David J. Stern is a well known Florida attorney whose law firm made millions of dollars during the recent foreclosure boom by processing evictions. Stern eventually took the back-office processing aspect of the firm's business and converted it into a publicly traded company called DJSP Enterprises, a move Stern made a cool $60 million from, according to public filings.
Interestingly, among DSJP's investors are a number of people who've had questionable dealings and have been investigated by federal regulators in the past. Other parties involved include a little-known Wall Street investment bank run by a former presidential candidate, Gen. Wesley K. Clark and a small New York-based private equity firm.
Stern enjoyed quite the lavish lifestyle through the peak of the foreclosure crisis, complete with several mansions, flashy sports cars, and a yacht called Misunderstood. But the good life may be at an end for Stern, his law firm and his investors as they are under investigation by the Florida Attorney General's office. The investigation is aimed at determining whether Stern's law firm filed false documents to speed up the foreclosure process in hundreds of cases.
The investigation has caused a number of the firm's biggest clients, including Citibank and Fannie Mae, to sever ties with DJSP. Many of the firm's top executives have resigned, and the firm has been forced to lay off about 80 percent of its 1,200 employees.
DJSP's investors, meanwhile, have also been hard-hit by the probe. Shares of the company, after having climbed to $14 per share last summer, are down to just 50 cents per share. Investors have consequently filed a lawsuit against DJSP claiming they were misled about the company's financial prospects. DJSP has denied those claims. DJSP has also been sued by a number of former employees claiming that the firm failed to follow regulations in laying them off, though the company has filed a motion to dismiss the claims.
But Stern is certainly not the only man in America who tried to cash in on the wave of foreclosures across the nation. Numerous equity firms across the country have taken large stakes over the last couple of years in the back-office operations of law firms specializing in the processing of seizures, commonly referred to as foreclosure mills.
The firms then make money by providing those services back to the law firms for a fee. In several cases, the equity firms and law firms have been sued by homeowners who accused them of illegal fee-splitting arrangements. The firms, of course, have denied the allegations in every case.
