Trial begins for Denver foreclosure law firm

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.