LPS Sued By Stockholders in Securities Fraud Case
Lender Processing Services, the company who supplied fabricated foreclosure documents to law firms and servicers, has been sued by its own shareholders in a class-action suit alleging that the company violated securities laws. The court filing is below:
The suit claims that LPS officers “made materially false and misleading statements” in press releases, analyst conference calls, and SEC filings. In particular, the petitioners allege that LPS “failed to disclose that the Company had been engaging in deceptive and improper document execution and preparation related to foreclosure proceedings.” This allowed them to put their business in a positive light and to issue their stock at what the petitioners allege were inflated prices. The stock has fallen precipitously since the revelations about robo-signing and document fraud became public. The 26-page court filing shows numerous instances of LPS officials talking up their business, as well as some fairly famous stories about LPS’ document fraud, including this one:
LPS has acknowledged problems in its paperwork. In its annual securities filing, in which it disclosed the federal probe, the company said it had found “an error” in how Docx handled notarization of some documents. Docx also has processed documents used in courts that incorrectly claimed an entity called “Bogus Assignee” was the owner of the loan, according to documents reviewed by The Wall Street Journal.
LPS and its subsidiary DocX were already under investigation in Florida by a US Attorney and the state Attorney General. But here, we have shareholders suing LPS for knowing misrepresentation of their business. The General Employee’ Retirement System of St. Clair Shores (MI), a public pension fund, is one of the plaintiffs.
The case will presumably turn on whether or not the plaintiffs can prove that the CEO and other top officers of LPS knew about the fraud inherent in their business. I don’t think that’s much of a hurdle, but it may get tricky legally.