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Southern California attorney arrested for loan modification activities

foreclosure signAn Irvine attorney accused of targeting hundreds of distressed homeowners became the first California lawyer arrested for illicit loan modification activities when he was charged with more than 100 felonies last month. Christopher Lee Diener [#187890] faces one count of conspiracy to commit grand theft, 116 counts of grand theft by false pretenses and a perjury charge. He faces up to 70 years in state prison if convicted.

Law enforcement agencies throughout California, as well as the State Bar, have received thousands of complaints from homeowners over the last year that they have been victimized by phony businesses that used attorneys as fronts to collect advance fees and then performed no work. The bar, which has a loan modification task force and is working with federal, state and local law enforcement, is investigating dozens of lawyers, but Diener, 42, was the first to be arrested.

Christopher Diener
Christopher Diener

According to Orange County prosecutors, Diener and two Ladera Ranch neighbors defrauded more than 400 victims in a $1.25 million loan modification scam. Diener, Stefano Joseph Marrero, 40, and Terrence Green Sr., 43, operated loan modification businesses under the names Home Relief Services, LLC, US Loan Mod Processing, HRS Communications, The Diener Law Firm and Diener Law Group. Marrero and Green were business partners and Diener was their lawyer.

Green was arrested with Diener and Marrero turned himself in.

Prosecutors said that in exchange for advance payments to Diener (a practice that has since been outlawed), the businesses promised to complete mortgage modifications within 90 days, claiming a 90 percent success rate. They offered a 100 percent money-back guarantee if the loan could not be modified.

In addition to the guarantees, the businesses said they would negotiate lower interest rates with lenders, reduce the principal owed on a mortgage, have second mortgages eliminated or forgiven and have late fees forgiven.

In fact, prosecutors said, the defendants failed to provide the promised services and instead fraudulently took $1.25 million from their clients, as well as more than $350,000 from credit card companies that had to refund cardholders to compensate for the fraud.

The men also are accused of promising referral fees to local and national real estate brokers and professionals. They traveled to a mortgage bankers’ convention in Las Vegas to solicit referrals from industry professionals with the promise of payment, law enforcement officials said.

Diener, Marrero and Green also have been targeted by Attorney General Jerry Brown, who has filed for civil penalties and is seeking restitution and an injunction against the three, and the Department of Real Estate, which issued a desist and refrain order a year ago related to soliciting clients.

The State Bar placed Diener on involuntary inactive enrollment in October and charged him with 80 counts of misconduct in 24 matters.

Lifting his license because Diener posed a “threat of harm” to the public, State Bar Court Judge Richard Honn said Diener “promised to help troubled homeowners — many of whom were in arrears or on the brink of foreclosure — modify their home loans and maintain financial stability.

“Instead he took their preciously scarce money and time and offered little to nothing in return. In fact … many of (Diener’s) clients ended up in a worse position than they were when they originally turned to (him) for help.”

Bar prosecutors allege that Diener misrepresented the scope of his services to clients, collected advanced fees under false pretenses and failed to perform any services to obtain a loan modification on behalf of his clients. According to the charges, most of the clients paid between $1,595 and $3,995 to Diener to negotiate a loan modification, but he typically did no work and did not return their phone calls or refund any fees. He also is charged with practicing in states where he is not licensed, including Nevada, Ohio, New York, Georgia, Alabama, Illinois, North Carolina and Florida.

In his response to the bar charges, Diener denied all the allegations.

Earlier in January, the bar shut down another Orange County loan modification business operated by two nonlawyers who falsely claimed the business was supervised by attorneys. After working with the state justice and real estate departments and the Orange County district attorney, bar investigators and prosecutors seized client files, terminated phone and computer services and posted notices to clients and the public about the shutdown. All officers, principals and employees of the businesses were ordered to cease and desist from holding themselves out as attorneys. The businesses were operated by Curtis Melone, of Huntington Beach, and Christopher Fox, of Redondo Beach, under such names as Guardian Credit Services, Green Credit Solutions, Green Credit Services, Erickson Law Group, Green Credit Law and PacWest Funding. The men allegedly promised homeowners they could help with loan modifications but then did nothing to help. They also misled the clients to believe that services would be performed or supervised by an attorney.

The bar’s loan modification task force has opened more than 1,300 investigations and so far has obtained 13 resignations with charges pending and placed four attorneys on involuntary inactive status. Trials before the State Bar Court are pending for two more lawyers.