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Florida attorney may be disbarred due to foreclosure "tsunami"

By Barbara Liston

ORLANDO, Florida (Reuters) - A Florida lawyer known as the "foreclosure king" who allegedly left a string of fraudulent legal documents and more than 100,000 abandoned court cases in his wake is facing disbarment as a result of a court ruling this week.

A referee for the Florida Supreme Court issued a recommendation this week that David J. Stern of Plantation in south Florida be stripped of his license to practice law. The Supreme Court typically follows its referees' recommendations, a Florida Bar spokeswoman told Reuters.

Stern's law firm handled approximately 20 percent of the foreclosures in Florida in 2009 at the peak of the housing crisis on behalf of Citibank, Bank of America, Fannie Mae and other major national lenders.

The firm raked in millions of dollars in fees but his tactics caused "massive and irreconcilable damage to the entire court system," according to a complaint filed in April by the Florida Bar.

Stern has 60 days to appeal the referee's recommendation once it reaches the court's docket. Stern's lawyer, Jeffrey Tew, did not immediately return a call for comment.

The referee, Palm Beach County judge Nancy Perez, concluded after a trial that Stern's goal was to beef up his business and income to help him achieve a high price for the sale of his mortgage document processing back office operation. Stern received $58 million when he handed off the back office business to DJSP Enterprises, a publicly traded company he helped create.

Perez found the root cause of many problems was Stern's acceptance of a "tsunami" of foreclosure cases from major lenders which he then placed in the hands of his overloaded associates, most of whom were new and inexperienced. In 2008, these lawyers averaged more than 1,600 cases each, according to her report.

Six circuit judges testified about the problems Stern or his associates caused in their courtrooms. The report described the filing of falsified documents, and lawyers skipping court hearings and ignoring court orders.

"His failure to exercise care resulted in massive injury to the system," Perez wrote.

Perez wrote that Stern's firm forged documents as far back as 1999, and that Stern was publicly reprimanded in 2002 for filing an affidavit that contained inaccurate information.

Perez found as an aggravating circumstance the fact that Stern claimed he did not have sufficient resources to withdraw properly from his pending cases, which she found in conflict with his net worth statement.

In January 2011, DJSP sued Stern, accusing him of fraud for allegedly inflating revenue by cutting corners, including letting workers sign foreclosure documents without reading them, a practice known as "robo-signing."

The lawsuit also said Stern awarded bonuses and "extravagant gifts" to workers who could churn out foreclosures quickly.

Stern closed his law office in March 2011.

(Editing by David Adams and Chris Reese)

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