Trial be­gins for Den­ver fore­clo­sure law firm

The Denver Post - - NEWS - By David Migoya

As thou­sands of Coloradans bat­tled to save their homes from fore­clo­sure in the past decade, the own­ers of one law firm al­legedly de­vised a scheme that even­tu­ally milked tens of mil­lions of dol­lars from banks, home­own­ers and in­vestors.

That’s the pic­ture painted by state pros­e­cu­tors Mon­day in the be­gin­ning of their civil law­suit against Larry Cas­tle, his at­tor­ney­wife, Caren, and the law firm they built into a fore­clo­sure em­pire that nearly cor­nered the in­dus­try in Colorado.

By al­legedly col­lud­ing with com­pa­nies in which they had a fi­nan­cial in­ter­est, and with their big­gest com­peti­tor in the fore­clo­sure busi­ness, the Cas­tles man­aged to wring ex­ten­sive prof­its from the mis­ery that came with the col­lapse of the real es­tate in­dus­try, pros­e­cu­tors said.

The Cas­tles did this by al­legedly con­spir­ing to in­crease a va­ri­ety of costs as­so­ci­ated with fore­clo­sure cases, notably the price charged for post­ing no­tices on home­own­ers’ prop­er­ties, pro­ce­dures that or­di­nar­ily cost $30 but were in­flated to $125, pros­e­cu­tors said. Mul­ti­plied by the nearly 200,000 fore­clo­sures filed by the Cas­tle Law Group over sev­eral years, the prof­its were as­ton­ish­ing in their scope, lawyers for the Colorado at­tor­ney gen­eral’s office have ar­gued.

But de­fense lawyers said the state is over­reach­ing in its char­ac­ter­i­za­tions and that Cas­tle was merely a piece of a much larger in­dus­try that was com­manded by banks that in­sisted fore­clo­sures hap­pen at a speedy and ef­fi­cient rate, and that any de­lays were costs the lawyers would have to bear.

In a two-hour open­ing state­ment, deputy At­tor­ney Gen­eral Eric Neusch de­scribed a com­plex web of cor­po­rate re­la­tion­ships that fun­neled cash into a va­ri­ety of Cas­tle-con­trolled en­ti­ties, some of which used the funds to buy land and other hold­ings in Costa Rica and Panama.

“Fix­ing the price with their largest com­peti­tor to avoid de­tec­tion,” Neusch said, “is a key part of the case, with­out which they could not or­ches­trate their scheme.”

The state sued Cas­tle and sev­eral other com­pa­nies in July 2014 fol­low­ing a two-year in­ves­ti­ga­tion into how the com­pa­nies ran their fore­clo­sure-re­lated op­er­a­tions.

The at­tor­ney gen­eral’s al­le­ga­tions range from col­lu­sion be­tween law firms to set the price on process ser­vice fees as­so­ci­ated with fore­clo­sure cases, to in­fla­tion — and in some cases out­right cre­ation — of fees charged to home­own­ers try­ing to save their houses from seizure, or the banks that hired the law firms to fore­close.

De­fense lawyer Larry Pozner por­trayed Cas­tle and his wife as ex­perts in the fore­clo­sure busi­ness who sim­ply learned how to run the process ef­fi­ciently, so much so that nearly 100 bank­ing clients gave their busi­ness to the Den­ver-based law firm. Any in­creases in costs were ones the banks hap­pily ac­cepted to en­sure a speedy fore­clo­sure.

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