Case 1:11-cv-06239-JBS-KMW Document 65 Filed 10/29/12 Page 1 of 40 PageID: 1408

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CHARLES J. and DIANE GILES, individually and on behalf of all others similarly situated, Plaintiffs, : : : : : : : : : : : : : : : : : :

Civil Action No. 11-6239 (JBS-KMW) JURY TRIAL DEMANDED

v. WELLS FARGO BANK, N.A., PHELAN HALLINAN & SCHMIEG, P.C., LAWRENCE T. PHELAN, FRANCIS S. HALLINAN, DANIEL S. SCHMIEG, ROSEMARIE DIAMOND, FULL SPECTRUM SERVICES, INC., and LAND TITLE SERVICES OF NEW JERSEY, INC., Defendants.

SECOND AMENDED CLASS ACTION COMPLAINT

TRUJILLO RODRIGUEZ & RICHARDS, LLC Lisa Rodriguez 58 Kings Highway East Haddonfield, New Jersey 08033 Tel: (856) 795-9000 NARKIN LLC John G. Narkin 1662 South Loggers Pond Place, #31 Boise, Idaho 83706 Tel: (208) 995-6119 HARWOOD FEFFER LLP Robert I. Harwood James G. Flynn 488 Madison Avenue, 8th Floor New York, New York 10022 Tel: (212) 935-7400 Attorneys for Plaintiffs and the Proposed Class

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On behalf of themselves and all others situated similarly, plaintiffs Charles J. and Diane Giles (collectively, the Giles or Representative Homeowners) bring this proposed consumer class action for damages under Section 1962(c) of the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(c). I. 1. This is an SUMMARY OF ALLEGATIONS action by financially troubled homeowners (Plaintiffs,

Homeowners or the Proposed Class) against a mortgage servicer, Wells Fargo Bank, N.A. (WFB), acting in concert with one of its outside mortgage foreclosure law firms, Phelan Hallinan & Schmieg, P.C. (Phelan P.C.), four of Phelan P.C.s partners Lawrence T. Phelan (Lawrence Phelan), Francis S. Hallinan (Hallinan), Daniel S. Schmieg (Schmieg), and Rosemarie Diamond (Diamond) and two default management service vendors owned and controlled by Lawrence Phelan, Hallinan, and Schmieg: Full Spectrum Services, Inc. (Full Spectrum) and Land Title Services of New Jersey, Inc. (Land Title). 2. Plaintiffs allege that each defendant, acting together in a coordinated fashion,

engaged in an institutionalized scheme to prosecute fraudulent mortgage foreclosure lawsuits against members of the Proposed Class, purportedly on behalf of two banks, Wachovia Bank, N.A. (Wachovia) or U.S. Bank, N.A. (U.S Bank), as a purported Trustee for the Pooling and Servicing Agreement dated as of November 1, 2004, Asset-Backed Pass-Through Certificate Series 2004-WWF1 (the Park Place Trust). 3. In fact, however, neither Wachovia nor U.S. Bank were trustees of the Park Place

Trust (and were thus not a legal owner of Plaintiffs mortgages) when WFB, acting in concert with Phelan P.C., filed and prosecuted foreclosure lawsuits against the Giles and other members of the Proposed Class.

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4.

Under New Jersey law, an entity attempting to foreclose a mortgage must own or Without a

control the underlying debt at the time a foreclosure action is commenced.

demonstration of ownership or control of a mortgage, such entity lacks standing to proceed with a foreclosure lawsuit, and its complaint must be dismissed. New Jersey law does not permit a foreclosing entity to a cure a defect of standing in its initial complaint by subsequently filing a purportedly corrective assignment and an amended complaint; an altogether new lawsuit must be filed by the proper legal party in interest. 5. WFB and Phelan P.C. unable to determine which party did own Plaintiffs

mortgages injected the name Wachovia or U.S. Bank as plaintiff in foreclosure complaints against members of the Proposed Class (defined below). They did this despite (a) their

ignorance and/or indifference to the identity of the bona fide owner of the Homeowners mortgages and (b) the absence of legal standing to prosecute foreclosure actions against members of the Proposed Class. Without a legitimate party to represent in court, WFB and Phelan P.C. were mere interlopers, incapable of enforcing any legal rights against the Homeowners. Nevertheless, WFB and Phelan P.C. brought foreclosure actions against members of the Proposed Class on behalf of manufactured clients who had no interest in the Homeowners mortgages. 6. WFB and Phelan P.C. engaged in this fraudulent scheme: (a) to dispossess

Homeowners from their property as quickly as possible, and to gain financially from their indiscriminately assembled foreclosure lawsuits and subsequent disposition of foreclosed property; and (b) to inflate or fabricate foreclosure-related fees charged to Homeowners threatened with loss of their homes through (i) excessive attorney fees claimed by Phelan P.C. and WFB and (ii) overstated bills submitted to WFB and Phelan P.C. by Land Title and Full

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Spectrum, two litigation support companies owned and controlled by Lawrence Phelan, Hallinan, and Schmieg. Such fees were passed on to foreclosed-upon homeowners by WFB and Phelan P.C. as supposedly reimbursable default management expenses they were required to pay to keep their homes. 7. With profit and speed as their overriding concerns, and for the reasons identified

above, WFB and Phelan P.C. willfully failed to undertake even rudimentary investigations of facts concerning the legality of their foreclosure actions. 8. Instead, to create the false illusion of mortgage ownership and standing, Phelan

P.C., at the instruction of and in concert with WFB, systematically filed falsified complaints, certifications, verifications, affidavits, motions, and other legal documents filed in New Jersey state courts that erroneously identified Wachovia or U.S. Bank as plaintiff in foreclosure actions against the Giles and other Proposed Class members. These court filings contained untrue statements of material fact purportedly based on personal knowledge of Phelan P.C.s lawyers. Many filings also contained forged signatures of Phelan P.C. lawyers. 9. The invalidity of foreclosure judgments obtained by the Phelan P.C. and WFB is

not an issue in this lawsuit. Plaintiffs allege that Defendants are liable for fraudulent practices they systematically used in prosecuting wrongful foreclosure actions and in thereby obtaining millions of dollars in ill-gotten gains at the expense of Plaintiff homeowners. 10. Prompted by WFB, sworn false and misleading statements by Phelan P.C. lawyers

concerning mortgage ownership and legal standing (which Proposed Class members justifiably relied upon) operated as a fraud on the judicial system. 11. Homeowners reliance on the truth of false statements made under oath in court

filings by Phelan P.C. in concert with WFB is demonstrated, among other ways, by the fact

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(confirmed by Judith Romano, general counsel of Phelan Hallinan & Schmieg) that [i]n the overwhelming majority of cases, foreclosure defendants do not even contest the entry of foreclosure judgments; fewer than seven percent of mortgage foreclosure lawsuits are contested in New Jersey state court. See Certification of Judith T. Romano dated Nov. 23, 2011 (Docket Item 5-2) at 3. 12. False and misleading sworn statements by Phelan P.C. and WFB concerning

mortgage ownership and legal standing had the purpose and effect of concealing material facts from Plaintiff homeowners and New Jersey Chancery Court judges prior to the entry of default judgments against members of the Proposed Class. Had the truth been known, the Homeowners would have opposed, and Chancery Court judges would have not have entered, fraudulently obtained default judgments against Plaintiffs in favor of Wachovia or U.S. Bank. 13. The fraudulent scheme deployed by WFB and Phelan P.C. resulted in monetary

damages to Plaintiff homeowners. Such damages include: (a) diminution or complete loss of value of property taken or sold as a result of wrongful foreclosure lawsuits filed by Phelan P.C. and WFB in the name of entities other than the still-undetermined bona fide legal owner of Plaintiffs mortgages; (b) attorneys fees incurred by Proposed Class members who (like the Giles) hired a lawyer to represent their interests in connection with wrongful default judgments procured by Phelan P.C. and WFB; and (c) payment of manufactured and inflated foreclosure-related costs, including (i) padded legal fees charged by Phelan P.C. in amounts exceeding uniform fee schedules established by government-sponsored enterprises (GSEs), principally, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (ii) payment of manufactured and inflated foreclosure-related costs that exceeded amounts established in uniform fee schedules published by Fannie Mae and Freddie Mac, including real estate title searches, property appraisals and so-called broker price opinions (BPOs), services for property inspection and/or maintenance, and other unexplained, undocumented, and duplicative activities.

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14.

In consequence of the foregoing unlawful conduct, as identified in further detail

below, Plaintiffs bring this proposed class action on behalf of all homeowners who, during the period from January 1, 2005 through the present (Class Period): (A) Were defendants in New Jersey mortgage foreclosure lawsuits filed and prosecuted by Phelan P.C., at the direction of and in concert with WFB, which were facilitated through preparation, execution and certification of fraudulent court documents falsely identifying as plaintiff Wachovia Bank, N.A. or U.S. Bank, N.A. in a purported capacity as Trustee for the Pooling and Servicing Agreement dated as of November 1, 2004, Asset-Backed Pass-Through Certificate Series 2004-WWF1; and (B) Sustained economic damage as a result of Defendants aforementioned misconduct. The term damage does not include overcharges contained in proofs of claim filed in U.S. Bankruptcy Court pursuant to 11 U.S.C. 501. II. 15. JURISDICTION AND VENUE

This proposed class action is instituted against Defendants for injuries suffered by

financially distressed homeowners resulting from Defendants RICO violations. To remedy these violations, Plaintiffs seek actual and statutory damages (including treble damages), together with costs of suit and reasonable attorneys fees. Federal question jurisdiction is

conferred upon this Court by 18 U.S.C. 1964(c) and 28 U.S.C. 1331 and 1337. 16. This Court has in personam jurisdiction over Defendants because they maintain

offices, have employees and agents, regularly transact business, or reside within this District. 17. Venue is proper in this District because the events giving rise to the Homeowners

claims occurred in or were directed at this District. III. A. The Representative Homeowners 18. Plaintiffs Charles J. and Diane Giles, husband and wife, were homeowners who PARTIES

have, at all relevant times, resided in Barnegat Township, Ocean County, New Jersey. 5

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B.

Defendants 19. Defendant WFB is a national banking association chartered in Sioux Falls, South

Dakota, with principal offices at 420 Montgomery Street, San Francisco, California 94163. WFB services residential mortgages through its division Wells Fargo Home Mortgage or its trade name Americas Servicing Company (ASC). WFB maintains principal places of business at 7000 Vista Dr., West Des Moines, Iowa 50266-93 and 3476 Stateview Boulevard, Fort Mill, South Carolina 29715. 20. Defendant Phelan P.C. is organized and operates as a professional corporation

under the laws of the State of New Jersey. Phelan P.C. maintains principal offices at 400 Fellowship Road, Suite 100, Mount Laurel, Burlington County, New Jersey 08054. 21. Defendant Lawrence Phelan is principal shareholder of Phelan P.C., as well as its

Pennsylvania alter ego law firm, Phelan Hallinan & Schmieg, LLP (Phelan LLP), which maintains principal offices at 1617 JFK Boulevard, Suite 1400, Philadelphia, Pennsylvania. Although he is not licensed to practice law in New Jersey, Lawrence Phelan serves as president and major shareholder of Phelan P.C. He has an approximately 41 percent interest in Phelan P.C. and a 49 percent interest in Phelan LLP. 22. Defendant Francis Hallinan has an equity ownership interest in both law firms,

Phelan P.C. and Phelan LLP. Hallinan functions as administrator of both firms. 23. Phelan LLP. 24. Defendant Diamond is an attorney employed by Phelan P.C. and Phelan LLP. Defendant Schmieg has an equity ownership interest in both Phelan P.C. and

Diamond has been identified by the principals of Phelan P.C. and Phelan LLP as managing partner of Phelan P.C.

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25.

Defendant Full Spectrum is a New Jersey business operating in the same office

building as Phelan P.C. at 400 Fellowship Road, Suite 200, Mount Laurel, Burlington County, New Jersey 08054. Full Spectrum is owned and controlled by Lawrence Phelan, Hallinan, and Schmieg. Full Spectrum purportedly provides litigation support services to the Phelan P.C. and Phelan LLP and their clients, including process serving, mortgage and judgment searches, and publication of legal notices. 26. Defendant Land Title is a New Jersey corporation operating in the same office

building as Phelan P.C. and Full Spectrum at 400 Fellowship Road, Suite 220, Mount Laurel, Burlington County, New Jersey 08054. Land Title is owned and controlled by Lawrence Phelan, Hallinan, and Schmieg. Land Title purportedly provides real estate title and valuation services to the Phelan P.C. and Phelan LLP and their clients. The building occupied by Phelan P.C., Full Spectrum, and Land Title is owned by a New Jersey limited liability company known as Camelot Enterprises, LLC, whose sole members are Defendants Lawrence Phelan and Hallinan. 27. Defendant Phelan P.C., Lawrence Phelan, Hallinan, Schmieg, Diamond, Land

Services, and Land Title, as well as non-defendant Phelan LLP, are referred to collectively as the Phelan Foreclosure Organization). IV. A. FACTS

Foreclosure Processes of the Phelan Foreclosure Organization and WFB 28. For the past decade, most residential mortgages in the United States have been

sold (i.e., securitized) by original lenders to investment banking firms that package revenue streams of pooled mortgages into instruments known as Residential Mortgage Backed Securities (RMBS). These instruments are purchased by investors and traded in public securities

markets. Financial institutions (i.e., Trustees) are designated as legal owners of securitized

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loans held in trusts for the benefit of RMBS investors. The identity and legal duties of Trustees and mortgage servicers are defined in documents known as Pooling and Servicing Agreements (PSAs). 1. 29. WFBs Duties and Compensation as Mortgage Servicer As the master mortgage servicer designated by the PSA establishing the Park

Place Trust (Park Place PSA), WFB is authorized to collect income from homeowners mortgage payments for distribution to the Trusts investors. When homeowners default on their mortgages, WFB is empowered to take reasonable action, at the homeowners expense, to cure the default (i.e., recover past due payments and costs incurred in doing so) and to restore the income-producing value of the mortgage assets, including, if necessary, by directing the initiation of foreclosure proceedings to liquidate mortgaged property at public auctions (i.e., sheriffs sales). WFB has responsibility for retaining and supervising the activities of outside law firms that file and prosecute such actions. 30. WFB is compensated for its mortgage servicing activities on behalf of the Park

Place Trust in three ways: (a) a fixed fee in an amount no greater than 0.50 percent for each loan; (b) float income from interest accrued between the time when WFB receives homeowners mortgage payments and when those payments are released for transmission to investors in the Park Place Trust; and (c) default management fees charged to delinquent homeowners, which WFB is allowed to keep as compensation for its efforts. 2. 31. WFB, Phelan P.C. and Phelan LLP Are Subject to Mandatory Industry-Wide Standards Established by Fannie Mae and Freddie Mac Fannie Mae and Freddie Mac are the largest RMBS investors in the United States,

collectively owning or guaranteeing about half of all outstanding mortgage debt nationwide. These government-sponsored enterprises (or GSEs) require WFB to abide by specific 8

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guidelines, including the requirement that legal work for foreclosures must be referred to a select few law firms in each state granted designated counsel or retained attorney status by the GSEs. Fannie Mae and Freddie Mac define the maximum rate of fees that can be charged by WFB and its foreclosure law firms, as well as the maximum time during which foreclosures must be brought to a definitive conclusion. Because of their market dominance, Fannie Mae and Freddie Mac establish prevailing industry standards governing both servicers like WFB and outside foreclosure law firms like Phelan P.C. and Phelan LLP. 32. Both WFB and the Phelan Foreclosure Organization pay superficial homage to

foreclosure fee guidelines set by Fannie Mae and Freddie Mac. For example, the 2009 version of Phelan Hallinan & Schmiegs web site asserted that, [f]or foreclosures and bankruptcies involving mortgages secured by one to four family residential dwellings, our firm adheres to the Fannie Mae and Freddie Mac fee schedules. Any unusual work not covered by this schedule would be specifically approved by [servicer clients] prior to our taking action. 33. In actual practice, however, neither WFB nor the Phelan Foreclosure Organization

has been constrained by the limits of Fannie Mae and Freddie Mac fee schedules. Instead, WFB, Phelan P.C., and Phelan LLP collectively pursue their common interest in exploiting economic incentives to maximize compensation they receive from foreclosure-related fees. 3. 34. How Automation Interconnects WFB and The Phelan Foreclosure Organization WFB must use computer software and platforms to monitor the progress of loans,

including late payments and default proceedings. The interplay between WFB and Phelan P.C. is made possible by the availability of this interactive and real time technology. 35. To perform these critical servicing tasks, WFB depends upon the products of

technologically sophisticated companies, including Lender Processing Services, Inc. (LPS), 9

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and its wholly owned subsidiary, LPS Default Solutions, Inc. (LPS Fidelity). As the lynchpin of its operation, WFB uses LPSs mortgage servicing platform (MSP), a program that automates all areas of loan servicing. 36. WFB also uses two other programs: (a) LPS Desktop, a web-based workflow

information system used by servicers to process communications, information, and data throughout the entire lifecycle of residential mortgages; and (b) VendorScape, a comparable product marketed by a company known as CoreLogic. Both LPS Desktop and VendorScape are designed for interactive function with MSP. 37. Outside foreclosure law firms, including the firms comprising the Phelan

Foreclosure Organization, are indispensable to WFBs mortgage servicing operation in the 26 states, including New Jersey, in which foreclosures must be authorized by judicial order. Correspondingly, foreclosure law firms like Phelan PC and Phelan LLP depend for their livelihood on referrals provided to them by WFB and other servicers. Despite mutual interests, WFB dominates and dictates the terms of the relationship. 38. WFB requires outside foreclosure law firms, including Phelan P.C. and Phelan

LLP to purchase and pay license fees to use technology products sold by LPS or CoreLogic. Among other administrative and support functions, LPS and CoreLogic refer foreclosure cases to outside counsel. In turn, LPS (through LPS Desktop) or CoreLogic (through VendorScape) monitor a law firms performance throughout each stage of the foreclosure process. 39. LPS requires WFB and other servicers to execute confidential Default Services

Agreements (DSAs), under which servicers must hire foreclosure lawyers who are members of an association of attorneys retained and managed by LPS Fidelity (the Fidelity Network).

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Through its membership in the Fidelity Network, the Phelan Foreclosure Organization receives foreclosure referrals and assignments from WFB. 40. As a condition to membership in the Fidelity Network (and thus their steady flow

of referrals), Phelan P.C., Phelan LLP, and other foreclosure law firms are required to enter into Network Agreements with LPS Fidelity and Local Counsel Agreements with servicers using LPSs default management services. These agreements obligate the Phelan Foreclosure

Organization and other Fidelity Network members to (a) pay steep technology and administrative fees to LPS, in exchange for case referrals generating low, fixed-rate fees for all legal services provided, typically $1,300 per case or less; and (b) accept onerous restrictions on and oversight of their professional practices. 41. The communications between WFB and Phelan P.C. (and its various related

entities) in connection with the Enterprise were thus accomplished primarily through its intricate set of software platforms. 4. 42. Red Light Yellow Light Green Light: The Uncompromising Imperative of Speed To complete their assignments as quickly as possible (the uniform bottom-line

demand of WFB and GSEs like Fannie Mae and Freddie Mac), Phelan P.C., Phelan LLP, and similar entities must comply with strict timelines in moving their foreclosure cases through the judicial system. Because the vast majority of communications between servicers and their foreclosure attorneys is transmitted through LPS Desktop or VendorScape, the flow of information is managed by LPS and CoreLogic. 43. Among other things, software provided by LPS and CoreLogic tracks the speed in

which firms like those in the Phelan Foreclosure Organization perform and finish their tasks.

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LPS tracks its network attorneys through an internal metric known as Attorney Performance Reviews (APR), which ranks foreclosure lawyers based on how fast they perform. 44. The computer screens of Phelan P.C., Phelan LLP, and other Fidelity Network

attorneys using LPS Desktop feature blinking traffic lights that indicate the status of the attorneys performance. Green represents satisfactory promptness. Yellow represents an alarming level of slowness. Red represents a warning of tardiness that could lead to financial penalties, suspension of referrals, or termination from the network. Fidelity Network attorneys who fail to achieve minimally acceptable APR ratings can be disqualified from lucrative future foreclosure work. Conversely, high APR ratings obtained through quick, trouble-free

foreclosures translates into potentially thousands of new cases and correspondingly large profits. Foreclosure firms dedicated single-mindedly to achieving the highest APR ratings are unmotivated to identify and solve potentially disabling problems (such as an inability to identify the actual owner of delinquent mortgages) which might slow down or prevent their foreclosure proceedings. 45. Unlike guidelines set by Fannie Mae and Freddie Mac for foreclosure fees and

expenses, WFB and the Phelan Foreclosure Organization are acutely aware that deviation from established foreclosure timelines will not be tolerated by their GSE patrons. 5. 46. The Phelan Foreclosure Organizations Business Model The Phelan Foreclosure Organization has long boasted about the speed and

efficiency with which it begins and ends its foreclosure cases. According to a 2009 version of Phelan Hallinan and Schmiegs web site, such speed is accomplished through its ability to leverage technology by completely computeriz[ing] its offices with every case management and invoice reporting syste[m] used in the foreclosure industry. This web site contrasts the

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Phelan Foreclosure Organization from other foreclosure firms by emphasizing the fact that it owns and controls the majority of its vendors to ensure as quick as possible turnaround time as humanly possible. Valuable time is saved in the initial service stage and the crucial sale stage. 47. In March 2005, the Phelan Foreclosure Organization replaced its title search

provider with Full Spectrum and Land Title, entities owned and controlled by defendants Lawrence Phelan, Hallinan, and Schmieg. The purposes of new business model were, among other things, to use cheap labor and rapid processes that could be dominated from the inside to achieve the Phelan Foreclosure Organizations goals for speed, a growing volume of foreclosure referrals, and expansion of shrinking profit margins resulting from changing economic conditions in the foreclosure industry by generating additional fees for title search and other mortgage-and foreclosure-related services, which are systematically overstated. 48. Title products obtained by the Phelan P.C. and Phelan LLP from Land Title and

Full Spectrum are also often worthless. This is because these title products frequently fail to accomplish their essential purpose: to identify the proper legal owners of properties and mortgages subject to foreclosure proceedings filed by Phelan P.C. and Phelan LLP. 6. 49. The Success of the Phelan Foreclosure Organizations Business Model Has Been Recognized and Rewarded by GSEs, WFB, and Other Servicers In 2008 alone, the Phelan Foreclosure Organization filed and prosecuted an

estimated 24,000 to 26,000 foreclosure cases, representing WFB and virtually every other major servicer. In 2009 and 2010, the Phelan Foreclosure Organization, obtained approximately $48 million from Fannie Mae, just one of its many institutional clients.1

In 2009 and 2010, Phelan P.C. and Phelan LLP obtained from Fannie Mae legal fees in the amount of $26.8 million. During the same period, Land Title and Full Spectrum obtained $21.2 million in fees from Fannie Mae.

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50.

Having run faster and less expensively than its competition, the Phelan

Foreclosure Organization describes itself as the premier default services operation in New Jersey and Pennsylvania. It has achieved this status through a barebones staff of about 20 lawyers. It has been able to function successfully without a larger complement of attorneys because approximately 97 percent of its foreclosure lawsuits end in default judgment, and the equity partners of Phelan P.C. and Phelan LLP recognize that their profit margins are enhanced by a low-overhead business model in which most of the work done on their large inventory of fill-in-the-blanks cases can be performed by non-lawyers operating in the manner of an assembly line that is seldom interrupted or slowed down by actual litigation. 51. Because of the extremely high volume of foreclosure cases they handle and the

haste with which they dispose of them, Phelan P.C. and Phelan LLP have been awarded coveted status as designated counsel for Fannie Mae and Freddie Mac in New Jersey and Pennsylvania. Apropos of its adeptness in meeting and exceeding the speediness requirements of its clients, Phelan P.C. and Phelan LLP call their joint newsletter The Timeline. 52. In the context of families struggling to hang onto their homes and a judicial

system in New Jersey that has only recently addressed institutionalized abuses of its residential mortgage foreclosure processes, however, unbridled speed is not a virtue. For WFB and Phelan P.C., the need for speed has motivated them to file as many foreclosure cases as they can, without proper investigation and by any means possible, even if their overstretched support staffs cannot process them adequately, and even when there is no evidence of ownership of allegedly defaulted mortgages.

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B.

The Giles and Other Proposed Class Members Were Damaged By Defendants Misconduct 53. Along with other members of the Proposed Class, the Representative

Homeowners have sustained monetary damages resulting directly from Defendants fraudulent foreclosure practices. 54. Plaintiffs Diane and Charles J. Giles owned a home in Barnegat Township, in

Ocean County, New Jersey, and obtained a mortgage originated by Argent Mortgage Company, LLC (Argent). Mr. Giles, an emergency medical technician, became medically disabled after trying to help others escape the fire and smoke of the World Trade Center on September 11, 2001 and during later search efforts at Ground Zero. As Mr. Giles disability and medical bills exceeded $200,000, the Giles fell behind on their mortgage. 55. Before the Giles financial difficulties, their mortgage had ostensibly been

securitized and deposited into a pool of other mortgages held in Park Place Trust for the benefit of RMBS investors. Under the Park Place PSA, WFB was appointed Master Servicer and Trust Administrator, while Wachovia was designated as Trustee, the legal owner of the pooled Park Place mortgage assets. 56. On December 30, 2005, more than a year before WFB and Phelan P.C. took

foreclosure action against the Giles, Wachovia sold its entire corporate trust and institutional custody portfolio to U.S. Bank. After this transaction, Wachovia had no ownership interest in the Giles mortgage, if it ever did, and Wachovia had no legal standing to sue the Giles in the foreclosure action that WFB and Phelan P.C. improperly prosecuted against them. 57. According to Timothy P. OBrien, WFBs current Senior Vice President and

Manager of Default Documents, [a]t the time that Wells Fargo asks a foreclosure law firm to initiate a foreclosure action in New Jersey, Wells Fargo sends that law firm a packet of 15

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information, including the loan documents, the default information and correspondence to the borrower, and current balance information. WFB also communicates the purported identity of the legal owner of a defaulted mortgage to outside foreclosure firms so that the name of a plaintiff can be inserted into complaints that WFB directs them to file. 1. 58. On Behalf of WFB, Phelan P.C. Filed False and Misleading Court Documents in Their Foreclosure Action Against The Giles In concert with WFB, on February 16, 2007, Phelan P.C. filed a foreclosure

Complaint (the Foreclosure Complaint) in the name of Wachovia against the Giles in the Superior Court, Chancery Division for Ocean County, New Jersey (Ocean County Court), Docket No. F-4671-07. 59. Paragraph 4 of the Foreclosure Complaint, purportedly signed by defendant

Diamond, alleged that holder of the obligation and Mortgage was an entity called Wachovia Bank, N.A., Trustee for the Pooling and Servicing Agreement dated as of November 1, 2004, Asset-Backed Pass-Through Certificate Series 2004-WWF1. This allegation, however, is false. Wachovia sold this package of mortgages over a year earlier. 60. Paragraph 6 of the Foreclosure Complaint alleged that, other than the mortgage

originated by Argent, a prospective assignment by Argent to Wachovia, and legal documents evidencing the Giles marriage, no other instruments appear of record which may affect the premises where the Giles lived. 61. Complaint: The following is Diamonds signature as it appeared in the Foreclosure

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62.

In connection with the filing of the Foreclosure Complaint, Diamond purportedly

signed and filed with the Ocean County Court two Certifications: (a) one attesting that all parties who should be joined in this action have been joined and (b) the other attesting that prior to filing the within Complaint, Diamond caused a title search of the public record to be made for the purpose of identifying any lien holders or other persons or entities with an interest in the property that is the subject of this foreclosure. 63. The above-referenced representations ascribed to Diamond were false and

misleading. The true owner of the Giles mortgage, the actual Trustee of the Park Place Trust, should have been named as plaintiff in the foreclosure action. Furthermore, Diamonds

statement that she ordered a title search of the public record was misleading because any good faith title search would have revealed that, for over a year, Wachovia no longer had legal rights connected to the Park Place Trust. 2. 64. Default Proceedings Against The Giles Unaware of Phelan P.C.s fraud on the Ocean County Court and of WFBs

sponsorship of it, the Giles did not contest the Foreclosure Complaint. The misrepresentations in Phelan P.C.s court filings had the purpose and effect of concealing from the Giles material facts establishing a complete defense to the foreclosure action commenced by Phelan P.C. and WFB in the name of Wachovia. The Giles relied upon these misrepresentations. Had they known that Phelan P.C. falsely claimed to represent a party that had divested its interest, if any, in their 17

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mortgage more than a year before the Foreclosure Complaint was filed, the Giles would have contested the wrongful foreclosure action against them by Phelan P.C. and WFB. 65. On April 5, 2007, Phelan P.C. filed with the Ocean County Clerk (a) a request for

a default judgment against the Giles in favor of Wachovia, and (b) a certification of default. Both documents were purportedly signed by Diamond, who again claimed falsely that her default judgment request was made on behalf of Wachovia. As shown below, the signature attributed to Defendant Diamond on this document does not resemble the handwriting attributed to her in the Foreclosure Complaint and its certifications:

66.

On June 5, 2007, based on Phelan P.C.s false representations, the Ocean County

Court entered a default judgment against the Giles, which authorized a sheriffs sale of the Giles home and determined that Wachovia was entitled to recover from the Giles an amount of $204,391.70, plus costs of suit and legal fees in an amount of $2,193.92. 67. Unaware of the duplicity of Phelan P.C. and WFB, and of the fraud they

perpetrated on the Ocean County Court, the Giles put their house up for sale and attempted to negotiate a resolution of their debt with representatives of WFB and Phelan P.C., including Diamond. Had they known that Phelan P.C. falsely claimed to represent a plaintiff that had already divested its interest in their mortgage, if any, more than a year before the Foreclosure Complaint was filed, the Giles would not have been disadvantaged in these negotiations and

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would have immediately asked the Ocean County Court to void the default judgment fraudulently procured by Phelan P.C. and WFB in the name of Wachovia. 3. 68. Phelan P.C. Schedules a Sheriffs Sale of the Giles Home Before the default judgment could be executed upon, the Giles hired an attorney,

Jerry J. Dasti, Esquire (Mr. Dasti), to protect their legal interests. 69. Phelan P.C. obtained a writ of execution on Wachovias default judgment. By

certified letter dated July 27, 2007 from Ms. Debbie Williams, a Phelan P.C. legal assistant, the Giles still believing that genuine workout discussions were under way with Diamond and representatives of WFB were shocked to learn for the first time that a sheriffs sale of their home had been scheduled for August 21, 2207 [sic]. Phelan P.C. obtained this writ in concert with WFB. 70. The sheriffs sale scheduled for August 21, 2007 was adjourned by the Ocean

County Sheriff. On September 12, 2007, Mr. Giles filed with the Ocean County Court an Emergency Application for a Stay of the Sheriffs Sale. Mr. Giles emergency application explained his dire health conditions to the Court, as well as the reasons why he suffered from them, and informed the Court that the Giles were trying to sell their home. Mr. Giles

emergency application also informed the Court that, according to a township-wide assessment, the fair market value of his home was $287,700. 4. 71. Wachovia Warned Phelan P.C. and WFB That They Lacked Standing After the Ocean County Court postponed the sheriffs sale until October 30, 2007,

friends and supporters of the Giles asked Wachovias corporate headquarters for help. It was only because of this appeal that Wachovia discovered that WFB and Phelan P.C. were acting improperly in Wachovias name without its authorization.

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72.

On October 23, 2007, Mark A. Farmer (Mr. Farmer), Wachovias senior vice

president and assistant general counsel, sent an e-mail to Mr. Dasti, thanking him for identifying the name of the Plaintiffs firm in the Giles foreclosure action (i.e., Phelan P.C.) and advising Mr. Dasti that Mr. Farmer had contacted the attorney handling the matter and informed him that Wachovia has not been the Trustee of the subject Pooling and Servicing Agreement since 12/30/05. 73. On October 24, 2007, Mr. Farmer sent a letter by U.S. mail and e-mail to Mr.

Vladimir Palma, an associate attorney at Phelan P.C. working under Diamonds direction, writing: Dear Mr. Palma: This letter is to confirm your voice message to me this morning and our subsequent conversation wherein you advised that you were able to reach your client [i.e., servicer WFB] and verify that Wachovia Bank, N.A. is not the proper Plaintiff as named in the referenced foreclosure action. Accordingly, your client has voluntarily agreed to postpone the sale date to November 19, 2007. During the interim, it is my understanding that you are awaiting the name of the proper Plaintiff from your client. Thereafter, you will file a motion to correct the name of the Plaintiff and ensure that the County records properly reflect the name of the true holder of the mortgage. As you are aware since Wachovia Bank, N.A. is not the Trustee and not the holder of the subject mortgage we are unable to address Mr. Charles Giles situation. Thank you for your prompt attention to this matter and your efforts to correct the public record. I look forward to receipt of an Order deleting the name Wachovia Bank, N.A. from the foreclosure action and recorded evidence correcting the public records. Sincerely, /s/ Mark A. Farmer Mark A. Farmer Senior Vice President & Assistant General Counsel Wachovia Corporation for its subsidiary Wachovia Bank, N.A.

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5. 74.

WFB and Phelan P.C. Continued To Pursue Foreclosure Against The Giles On several occasions, including November 9, 2007, Mr. Dasti communicated on

behalf of the Giles with WFB mortgage servicing representative, Ms. Leesa Whit-Potter, about the renewed possibility of a loan restructuring that would obviate the need for further litigation in Wachovias foreclosure action against the Giles. WFB and Phelan P.C. elected instead to litigate. 75. On November 14, 2007, Phelan P.C. filed a motion, memorandum, and attorney

certification with the Ocean County Court, seeking an Order [r]escinding the assignment [to Wachovia] and amending all pleadings to correct the Plaintiff to U.S. Bank as Trustee (Motion to Rescind). Given Wachovias indisputable lack of legal standing, Phelan P.C. was forced to admit that (a) the Foreclosure Complaint incorrectly named Wachovia Bank. N.A. as plaintiff and as Trustee of the Park Place Trust, and (b) the actual holder of the [Giles] note and mortgage was erroneously identified. 76. To support the Motion to Rescind, attorney Palma blamed WFB for their botched

foreclosure action against the Giles, telling the Ocean County Court that it was WFB, whose records, [allegedly] through mistake and inadvertence, named the holder of the note and mortgage as Wachovia Bank, N.A. as Trustee. Mr. Palma attempted to exonerate WFB from the seriousness of this servicer error, which, he contended, had no effect on the validity of the subject mortgage because neither [his proposed substitute Plaintiff] nor Defendants are in no way prejudiced [sic] insofar as the Giles have always communicated with the servicer, Americas Servicing Company [i.e., WFB]. 77. Mr. Palmas Attorney Certification misrepresented to the Ocean County Court

that the Giles mortgage was sold by Ameriquest Mortgage Company to Plaintiff, U.S. Bank

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as Trustee.

This false and misleading representation was not supported by any evidence

demonstrating that U.S. Bank actually became Trustee and acquired ownership of the assets of the Park Place Trust according to the specific terms of the Park Place PSA.2 Nor was any evidence presented showing that such ownership resided in U.S. Bank at the time WFB and Phelan P.C. filed their Foreclosure Complaint against the Giles, an indispensable element of a cause of action for foreclosure in New Jersey. Evidence in other pending federal litigation undermines the contention by WFB and Phelan P.C. in the Giles foreclosure action that U.S. Bank effectively succeeded Wachovia as Trustee of the Park Trust. See Schwend v. U.S. Bank, N.A., 2010 U.S. Dist. LEXIS 127915, at *6-*8 (E.D. Mo., Dec. 3, 2010). 78. On November 29, 2007, the Giles filed with the Ocean County Court a seven-

page letter brief in opposition to Phelan P.C.'s Motion to Rescind and in support of their own Cross-Motion to Dismiss. The Giles letter brief asserted correctly that Wachovia Bank, N.A., the Plaintiff in this action, is not entitled to any relief. Additionally, U.S. Bank, N.A., the party that [Phelan P.C.] counsel now claims is the appropriate Plaintiff, is not barred from refilling this action and following the appropriate steps to seek foreclosure after placing its proof upon the record. 79. In December 2007, the Giles received and accepted a far-below-market-value

offer to buy their house. They agreed to this transaction, not because the offer was fair or

If U.S. Bank did succeed Wachovia as trustee for Park Place Trust, there would be ample legal documentation evidencing its appointment. Under paragraph 807 of the Park Place PSA, a resigning trustee must provide written notice of its resignation to (1) the depositor, Park Place Securities, Inc., (2) the NIMS insurer, (3) the master servicer, WFB, and (4) the beneficial owners of the trust assets, the certificate holders (collectively, Notified Entities). Under paragraph 808 of the Park Place PSA, any successor trustee must execute, acknowledge and deliver to Notified Entities a formal instrument accepting [its] appointment as trustee.

A copy of the Park Place PSA is available at http://www.scribd.com/doc/66065721/Pooling-and-ServicingAgreement-dated-as-of-November-1-2004-Asset-Backed-Pass-Through-Certificate-Series-2004-WWF1. Even if Wachovia and U.S. Bank did execute a general agreement regarding transfer of Wachovias trust operations to U.S. Bank, there is apparently no document demonstrating that U.S. Bank effectively acquired and maintained legal ownership of all of the assets of the Park Place Trust.

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because they lacked compelling legal defenses to the foreclosure action, but because (a) the Giles were depleted of remaining financial or emotional resources with which to fight the wrongful foreclosure prosecution of Phelan P.C. and WFB and (b) Mr. Giles disability and severe health problems continued to worsen. Had Phelan P.C. and WFB suspended their wrongful foreclosure prosecution in the name of Wachovia and allowed the Giles a reasonable opportunity to sell their property at a price commensurate with its true market value, their liability for damages sustained by the Giles could have been mitigated. But because WFB and Phelan P.C. operated inflexibly under strict timeline requirements governing completion of foreclosure actions, further delay was no option for these Defendants. 6. 80. Fraudulent Expense Claims by Phelan P.C. The improper motivation behind the wrongful foreclosure lawsuits prosecuted by

Phelan P.C. and WFB against members of the Proposed Class soon became apparent. A letter dated and faxed on December 10, 2007 by Ms. Jessica Hansbury, a Phelan P.C. employee, written on behalf of WFB, represented falsely that the Giles owed (a) $7,817 in Legal Fees and Costs through December 10, 2007 and (b) $340 in Property Inspections/BPO [broker price opinion] fees.3 81. After the Giles objected to overstated foreclosure charges from Phelan P.C., WFB

took the unusual step of retreating from its foreclosure law firms claim without insisting upon its payment in full. Without the legal representation the Giles obtained and paid for out of their own resources, they would have had to pay these inflated or manufactured foreclosure fees out of
3

At the time of the Giles foreclosure prosecution, Fannie Maes flat-rate schedule for payment of legal fees in New Jersey foreclosure actions was $1,300 per case. Phelan P.C.s undocumented claim for $7,817 defies explanation. Moreover, the $340 charge for Property Inspections/BPO was objectively excessive. Fannie Maes maximum reimbursable rate for an exterior BPO was $80 and $105 for an interior BPO. According to the National Association of BPO Professionals, the cost of a BPO is as little as $30. Moreover, Fannie Maes maximum reimbursable rate for property inspection is $60.

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their sale proceeds. Other members of the Proposed Class, like the 97 percent of foreclosure defendants who endure a default judgment, did pay such overstated fees when they chose to avoid forced dispossession from their home because of the wrongful foreclosure actions by WFB and Phelan P.C.4 7. 82. The Unadjudicated Outcome of Wachovia v. Giles On January 15, 2008, the Giles completed the sale of their home for $238,000,

$49,000 below its assessed value. The Giles suffered concrete economic damages in the loss of home equity wiped out through their coerced distress sale and through nearly $1,800 in legal fees they were paid to their counsel for professional services, including his opposition to Phelan P.C.'s Motion to Rescind. If the Representative Homeowners had the additional financial and emotional wherewithal necessary to litigate Wachovia v. Giles through to an adjudicated decision on the merits, WFB and Phelan P.C. would have been unable to evict the Giles under the improperly invoked authority of Wachovia or the unsubstantiated authority of U.S. Bank. 83. The Giles distress sale was the result of a bitter, though temporary,

compromise of their legal rights. On January 18, 2008, just three days after sale of the Giles property, the Ocean County Court entered an Order that: (a) granted the Phelan Firms Motion to Rescind; (b) confirmed Phelan P.C.s voluntarily dismissal of its foreclosure action against the Giles; and (c) preserved the Giles rights as to all affirmative claims resulting from foreclosure action by Phelan P.C. and WFB. The litigation ended without a final judgment.

These inflated and manufactured fees are paid when homeowners avoid a sheriffs sale by reaching a loan modification or workout arrangement with WFB and Phelan P.C. Although they may not be recoverable outside of Bankruptcy Court (Opinion dated September 28, 2012, Docket Item 63, at pp. 25-28), overstated fees are also paid by homeowners who save their home by filing a petition for relief under Chapter 13 of the Bankruptcy Code. See, e.g., Amended Class Action Complaint dated December 9, 2011, Docket Item 16, at 126-46.

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8. 84.

Epilogue to Wachovia v. Giles On March 12, 2008, Phelan P.C. filed a discharge of a lis pendens on the Giles

former home with the Ocean County Clerk. In its caption, the discharge falsely identified Wachovia as plaintiff, despite Mr. Palmas earlier representation to the Ocean County court that it was necessary to amen[d] all pleadings to correctly identify the foreclosing Plaintiff as U.S. Bank as Trustee. (Emphasis added.) 85. Diamonds signature on this legal document appears below:

9. 86.

WFB, Phelan P.C. and Phelan LLP Continued to File Wrongful Foreclosure Lawsuits in the Name of Wachovia and U.S. Bank Even after Phelan P.C. and WFB were forced to admit to the Ocean County Court

that their Foreclosure Complaint in Wachovia v. Giles had incorrectly named Wachovia Bank as plaintiff and Trustee of the Park Place Trust and that Wachovia was not the actual holder of the [Giles] note and mortgage, WFB, Phelan P.C. and Phelan LLP continued to make identical false claims in foreclosure lawsuits brought in the name of Wachovia or U.S. Bank as plaintiff in the purported capacity of Trustee of the Park Place Trust. 87. A non-exhaustive sample of such wrongful foreclosure cases includes: a. b. c. d. Wachovia Bank, N.A. v. Spivey, No. 07-004303 (Pa. C.P. Phila. Co.); Wachovia Bank, N.A. v. Smith, No. F-1358107(N.J. Super., Ch. Div., Essex Co.); Wachovia Bank, N.A. v. Moshe, No. F-997506 (N.J. Super., Ch. Div., Monmouth Co.); Wachovia Bank, N.A. v. Bender, No. 07-6730 (Pa. C.P. Berks Co.); 25

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e. f. g. 88.

Wachovia Bank, N.A. v. Hrubosky, No. 07-0102422 (Pa. C.P. Phila. Co.); U.S. Bank, N.A. v. Kidd, No. 07-001014 (Pa. C.P. Phila. Co.); and Wachovia Bank, N.A. v. Corbin, No.004407 (Pa. C.P. Phila. Co.).

Phelan P.C. also continued to prosecute foreclosure actions in the name of other

foreclosure plaintiffs without legal standing to bring them. See, e.g., U.S. Bank v. Spencer, 2011 N.J. Super. Unpub. LEXIS 746, at *33-*34 (N.J. Super. Ch. Div. Bergen Co. March 22, 2011) (the Phelan Firm, purportedly on behalf of U.S. Bank, provided no documentation or support for its position [that U.S. Bank] is the trustee for [a RMBS trust], and therefore has not established its right to sue on behalf of [the Trust]). C. Judicial Action in New Jersey 89. WFBs and Phelan P.C.s robo-signing practices have not gone unnoticed by

the state judiciary in New Jersey. See state court proceedings initiated by the Hon. Mary C. Jacobson, Presiding Judge of the Chancery Court in Mercer County, New Jersey, in In the Matter of Residential Mortgage Foreclosure Pleading and Document Irregularities, Docket No. F059553-10. There, the public record established that Thomas Strain, an employee of Full Spectrum, admitted in a deposition to notarizing approximately 50 foreclosure-related documents per day, often outside the presence of the signer, often defendant Hallinan. The public record also established that, after New Jersey Chancery Division judges expressed concerns about Phelan P.C.s mortgage assignment practices, the Phelan Foreclosure Organization spent $175,000 to redo approximately 3,000 assignments that Strain had notarized. 90. In addition, WFB employees admitted in deposition testimony that they did not

review or have personal knowledge of the facts asserted in legal documents signed in massproduced fashion, a process in which WFB relied instead on outside foreclosure counsel or other servicer employees for accuracy. 26

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91.

Based on such information in the public record, the New Jersey judiciary:

a. Effectively suspended uncontested foreclosure actions prosecuted by WFB and five other implicated servicers; b. Required servicers to justify their actions with detailed information provided to a special master charged with determining the sufficiency of the servicers' foreclosure practices and processes; and c. Established and implemented new court rules specifically requiring foreclosure law firms to identify steps they have taken to verify evidentiary support for factual statements in the legal documents they sign, including their compliance with Rule 4:64-1(b)(10), which requires that if plaintiff is not the original mortgagee or original nominee mortgagee, a foreclosure complaint must provide the name of the original mortgagee and a recital of all assignments in the chain of title. 92. On June 9, 2011, Chief Justice Stuart J. Rabner entered an order finalizing

amendments to court rules governing residential mortgage foreclosures in New Jersey. The Order requires foreclosure lawyers to execute certifications and affidavits providing specific information demonstrating that they have confirmed the accuracy of facts in foreclosure legal documents through direct communications with servicer employees. V. 93. CLASS ACTION ALLEGATIONS

The Representative Homeowners bring this lawsuit, individually and as a class

action, under Rule 23(b)(3) of the Federal Rules of Civil Procedure, on behalf of all members of the following Class: All homeowners who, during the period from January 1, 2005 through the present (Class Period): (A) were defendants in New Jersey mortgage foreclosure lawsuits filed and prosecuted by Phelan Hallinan & Schmieg, P.C., at the direction of and in concert with Wells Fargo Bank, N.A., which were facilitated through preparation, execution and certification of fraudulent court documents falsely identifying as plaintiff Wachovia Bank, N.A. or U.S. Bank, N.A. in a purported capacity as Trustee for the Pooling and Servicing Agreement dated as of November 1, 2004, Asset-Backed Pass-Through Certificate Series 2004-WWF1; and

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(B) sustained economic damage as a result of Defendants aforementioned misconduct. The term damage does not include overcharges contained in proofs of claim filed in U.S. Bankruptcy Court pursuant to 11 U.S.C. 501. 94. 95. This litigation is properly maintainable as a class action. The Proposed Class is so numerous and dispersed that joinder of all members is

impracticable. Approximately 583 New Jersey mortgages were deposited into the Park Place Trust, the vast majority of which were of the high-risk, sub-prime variety. A large percentage of those mortgages went into default and resulted in foreclosure actions filed by Phelan P.C. at the direction of and in concert with WFB. The exact number and identity of those foreclosures can be ascertained without difficulty through discovery. 96. There are questions of law and fact common to the Class. These common

questions relate to the existence of the pattern of wrongful conduct alleged, and to the type and common pattern of injury sustained as a result thereof. The questions include, but are not limited to: a. Whether Wachovia and/or U.S. Bank had legal standing to initiate and prosecute mortgage foreclosure actions against Proposed Class members as Trustee of the Park Place Trust; b. Whether WFB and Phelan P.C. falsified or caused the falsification of statements in complaints, affidavits, verifications, certifications, motions and other legal documents filed in foreclosure lawsuits brought in the name of Wachovia and/or U.S. Bank as purported Trustee for the Park Place Trust; c. Whether false statements authorized by WFB and set forth in court filings by Phelan P.C. operated as a fraud on New Jersey Chancery Courts and on members of the Proposed Class; d. Defendants; e. The duration, sequence, and character of the fraudulent conduct by

Whether Defendants conduct violated RICO;

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f. Whether Defendants conduct caused injury to the person and property of the Representative Plaintiffs and other members of the Proposed Class; and g. The appropriate measures of damages sustained by Plaintiffs and other members of the Proposed Class. 97. The Representative Homeowners are members of the Class. Their claims are

typical of the claims of other Proposed Class members. Plaintiffs will fairly and adequately protect the interests of the members of the Proposed Class. Plaintiffs interests are aligned closely with, and are not antagonistic to, those of the other members of the Proposed Class. The Representative Homeowners are represented by competent counsel experienced in the prosecution of class action litigation. 98. The prosecution of separate actions by individual members of the Proposed Class

would create a risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for Defendants. 99. Questions of law and fact common to the members of the Class predominate over

questions affecting only individual members. 100. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy. Prosecution as a class action will eliminate the possibility of repetitious litigation. Treatment as a class action will permit a large number of similarly situated persons to adjudicate their common claims in a single forum simultaneously, efficiently and without duplication of effort and expense that numerous individual actions would engender. Class treatment will also permit the adjudication of claims by many Proposed Class members who otherwise could not afford to litigate substantively complex issues like those at issue in this Complaint. This action presents no difficulties of management that would preclude its maintenance as a class action. 29

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VI. CLAIM FOR RELIEF VIOLATIONS OF 18 U.S.C. 1962(c) (RICO) 101. 102. This cause of action is asserted against all Defendants. Plaintiffs, each Proposed Class member, and each Defendant is a person within

the meaning of 18 U.S.C. 1961(3). 103. In violation of 18 U.S.C. 1962(c), Defendants conducted the affairs of the

association-in-fact enterprise identified below. The affairs of this enterprise affected interstate commerce through a pattern of racketeering activity. A. The Enterprise 104. The Phelan/Wells Fargo Foreclosure Enterprise (the Enterprise) is an

association-in-fact consisting of (a) WFB; (b) Phelan, P.C; (c) non-defendant Phelan LLP; (d) Lawrence Phelan, Hallinan, Schmieg, and Diamond; and (e) Full Spectrum and Land Title. 105. WFB, a national mortgage servicer headquartered in San Francisco, is a legal entity

independent of other Enterprise members. Attorneys Lawrence Phelan, Hallinan and Schmieg own and control Phelan P.C., a New Jersey foreclosure law firm, while attorney Diamond serves as its managing partner. Attorneys Lawrence Phelan, Hallinan and Schmieg also own and control Phelan LLP, a Pennsylvania foreclosure law firm whose management and day-to-day operations are integrated closely with Phelan P.C. In addition, Lawrence Phelan, Hallinan, and Schmieg own and control Full Spectrum and Land Title, vendors of ancillary default management services ordered and invoiced by Phelan P.C. and Phelan LLP in foreclosure litigation.

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106.

The Enterprise is an ongoing, continuing group or unit of persons and entities

associated together for the common purpose of processing residential mortgage foreclosure lawsuits. The Enterprise operated continuously throughout the Class Period. 107. 108. The Enterprise engages in, and its activities affect, interstate commerce. While all Defendants participate in and are part of the Enterprise, they have an

existence separate and distinct from the Enterprise. B. Predicate Acts of Mail and Wire Fraud 1. 109. Fraudulent Scheme and Intent to Defraud WFB, Phelan P.C., non-defendant Phelan LLP, Lawrence Phelan, Hallinan,

Schmieg, Diamond, Full Spectrum, and Land Title each committed mail and wire fraud in violation of 18 U.S.C. 1341 and 1343. They did so through their devise and implementation of a scheme or artifice to defraud Plaintiff homeowners and the New Jersey court system, and by obtaining from money or property by means of false or fraudulent pretenses and representations. 110. In concert with WFB, Phelan P.C. and Phelan LLP filed and prosecuted mortgage

foreclosure lawsuits against members of the Proposed Class and other Pennsylvania homeowners on behalf of Wachovia and/or U.S. Bank, as a purported Trustee for the Park Place Trust. Neither Wachovia nor U.S. Bank was Trustee of the Park Place Trust. Neither financial institution was legal owner of Plaintiffs mortgages when the foreclosure lawsuits were initiated. Neither

Wachovia nor U.S. Bank had legal standing to bring the foreclosure actions when they were filed. 111. WFB, Phelan P.C. and Phelan LLP, unable to ascertain the identity of the party that

did own the Homeowners mortgages, injected the name Wachovia or U.S. Bank as plaintiff in their foreclosure complaints. They did this with intent to deceive New Jersey and Pennsylvania state courts and the Homeowners. They also acted with willful and reckless indifference to the identity of

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the bona fide owner of the Homeowners mortgages. Without a legitimately named plaintiff to represent, WFB and Phelan P.C. were incapable of enforcing any legal rights against members of the Proposed Class 112. Defendants scheme to obtain money or property by means of false or fraudulent

pretenses and representations enabled them to: (a) evict Plaintiff homeowners from their property without any legal right to do so; (b) gain financially from subsequent disposition of foreclosed property; (c) inflate or fabricate foreclosure-related fees charged to Plaintiff homeowners threatened with loss of their homes through (i) excessive attorney fees claimed by Phelan P.C. and WFB and (ii) reimbursement of overstated bills generated by Land Title and Full Spectrum. 113. This scheme was effectuated by the filing by Phelan P.C. and WFB of deceptive

foreclosure documents, which included complaints, certifications, verifications, affidavits, motions containing false and misleading statements concerning the legal status of Wachovia and/or U.S. Bank as foreclosing Plaintiff. The false and misleading nature of some documents was compounded by forged signatures of Diamond and other Phelan P.C. attorneys. 2. 114. Use of Interstate Wire Facilities and U.S. Mail The U.S. Mail or interstate wire facilities were used in connection with the

fraudulent scheme identified above, among other instances,5 through the following communications: (a) Shortly before February 16, 2007, an employee of WFB sent an electronic message to an employee of Phelan P.C., via computer systems designed and maintained by LPS or CoreLogic, which directed Phelan P.C. to file a foreclosure lawsuit against the Giles in the name of Wachovia as Trustee for the Park Place Trust;

Before discovery begins, it is not possible to determine conclusively whether some false and misleading documents, such as the Foreclosure Complaint against the Giles dated February 16, 2007 and the accompanying Diamond certifications, were transmitted through use of the mail or interstate wire facilities. It is probable that they were.

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(b) A letter to the Giles dated July 27, 2007, sent by Ms. Debbie Williams, a Phelan P.C. legal assistant (transmitted via U.S. Postal Service, certified mail, return receipt requested), enclosed a Notice of Sheriffs Sale. The letter and Notice were received by the Giles at 10:35 a.m. on August 1, 2007. Like Phelan P.C.s foreclosure Complaint and Certifications dated February 16, 2007, and its Certification of Default dated April 5, 2007, the Notice falsely identified Wachovia as Plaintiff in the mortgage foreclosure action improperly prosecuted against them; (c) On or about October 24, 2007, Phelan P.C. attorney Vladimir Palma communicated with one or more representatives of WFB, either by telephone or via computer systems designed and maintained by LPS or CoreLogic, concerning Wachovias complaint regarding their unauthorized use of Wachovias name in foreclosure proceedings against the Giles. In this communication, WFBs representative(s) confirmed to Mr. Palma that Wachovia Bank, N.A. is not the proper Plaintiff and that WFB would attempt to find the name of the proper Plaintiff before November 19, 2007, the date upon which WFB voluntarily agreed to postpone its Sheriffs Sale of the Giles home; (d) In the days before November 14, 2007, Phelan P.C. attorney Palma communicated with one or more representatives of WFB, either by telephone or via computer systems designed and maintained by LPS or CoreLogic, during which time WFB directed Mr. Palma to file a court motion asking to substitute U.S. Bank as plaintiff in the Giles foreclosure lawsuit; (e) On November 14, 2007, Mr. Oliver Ayon, a Phelan P.C. legal assistant, served by regular and certified U.S. Mail copies of Mr. Palmas Motion to Rescind, supporting brief and attorney certification to the Giles and their attorney. The motion papers misrepresent that the Giles mortgage was sold by Ameriquest Mortgage Company to Plaintiff, U.S. Bank as Trustee and that the Giles were in no way prejudiced by his law firm and clients wrongful prosecution of a foreclosure action in the name of Wachovia; and (f) On December 10, 2007, Ms. Jessica Hansbury, a Phelan P.C. employee, faxed a letter to Mr. Dasti, counsel to the Giles, falsely representing that the Giles owed WFB $7,817 in Legal Fees and Costs through December 10, 2007 and Property Inspections/BPO fees in an amount of $340. C. Conduct of the Enterprises Affairs 115. Throughout the Class Period, WFB, Phelan P.C., Phelan LLP, Lawrence Phelan,

Hallinan, Schmieg, Diamond, Land Title, and Full Spectrum exerted control over and participated in the activities of the Enterprise.

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WFB 116. Using automated technology provided by LPS and CoreLogic, WFB conducted and

participated in the conduct of the affairs of the Enterprise by: a. directing, encouraging or permitting Phelan P.C., on its behalf, to file complaints, affidavits, certifications, verifications, motions and other legal documents that contain false and misleading statements intended to mislead New Jersey Chancery Courts and Plaintiff homeowners concerning (i) purported legal ownership of Plaintiffs mortgages by Wachovia and/or U.S. Bank as Trustee of the Park Place Trust and (ii) legal standing of Wachovia and/or U.S. Bank to prosecute foreclosure lawsuits against members of the Proposed Class; and b. sharing the proceeds of unlawfully inflated fees charged to Plaintiff homeowners for default management services ordered by Phelan P.C. through affiliated companies, Full Spectrum and Land Title Services, which are wholly owned and controlled by Lawrence Phelan, Hallinan and Schmieg. PHELAN P.C., PHELAN LLP, AND ROSEMARIE DIAMOND 117. Motivated by immediate financial gain and future opportunities for further profit

that result from meeting or exceeding strict timelines required by WFB, Fannie Mae, and Freddie Mac, defendants Phelan P.C. and Diamond (and non-defendant Phelan LLP) conducted or participated in the conduct of the affairs of the Enterprise by: (a) willfully failing to perform investigations necessary to determine the factual basis of allegations made in foreclosure lawsuits brought against members of the Proposed Class, at the direction of and in concert with WFB, in the name of Wachovia and/or U.S. Bank as Trustee of the Park Place Trust; (b) filing complaints, affidavits, certifications, verifications, motions and other legal documents that contain false and misleading statements intended to mislead New Jersey Chancery Courts and Plaintiff homeowners concerning (i) purported legal ownership of Plaintiffs mortgages by Wachovia and/or U.S. Bank as Trustee of the Park Place Trust and (ii) legal standing of Wachovia and/or U.S. Bank to prosecute foreclosure lawsuits against members of the Proposed Class; (c) inflating legal fees they charged for prosecution of foreclosure lawsuits filed on behalf of WFB against members of the Proposed Class, which exceeded maximum amounts specified in mandatory standards published by Fannie Mae and Freddie Mac.;

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(d) through Phelan P.C.s equity partners wholly owned and controlled companies, Full Spectrum and Land Title Services, charging unlawfully inflated fees to Plaintiff homeowners for default management services ordered by Phelan P.C., a portion of which was kicked back as profit to WFB; and (e) while not a defendant in this action, Phelan LLP acted in the identical fashion identified above in connection with its wrongful foreclosure prosecutions against Pennsylvania homeowners, at the direction of and in concert with WFB, in the name of Wachovia and/or U.S. Bank as Trustee of the Park Place Trust. LAWRENCE PHELAN, HALLINAN, AND SCHMIEG 118. Having complete ownership and domination over Phelan P.C., Phelan LLP, Land

Title and Full Spectrum, Defendants Lawrence Phelan, Hallinan, and Schmieg bear full responsibility for the wrongful activities of those Defendants, as well as the wrongful activities of Diamond as managing partner of Phelan P.C. Defendants Lawrence Phelan, Hallinan, and Schmieg (a) established the corrupt business model through which the Phelan Foreclosure Organization operated, (b) supervised and monitored the Phelan Foreclosure Organization to ensure that their corrupt business plan was implemented to their complete satisfaction and (c) gained financially through the Phelan Foreclosure Organization's wrongful conduct, which was integral to profitability of the corrupt business model. LAND TITLE AND FULL SPECTRUM 119. Land Title and Full Spectrum conducted or participated in the conduct of the affairs

by implementing the law firm-title business model devised by Defendants Lawrence Phelan, Hallinan, and Schmieg as a means of overcoming the diminishing profit margins of Phelan P.C. and Phelan LLP caused by increasing costs of doing business in the residential mortgage foreclosure industry. The predominant features of this business model are barebones cost, extremely high speed, and excessively marked-up billings. The Phelan Foreclosure Organization

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also depends upon Full Spectrum and Land Titles disregard for the quality and effectiveness of its services, which enables the profitable filing of wrongful foreclosure lawsuits in the name of uninterested entities without legal standing to sue. 120. Collectively and individually, each Defendant benefits from its unlawful conduct

and participation in the affairs of the Enterprise. D. Defendants Pattern of Racketeering Activity 121. Each Defendant conducted and participated in the affairs of the Enterprise

through a pattern of racketeering activity, including acts indictable under 18 U.S.C. 1341, relating to mail fraud, and 18 U.S.C. 1343, relating to wire fraud. 122. Defendants pattern of racketeering is evidenced by their fraudulent conduct

directed to the Giles and to other members of the Proposed Class who have been prosecuted in wrongful foreclosure suits filed by WFB and Phelan P.C. in the name of Wachovia or U.S. Bank as purported Trustee of the Park Place Trust. 123. Defendants pattern of racketeering is also evidenced by their fraudulent conduct

directed to Pennsylvania homeowners who have been prosecuted in wrongful foreclosure suits filed by WFB and Phelan LLP in the name of Wachovia or U.S. Bank as purported Trustee of the Park Place Trust. 124. On numerous separate occasions, Defendants used the U.S. mails and interstate

wire facilities in furtherance of their fraudulent schemes. Each fraudulent mailing and interstate wire transmission constitute a racketeering activity within the meaning of 18 U.S.C. 1961(1)(B). Collectively, these violations also constitute a pattern of racketeering activity within the meaning of 18 U.S.C. 1961(5), in which Defendants intended to defraud New Jersey Chancery Court judges, the Representative Homeowners, and members of the Proposed Class.

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125.

Defendants racketeering activities constitute a common course of conduct, with

similar pattern and purpose. Each separate use of the U.S. mails and/or interstate wire facilities employed by Defendants was related, had similar intended purposes, involved similar participants and methods of execution, and had the same results affecting the same victims state courts, the Representative Homeowners, and all members of the Proposed Class. Each Defendant engaged in the pattern of racketeering activity for the purpose of conducting the ongoing business affairs of the Enterprise. E. Damages Caused by Defendants Scheme 126. Defendants violations of federal law and their pattern of racketeering activity

have directly and proximately caused the Representative Homeowners and members of the Class to be injured in their property. These damages include: (a) diminution or complete loss of value of property taken or sold as a result of wrongful foreclosure lawsuits filed by Phelan P.C. and WFB in the name of entities other than the still-undetermined bona fide legal owner of Plaintiffs mortgages; (b) attorneys fees incurred by Proposed Class members who (like the Giles) retained counsel to represent their interests in connection with wrongful default judgments procured by Phelan P.C. and WFB; and (c) payment of manufactured and inflated foreclosure-related costs, including (i) padded legal fees charged by Phelan P.C. in amounts that exceeded uniform fee schedules established by Fannie Mae and Freddie Mac; and (ii) payment of manufactured and inflated foreclosure-related costs that exceeded amounts established in uniform fee schedules published by Fannie Mae and Freddie Mac. . 127. Under 18 U.S.C. 1964(c), Defendants are jointly and severally liable to Plaintiffs and members of the Class for three times the damages sustained by Plaintiffs and Class members, plus the costs of bringing this suit, including reasonable attorneys fees.

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VII. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray that: A. The Court determine that this action may be maintained as a class action under

Rule 23 of the Federal Rules of Civil Procedure. B. Defendants conduct be determined to have violated the Racketeer Influenced and

Corruption Act, 18 U.S.C. 1962(c). C. Judgment be entered against Defendants for damages sustained by the

Representative Plaintiffs and other Class members to the maximum extent allowed by law, together with the costs of this action, including reasonable attorneys fees. D. Plaintiffs and members of the Class have such other relief that the Court may

deem just and proper. VIII. JURY TRIAL DEMANDED Plaintiffs demand a trial by jury.

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Dated:

October 29, 2012 Respectfully submitted, TRUJILLO RODRIGUEZ & RICHARDS LLC s/ Lisa J. Rodriguez Lisa Rodriguez 258 Kings Highway East Haddonfield, NJ 08033 Tel: (856) 795-9000 NARKIN LLC John G. Narkin 1662 South Loggers Pond Place, #31 Boise, Idaho 83706 Tel: (208) 995-6119 HARWOOD FEFFER LLP Robert I. Harwood James G. Flynn 488 Madison Avenue, 8th Floor New York, New York 10022 Tel: (212) 935-7400

Attorneys for Plaintiffs and the Proposed Class

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