NY Judge Slams Wells Fargo For Forging Documents... And Why Nothing Will Change

Bankruptcy judge Robert Drain of the New York Southern District has long been one of the more fascinating litigators at One Bowling Green. However, until today we though that his often outspoken style is reserved for his career caseload, which includes among it Delphi, Hostess, and RCN; little did we know that Drain is also an activist on par with the infamous Jed Rakoff (author of the infamous rhetorical essay "Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis?" which over 1 year later still has no answer).

Today, thanks to Zero Hedge contributor 4closurefraud.org, who over the weekend noticed a critical filing in the case of Cynthia Carrsow-Franklin vs Wells Fargo, we find something stunning: in his 30-page decision (attached below), Drain accused Wells of forging, and explicitly used the word "forged", not once, not twice, but a whopping 22 times in his opinion!

By way of background, the case involves a debtor, New York speech pathologist for autistic children, Cynthia Carrsow Franklin, whose Westchester Country house Wells Fargo is trying to prove it has a right to foreclose on. The proceedings had been going on since 2010, and it took five years of endless Wells Fargo lies for the presiding judge to finally snap and, as the Post reported, "shred Wells Fargo’s arguments regarding two crucial documents needed to prove ownership of a loan: an indorsement (another term for endorsement) on a note and an assignment of mortgage."

It goes without saying that a whole lot of robosigning and rubberstamping are involved.

What followed was an epic litany of incendiary allegations that Wells Fargo, which for its sake is not being prosecuted, is nothing but a petty criminal engaging in forgery and fabrication.

Some examples:

  • ... the Debtor contended that the blank indorsement that appeared for the first time on the form of Note attached to Claim No. 1-2 was as improper as the purported July 12, 2010 Assignment of Mortgage to Wells Fargo executed on behalf of the assignor/nominee by an employee of Wells Fargo. As alleged by the Claim Objection, the blank indorsement was forged in response to problems with the documentation of Wells Fargo’s right to enforce the Note, just, as the Debtor contended, the July 12, 2010 Assignment of Mortgage was manufactured three days before Claim No. 1-1 was filed in order to falsely lead the Debtor and the Court to think that Wells Fargo had an independent right to enforce a mortgage on the Property.
  • ... While agreeing to the admission of the original version of the Note, the Debtor did not, of course, agree to the validity of the blank ABN Amro indorsement, continuing to assert that it was forged. The Debtor also objected to the admission of certain other proposed exhibits printed from Wells Fargo’s computer file for the loan at issue, which Wells Fargo offered as business records under Fed. R. Evid. 803(6).
  • ... It constitutes substantial evidence that Wells Fargo’s administrative group responsible for the documentary aspects of enforcing defaulted loan documents created new mortgage assignments and forged indorsements when it was determined by outside counsel that they were required to enforce loans. Given that evidence, Wells Fargo should have the burden to establish the bona fides of the blank ABN Amro indorsement...
  • ...Because Wells Fargo does not rely on the Assignment of Mortgage to prove its claim, the foregoing evidence is helpful to the Debtor only indirectly, insofar as it goes to show that the blank indorsement, upon which Wells Fargo is relying, was forged. Nevertheless it does show a general willingness and practice on Wells Fargo’s part to create documentary evidence, after-the-fact, when enforcing its claims, WHICH IS EXTRAORDINARY.

The basis for Drain's harsh accusations of petty criminality by Warren Buffett's preferred bank is sourced in the work of Herman John Kennerty, who was deposed for this case by Franklin’s attorney. Kennerty is one of those mortgage loan processing managers who, like the infamous Linda Green was best known for engaging in massive and widespread robosigning: "Drain casts a harsh eye on Kennerty’s statements about his work as a manager heading up a “default documents” department for Wells Fargo at the time of Franklin’s foreclosure. Kennerty admitted to signing between 50 and 150 original documents each day related to administration and enforcement of Wells’ defaulted loans, according to the ruling." To wit:

It appears from Mr. Kennerty’s deposition transcript, although his testimony on this point was at times quite evasive, that during the period in question in 2010 he signed on average between 50 and 150 original documents a day in connection with Wells Fargo’s administration and enforcement of defaulted loans.


In other words, on a daily basis Mr. Kennerty and his team, members of which he also testified signed a like number of documents each day, id., processed a large volume of loan documents for enforcement with very little thought about what they were doing.


It is not clear that Mr. Kennerty fully understood the legal consequences of signing these documents; for example, he testified when shown the Assignment of Mortgage that he executed it not on behalf of the assigning party but, rather, on behalf of the party “in getting the assignment,” although he also testified that “I’m – I’m not an attorney, but the way I understand this document, it was assigning the mortgage, taking it out of MERS’ name and putting into Wells Fargo Bank’s name.” Id. at 93-4. It is clear, however, that he pretty much signed whatever outside counsel working on the default put in front of him and that these documents often included assignments, including the Assignment of Mortgage, drafted by Wells Fargo’s outside enforcement counsel to fill in missing gaps in the record.

The fabrication process in detail:

... in describing the work of his “assignment team” Mr. Kennerty stated, “[I]f there was not an assignment in there [that is, in Wells Fargo’s loan file] then they would – excuse me, they would advise the attorney that we did not have it, that they would need to draft the – the appropriate assignment.” Id. at 116. See also id. at 76 (“[I]f the assignment needed to be created they would have advised the attorney, the requesting attorney to – that we did not have the assignment in the collateral file, then they needed to draw up the appropriate document.”); id. at 121 (“Once it [that is, the collateral file] was received then they would check to see if it was something that could be used or not used; and, if it’s something that was in the file, but couldn’t be used then they would advise the requesting attorney to go ahead and draft the actual document.”).

And some more from Kinnerty's own testimony:

Q. And the actual procedure for endorsing an original note, if you could just walk me through that process. What would the processor do?


A. To the best of my recollection, they would – the request would come in. Again, we would check to see if we had the collateral file. If we – if we had it and depending on the status of the – of the loan itself, if we had the note then we could check to see, you know, what was actually on the note to see what needed to be done. If we did not have the collateral file then they would work – that processor would work with the collateral file ordering team to reach out with the appropriate attorney or, I’m sorry, the appropriate custodian to obtain the collateral file. And then they would look to – once the file came in they would look to ensure that the original note was in  there and check to see if there was any endorsement on the back of the note.


Q. Okay. And if there wasn’t how would they go about – how would the processor go about endorsing the note?


A. I don’t recall specifically how they completed that particular task.


Q. Was it a rubber stamp? Was it somebody signing? How was it?


A. To the best of my recollection, a stamp was involved but then it had to be signed.


Q. Okay. And if an endorsement was coming from an entity that no longer existed how would it be signed?


A. I do not recall.

So now that Wells has been exposed in court fir its data forgery, what happens next?

Several things. According to the Post, "Wells Fargo has about two weeks to file a notice of appeal. The megabank lost this round, but the judge also made it clear that Franklin’s debt remains."

To be sure, Wells will redouble its efforts to avoid an adverse case decision, as this is already the second legal loss for the California bank in just one week: "Drain’s ruling followed another major loss for Wells Fargo in a residential foreclosure case last week — and another smackdown, this time from a Missouri state court judge. This in turn comes after Wells Fargo and three other big banks were hit with a $2.7 million penalty to settle allegations of unlawful foreclosures in Massachusetts."

On Jan. 26, Judge R. Brent Elliott of Missouri’s 43rd Judicial Circuit awarded $2.9 million in punitive damages to a Missouri couple who spent years in limbo after Wells wrongfully foreclosed on their home. Wells sold it to Freddie Mac on Aug. 15, 2008, even after agreeing to a reinstatement of the loan following a disputed debt.


Elliott also blasted Wells Fargo for “outrageous and reprehensible” decisions and “deceptive and intentional conduct” that “displayed a complete and total disregard for the rights of David and Crystal Holm.


Defendant Wells Fargo operated from a position of superiority provided by its enormous wealth,” Brent wrote in a blistering nine-page decision. “Wells Fargo’s decision took advantage of an obviously financially vulnerable family,” the judge continued, noting that Wells Fargo showed no evidence of remorse for the harm caused.


“In fact, the Court recalls the lack of remorse and humanity illustrated by a Wells Fargo corporate representative who testified, ‘I’m not here as a human being. I’m here as a representative of Wells Fargo,’ ” the judge wrote.


The couple and their 12-year-old daughter got their home back, along with a total of $3.25 million in damages.

And yet, despite these pyrrhic victories, the most likely recourse by Wells, who as Judge Elliott noted "operates from a position of superiority provided by its enormous wealth" will be to spend some more of that wealth to make sure the US judicial system works as expected: on behalf of the richest and most criminal.  Moments ago Reuters reported a far more expected and traditional outcome of this corrupt day and age: "A U.S. judge on Monday rejected allegations by the New York state attorney general that Wells Fargo was not complying with the $25 billion mortgage settlement that federal and state authorities reached with five banks in 2012."

U.S. District Judge Rosemary Collyer described Attorney General Eric Schneiderman's allegations as "so insubstantial" that the state failed to alleged a breach of the agreement.


In 2013, Schneiderman accused Wells Fargo of failing to comply with several mortgage servicing standards as prescribed by the earlier settlement.

And here is the absolutely epic punchline: DC District "Judge" Rosemary Collyer... 

... was recently appointed by the Chief Justice of the United States to a seven year term on the Foreign Intelligence Surveillance Court, which expires in 2020. As a reminder, the Court is the one that, in absolute isolation with zero checks and balances, "oversees" the surveillance activities under the Foreign Intelligence Surveillance Act. Said otherwise, she is one of the 11 judges in charge of making sure that the NSA spies only on foreigners, not on US citizens, something which the Snowden revelations have shown, is patently false.

In other words, the same US "judge" who decides that perpetuating the US crony capitalist system in which a bank caught forging documents is for, reasons unknown, allowed to get away with everything without as much as a wrist slap, is the same judge who makes sure that the NSA can continue spying on US citizens without fear of any reprisals or being caught in breach of any number of surveillance laws and constitutional amendments (read more in "How a Court Secretly Evolved, Extending U.S. Spies’ Reach.")

Wait, did we say "reasons unknown" - what we meant was reasons very well known. The only unknown is whether the reasons are in the 7 or 8 figures. Because when one "operates from a position of superiority provided by its enormous wealth", not to mention tens of billions in taxpayer bailouts, that is the only question.

Oh, and when Judge Rakoff decided to pen the post-script to his "Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis?" Op-Ed, maybe he should speak to "Judge" Collyer first for some truly valuable perspective on how the US judicial system really works.

* * *

Judge Drain's full, if completely irrelevant, opinion below