and DAL that DS Law and the Target Business weresystematically operating in an unlawful manner. In addition, the Seller Defendants failed to disclose to DJSP and DAL that the TargetBusiness’ reported revenues were not accurate, inflated, and improperly calculated and that the expenses of the business were alsodistorted due to the systematic practices designed to “shorten” the legal process. The Seller Defendants falsely led DAL and DJSP tobelieve that they were acquiring a long-term profitable business that operated in accordance with all applicable laws to induce DAL andDJSP to enter into the Transaction.

4ClosureFraud posted an entry which cheered Florida’s AG Pam Bondi for finally taking some action on the fraudclosure front.  Two newspapers picked up the story and I did a post on it.  We all thought the Petition meant something…but it doesn’t. The law is well settled…and it’s very, very bad law…..lawyers and law firms are immune from prosecution for unfair and deceptive practices.  Asking the question posed to the Supreme Court at best is going to receive a very swift, “Lawyers Are Exempt” response.  A response such as this is going to be very much like a hot poker shoved in the eye of the citizens who are suffering as part of this mess.

Now maybe the Supreme Court will take the position of Captain Obvious and tell the Attorney General…you’ve got a whole lotta other targets you could be going after.  Like LPS…they’ve been in the news lately or David J. Stern Enterprises, they have not been in the news lately but should be.  DJSP was a bad deal from the outset, and the evidence is laying all around.  It’s in federal court cases. It’s in documents filed with the Securities and Exchange Commission. It’s in depositions filed right there with the Florida Attorney General’s Office.

And so now that I’ve had a day to think about Bondi’s Motion, I feel suckered.  The Motion itself lacks any substance and is not supported by the case law and examples that are necessary to make it a compelling legal document.  I’m afraid it’s going to elicit a wet towel response from the Supreme Court and that’s only going to make citizens even angrier with lawyers than they already are.  I don’t want that. I want lawyers and courts and my profession screaming, “DAMN THE TORPEDOES, WE’RE GONNA SOLVE THIS!” In the midst of this crisis I want to general public to see lawyers as the defenders of their rights and the defenders of the Rule of Law, stepping into the mess that the banksters created and shoving some justice and integrity down their monstorous throats….

That’s what Florida’s lawyers should be doing….not filing tepid motions that will lead nowhere.

The collapse of the Law Offices of David J. Stern is causing chaos and costing taxpayers millions of dollars.  Clerks of Court, judicial assistants and judges across this state are left sorting through files and processing Stipulation to Withdraw paperwork and generally left to try and sort out the mess.  That costs every single taxpayer money.  Multiply that by hundreds of thousands of files in counties all across the state and you’re talking a massive burden on this state’s taxpayers.  Meanwhile, the clients, including Fannie and Freddie, must now go through each of their files to assess just what kind of a mess they have on their hands.  The resulting time and attorneys fees will add many months and millions of dollars into the mess.

When the general public and taxpayers are paying for all of this, I have a real problem when the Fat Cats that caused all of this are not forced to pay the costs….where is any justice, any equality, any fundamental fairness in all of this?  Where are all the managers and lawyers and bright financial people that put all of this together?  I bet they’re still driving their obscenely expensive cars, living in obscene castles, with obscene boats.

How do our government leaders allow this to continue?  Why no handcuffs?  When will Florida’s Attorney General step up, speak out and release findings from the on-going investigation?  Many mechanism exist to try and reclaim some of the costs, but the most black and white immediate way is to dismiss all pending David J. Stern cases which are not verified and force them to be refiled under the rules mandated by the Florida Supreme Court to protect all consumers.

HOW CAN OUR COUNTRY EVERY REGAIN OUR PROWESS IF WE HAVE LOST THE WILL TO METE OUT JUSTICE?

New York Times

Everyone in the world, get to know David J. Stern and David J. Stern Enterprises….read the New York Times Article Here.

His tyranny cannot last.  We cannot allow it to continue.  Too many people have already been hurt.  It must stop.

Although the Florida Supreme Court has declined to take any affirmative action against the widespread fraud and abuse that is occurring in Florida courtrooms, all attorneys should be reminded that they have an obligation under the Rules Regulating the Florida Bar to report all potential ethical violations of other attorneys.

As reported in the attached article that appeared in the Florida Daily Business Review, I recently filed a complaint with the Florida Bar requesting that they look into the very unusual situation involving the Law Offices of David Stern and the non-legal component (whatever that is) of that practice, David J. Stern Enterprises.  I encourage everyone to read this article carefully (especially US Congressman Grayson) then stay tuned to see if the Florida Bar actually takes any interest in the very real issues that provoked the complaint…..

STERN2

For comprehensive reporting of many complex issues that relate to our courts and foreclosure in particular, please visit the website of the Daily Business Review Here.

While I’m certainly glad that national and statewide press have now picked up on the issues relating to foreclosure and foreclosure fraud, we cannot forget that the excellent regional press sources like Daily Business Review have been tracking and reporting on these issues for quite some time.  Please support their reporting and effort by subscribing to their excellent paper.

Profits at this state’s most notorious foreclosure mill were announced yesterday.  The thing that I still cannot understand is why our local, elected circuit court judges allow so much shotty practice of law to occur from this mill and others, while the mills are allowed to announce million dollar profits…oh and another question about how what is essentially a law practice can be permitted to be publicly traded.  The whole problem with this is the rules and ethical obligations of lawyers are inconsistent with a publicly traded company.

When will all this stop?  Make sure to tune into the earnings conference call at 8:30 (Perhaps every judge in the state should tune in for this call.)

Management will conduct a conference call at 8:30 a.m. Eastern Time on Wednesday, September 8, 2010, to discuss the second quarter and year-to-date 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-312-5504. When prompted by the operator, mention conference ID 94593027.

PLANTATION, Fla., Sept. 7, 2010 (GLOBE NEWSWIRE) — DJSP Enterprises, Inc. (Nasdaq:DJSP – News) (Nasdaq:DJSPW – News) (Nasdaq:DJSPU – News), one of the largest providers of processing services for the mortgage and real estate industries in the United States, today announced financial results for the three and six month periods ended June 30, 2010.

Second Quarter Financial Highlights

• Total revenue for the second quarter 2010 decreased 9.1% to $56.1 million from $61.7 million in last year’s comparable period.
• Excluding client costs, total revenue for the second quarter 2010 decreased to $28.9 million from $30.9 million or 6.5% compared to the same period last year.
• Adjusted Net Income including noncontrolling interests was $5.5 million for the second quarter 2010 or $0.28 per diluted share.*
• Adjusted EBITDA for the second quarter 2010 was $6.7 million.

Year to Date Financial Highlights

• Total revenue for the six months ended June 30, 2010 increased 9.3% to $127.7 million from $116.8 million in last year’s comparable period.
• Excluding client costs, total revenue for the six months ended June 30, 2010 decreased to $59.7 million from $61.0 million or 2.1% compared to the same period last year.
• Adjusted Net Income including noncontrolling interests was $14.2 million for the six months ended June 30, 2010 or $0.73 per diluted share.*
• Adjusted EBITDA for the six months ended June 30, 2010 was $21.1 million.

*Calculated using treasury stock method assuming an average ordinary share price of $8.25 for the quarter ended June 30, 2010; assuming 19.5 million average diluted shares outstanding.

Second Quarter Results

Total revenue for second quarter 2010 decreased 9.1% to $56.1 million from $61.7 million in the same period last year. This was primarily due to a decrease in foreclosure referrals, title fees, and client reimbursed costs. Title fees decreased due to the decrease in foreclosure volume and the switch made by some clients to use their own title company. These decreases in revenue were partially offset by increases in REO closings, REO liquidation operations at Default Servicing, and eviction fees. Two new service offerings, Deed-in-lieu and Mediations, also contributed to offsetting these decreases. During the second quarter, client reimbursed costs decreased by 11.7% to $27.2 million from $30.8 million in the same quarter in 2009 as a result of a decrease in foreclosure volume. Our REO closing business became an increasingly significant source of revenue during the quarter, generating $3.5 million in revenue compared to $2.1 million in the same period last year. Our REO liquidation business, which emanates from a single customer, contributed $3.2 million in revenue in the second quarter compared to $2.9 million in the same quarter last year. Going forward, we intend to offer both REO closing and liquidation services to additional customers as a means of increasing revenues and profits. Deed-in-lieu and Mediation services were initiated in the second quarter and contributed a combined $0.7 million to our revenues during the quarter. Revenue from foreclosure services decreased by $1.5 million, or 8.3%, for the quarter to $16.6 million, compared to $18.1 million during the same period last year.

Our adjusted EBITDA decreased to $6.7 million for the three months ended June 30, 2010 from $17.7 million in the same period last year. This decrease was primarily due to three factors: the decrease in foreclosure volume; an increase in compensation expenses; and an increase in expenses related to becoming a public company, including $0.9 million in legal expenses. Our compensation expenses increased $2.6 million, on an adjusted basis, primarily as a result of staffing increases. Increases in staffing were made to address expressed client needs, expanding legacy files due to court delays, and necessary upgrades to the corporate management structure. A much smaller increment of the increase in staffing was due to the mandatory mediation requirement dictated by the Florida Supreme Court for foreclosure files.

During the second quarter 2010, our adjusted net income decreased to $3.5 million from $8.3 million in for the same period in 2009, due to the decrease in revenue and increase in our expenses stated above.

Year-to-Date Results

Total revenue for the six months ended June 30, 2010 increased $10.9 million, or 9.3%, to $127.7 million from $116.8 million in last year’s comparable period. The revenue resulted from an increase in client reimbursed costs, REO closings, REO liquidations, eviction services, and two new services, Deed-in-lieu and Mediation. These increases were offset by decreases in our foreclosure and title services fees. Excluding client reimbursed costs, our total revenues decreased by $1.3 million, or 2.1%, to $59.7 million compared to $61.0 million for the same period last year. Revenues from our REO closing and liquidation business increased by $2.4 million and $1.6 million, respectively, over the same period last year. As mentioned above we initiated two new services, Deed-in-lieu and Mediations, which contributed a combined $0.7 million to total revenue.

Compensation expenses, on an adjusted basis, increased by $5.9 million, or 30.7%, to $25.1 million for the six months in 2010 compared to $19.2 million during the same period in 2009.

General and administrative expenses, on an adjusted basis, increased by $5.1 million, or 60.7%, to $13.5 million from $8.4 million last year. Public company and nonrecurring expenses increased our expenses by approximately $2.5 million during the first six months of 2010. Other operating expenses, including rent, supplies, travel, mailing, and others, increased as a result of the increase in headcount.

During the first six months of 2010, our adjusted net income decreased to $7.8 million from $15.8 million in the same period in 2009.

We generated $17.1 million in cash from operating activities in the six months ended June 30, 2010, compared to $26.4 million in the six months ended June 30, 2009.

Our overall debt of $74.6 million bears an average interest rate of 2.9%. The senior note of $35 million bears no interest for the first six months.

Operating Discussion

As a result of management’s discussions with our largest client, The Law Offices of David J. Stern, P.A. (“DJSPA“) and with the major lenders and servicers for whom DJSPA processes foreclosure files, we believed file volume would increase in the third quarter and we previously decided to maintain current staffing levels. However, file volumes continue to be delayed and existing staffing levels are not sustainable indefinitely.

Rick Powers, President and COO commented, “While a large portion of our business can only be processed with human capital, we are identifying opportunities where technology and process change can be implemented to create efficiency. We are prepared to create efficiencies and make cuts where appropriate over the next three to six months.”

DJSP Enterprises continues to diversify our service offerings beyond default services. As part of our effort to grow our business, we are building business to address the new government initiatives. In this regard, we have expanded our national Deed-in-lieu and modification services. Our Deed-in-lieu business has been our fastest growing service offering in the third quarter. In addition, with the addition of Timios we are moving to expand our title services, which among other things, provides title work for refinancing, into the nation’s largest and hardest hit real estate market of California.

Timios, Inc.

As of August 1^st, all Florida title operations have been consolidated under the common management of Timios, Inc. and have already adopted Timios’ best in class paperless operating system for all new orders. In addition we are in the process of licensing Timios in California, the nation’s largest real estate market. This is a major step in becoming a cyclical provider of services to the mortgage industry.

Rick Power added, “That we were able to accomplish this consolidation in such a short period of time speaks to the strong technology at Timios and the quality of both management teams. We are looking forward to entering the California market and expect continued strong performance from Timios.”

Management

David J. Stern Chairman and CEO stated, “We are happy to announce that Kerry Propper will be taking Matthew Kayton’s seat on the board of directors. Mr. Kayton will transition roles with the company and will continue to work with us on a consulting basis in the areas of Title services, acquisitions and other strategic initiatives.”

Mr. Stern continued, “I am very thankful to Matthew for his service and I look forward to his continued contribution as a consultant. Kerry brings a great deal of public company experience to the board and I am pleased that he will be joining us.”

Conference call Information:

Management will conduct a conference call at 8:30 a.m. Eastern Time on Wednesday, September 8, 2010, to discuss the second quarter and year-to-date 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-312-5504. When prompted by the operator, mention conference ID 94593027. Participating in the call for DJSP will be David J. Stern, Chairman and Chief Executive Officer, Rick Powers, President and Chief Operating Officer, and Kumar Gursahaney, Executive Vice President and Chief Financial Officer.

If you are unable to participate in the call at this time, a replay will be available for one week starting on Wednesday, September 8, 2010, at 11:30 Eastern Time. To access the replay, dial 706-645-9291. Please use passcode 94593027. The call will also be carried live by webcast over the Internet and accessible at www.djspenterprises.com.

About DJSP Enterprises, Inc.

DJSP is the largest provider of processing services for the mortgage and real estate industries in Florida and one of the largest in the United States. We provide a wide range of processing services in connection with mortgages, mortgage defaults, title searches and abstracts, REO (bank-owned) properties, loan modifications, title insurance, loss mitigation, bankruptcy, related litigation and other services. Our principal customer is DJSPA, whose clients include all of the top 10 and 17 of the top 20 mortgage servicers in the United States, many of which have been DJSPA clients for more than 10 years. We have approximately 1,200 employees and contractors and are headquartered in Plantation, Florida, with additional operations in Louisville, Kentucky and San Juan, Puerto Rico. Our U.S. operations are supported by a scalable, low-cost back office operation in Manila, the Philippines that provides data entry and document preparation support for our U.S. operations.

Forward Looking Statements

This press release contains forward-looking statements about us within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), including but not limited to management’s expectations about efficiencies and expense reduction efforts. Mr. Kayton’s ongoing consulting role with us, our strategic growth initiatives and our ability to provide closing services in California. Additionally, words such as “anticipate,” “believe,” “estimate,” “expect” and “intend” and other similar expressions are forward-looking statements within the meaning of the Act. Such forward-looking statements are based upon the current beliefs and expectations of our management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions, changing interpretations of generally accepted accounting principles; outcomes of government or other regulatory reviews, particularly those relating to the regulation of the practice of law; the impact of inquiries, investigations, litigation or other legal proceedings involving us or our affiliates, which, because of the nature of our business, have happened in the past to us and the DJSPA; the impact and cost of continued compliance with government or state bar regulations or requirements; legislation or other changes in the regulatory environment, particularly those impacting the mortgage default industry; unexpected changes adversely affecting the businesses in which we are engaged; fluctuations in customer demand; our ability to manage growth and integrate acquisitions; intensity of competition from other providers in the industry; general economic conditions, including improvements in the economic environment that slows or reverses the growth in the number of mortgage defaults, particularly in the State of Florida; the ability to efficiently expand our operations to other states or to provide services we do not currently provide; the impact and cost of complying with applicable U.S. Securities and Exchange Commission (“SEC”) rules and regulations; geopolitical events and changes, as well as other relevant risks detailed in our filings with the SEC, including our Annual Report on Form 20-F for the period ended December 31, 2009, which are available at the SEC’s internet site (http://www.sec.gov). Forward-looking statements in this press release speak only as of the date of the press release, and we assume no obligation to update forward-looking statements or the reasons why actual results could differ.

Non-GAAP Financial Measures

The financial information and data contained in this press release are unaudited and do not conform to the SEC’s Regulation S-X. This press release includes certain estimated financial information and forecasts presented that are not derived in accordance with accounting principles generally accepted in the United States (“GAAP”), and which may be deemed to be non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Management believes that the presentation of these non-GAAP financial measures serves to enhance the understanding of the Company’s financial performance. Such measures are not recognized terms under GAAP, and should be considered in addition to, and not as substitutes for, or superior to, operating income, cash flows, revenues, or other measures of financial performance prepared in accordance with GAAP. Such measures are not a completely representative measure of either the historical performance or, necessarily, the future potential of the Company.

The adjusted EBITDA measure presented consists of income (loss) from continuing operations before (a) interest expense; (b) income tax expense; (c) depreciation and amortization; and (d) income and/or expense items that are expected to be at different levels in future periods. We are providing adjusted EBITDA, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted EBITDA helps us to evaluate and compare our performance on a consistent basis with the operating cost structure in place as a publicly traded operating company, reflecting the effects of that cost structure and our current fee schedule. In the calculation of adjusted EBITDA for the three and six months ended June 30, 2009, we exclude from expenses the compensation paid to Mr. Stern that exceeded the base compensation that he was entitled to receive after we became a publicly traded operating company (and prior to September 1, 2010), because the Company no longer has any arrangement with Mr. Stern that would require any payments to him at a comparable level. Mr. Stern does not have an incentive plan arrangement providing for pay above base compensation. In addition, we excluded the payroll taxes associated with such compensation, as well as travel expenses incurred on behalf of Mr. Stern in prior periods that are no longer provided since we became a publicly traded operating company. The adjustment to Fee to Processing reflects the additional fees DJS Processing, LLC would have received under the Services Agreement if the fee schedule under the Services Agreement had been determined in a fashion consistent with the current fee schedule. In the calculation of adjusted EBITDA for the three and six months ended June 30, 2010, we included additional fees due to DJS Processing, LLC as a result of a retroactive amendment to the fee schedule for the Services Agreement agreed to by DJS Processing, LLC and DJSPA to increase the fees payable to DJS Processing, LLC effective January 1, 2010.

In the calculation of the adjusted net income measure presented for the three and six months ended June 30, 2010, we deducted the actual GAAP interest, depreciation and amortization for the period from the adjusted EBITDA calculation and then subtracted assumed income tax expense, calculated at the expected going forward tax rate of 38.6% on pre-tax income after minority interest. For periods prior to our becoming a publicly traded operating company, we were not subject to income tax and therefore did not record income tax expense. We are providing adjusted net income, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted net income helps us to evaluate and compare our past performance on a consistent basis with the taxable structure in place after our becoming a publicly traded operating company, reflecting the effects of that taxable structure on profitability. In the calculation of adjusted net income measure presented for the three and six months ended June 30, 2010, we deducted the actual GAAP interest, depreciation, amortization and income taxes for the period from the adjusted EBITDA calculation. The following table provides reconciliations of net income (GAAP) to Adjusted EBITDA (Non-GAAP) and adjusted net income (Non-GAAP).