The Bureau and the CPD bring this action against

HOME

 

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION
CONSUMER FINANCIAL
PROTECTION BUREAU
1700 G Street NW
Washington, D.C. 20552
STATE OF MARYLAND, Office of
the Attorney General of Maryland,
Consumer Protection Division
200 St. Paul Place, 16th Floor
Baltimore, MD 21202
Baltimore County
Plaintiffs,
v.
WELLS FARGO BANK, N.A.
464 California Street
San Francisco, CA 94104
JPMORGAN CHASE BANK, N.A.
270 Park Avenue
New York City, NY 10017
ELAINE OLIPHANT COHEN
2100 Heritage Drive
Baltimore, MD 21209
Baltimore County
TODD COHEN
2100 Heritage Drive
Baltimore, MD 21209
Baltimore County
Defendants.
Case No.
COMPLAINT
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 1 of 14
2
Plaintiffs, the Consumer Financial Protection Bureau (“Bureau”) and the State of Maryland’s Office
of the Attorney General’s Consumer Protection Division (“CPD”), allege as follows:
INTRODUCTION
1. The Bureau and the CPD bring this action against Wells Fargo Bank, N.A. (“Wells Fargo”),
JPMorgan Chase Bank, N.A. (“Chase”), Elaine Oliphant Cohen, and Todd Cohen (collectively,
“Defendants”) to address Defendants’ participation in an illegal scheme to exchange money or marketing
services for referrals of settlement-service business in connection with consumers’ home-mortgage
transactions.
2. The Real Estate Settlement Procedures Act (“RESPA”) prohibits giving or accepting a “fee,
kickback, or thing of value” in exchange for a referral of business related to a real-estate-settlement service,
including services ordinarily provided by title companies, such as title searches, title examinations, the
provision of title certificates, and title insurance. 12 U.S.C. § 2607(a).
3. A now-defunct Maryland title company, Genuine Title, LLC, from 2009 through 2013
provided marketing services to loan officers from Wells Fargo, Chase, and another financial institution
(“Unnamed Financial Institution”). The marketing services that Genuine Title provided assisted these loan
officers in generating business and increased the number of loans that Wells Fargo, Chase, and Unnamed
Financial Institution originated or refinanced.
4. Under agreements or understandings between Genuine Title and the loan officers, the loan
officers exercised their ability to influence consumers in settlement transactions to use Genuine Title for
settlement services.
5. Genuine Title also paid loan officers for referrals of business. Todd Cohen, a loan officer
who worked at several financial institutions, including Wells Fargo and Unnamed Financial Institution,
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 2 of 14
3
referred business to Genuine Title in exchange for marketing services provided by Genuine Title. In
addition to receiving the marketing services, Genuine Title made cash payments of tens of thousands of
dollars to Todd Cohen’s wife, Elaine Oliphant Cohen.
JURISDICTION AND VENUE
6. This Court has subject-matter jurisdiction over this action because the action is “brought
under Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331,
and is brought by an agency of the United States, 28 U.S.C. § 1345. This Court has supplemental jurisdiction
over the state law claims because those claims are so related to the federal claims that they form part of the
same case or controversy. 12 U.S.C. § 1367(a).
7. Venue is proper in this district because a substantial amount of the transactions, acts,
practices, and courses of conduct at issue occurred within this district, Wells Fargo and Chase maintain
offices and do business in this district, and Cohen and Oliphant Cohen reside in this district. 28 U.S.C. §
1391(b), (c); 12 U.S.C. § 5564(f); 12 U.S.C. § 2614.
PARTIES
8. The Bureau is an agency of the United States charged with regulating the offering and
providing of consumer-financial products and services under “Federal consumer financial laws,” 12 U.S.C. §
5491(a), including RESPA and the Consumer Financial Protection Act of 2010 (“CFPA”). 12 U.S.C. §
5481(12)(M), (14). The Bureau has independent litigating authority, 12 U.S.C. § 5564(a)-(b), including the
authority to enforce RESPA and the CFPA. 12 U.S.C. § 2607(d)(4).
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 3 of 14
4
9. The CPD enforces regulatory and consumer-protection laws, including the Maryland
Consumer Protection Act., Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.)
(“CPA”).
10. Defendant Wells Fargo is the main operating subsidiary of the holding company
Wells Fargo & Company. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. and
is a licensed mortgage lender. Wells Fargo offers and provides real-estate-settlement services to
consumers primarily for personal, family, or household purposes, including but not limited to the
origination of federally related mortgage loans by the taking of loan applications, loan processing,
and the underwriting and funding of loans. See 12 U.S.C. § 2602(3). Wells Fargo is therefore a
“covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Wells Fargo is also a
“merchant” under CPA § 13-101(g) because it offers or makes consumer credit available to
consumers.
11. Defendant Chase is an operating subsidiary of the holding company JPMorgan
Chase & Company. Chase offers and provides real-estate-settlement services to consumers primarily
for personal, family, or household purposes, including but not limited to the origination of federally
related mortgage loans by the taking of loan applications, loan processing, and the underwriting and
funding of loans. See 12 U.S.C. § 2602(3). Chase is therefore a “covered person” under the CFPA. 12
U.S.C. § 5481(6), (15)(A)(iii). Chase is also a “merchant” under CPA § 13-101(g) because it offers or
makes consumer credit available to consumers.
12. Defendant Todd Cohen was a loan officer for Wells Fargo and Unnamed Financial
Institution. While employed by Wells Fargo and Unnamed Financial Institution, in connection with
originating federally related mortgage loans to consumers primarily for personal, family, or
household purposes, Todd Cohen provided “real estate settlement services,” including but not
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 4 of 14
5
limited to the taking of loan applications and loan processing. See 12 U.S.C. § 2603(3). Therefore, Todd
Cohen was a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Todd Cohen is also a
“merchant” under CPA § 13-101(g) because he offered or made consumer credit available to consumers.
13. Defendant Elaine Oliphant Cohen is married to Todd Cohen.
FACTS
A. Genuine Title provided valuable marketing services to loan officers in exchange for
referrals of business.
14. Genuine Title provided services in connection with real-estate settlements. Genuine Title’s
services included title searches, title examinations, the provision of title certificates and title insurance, and
the handling of the processing and closing, or settlement, of real-estate transactions. The majority of
Genuine Title’s settlement services were for refinance transactions.
15. A consumer refinancing a mortgage ordinarily does not have a preferred title company;
instead, a consumer typically relies on the loan officer processing the mortgage to recommend a title
company. From 2009 through 2013, Genuine Title engaged in a scheme in which it provided marketing
services to loan officers and, in exchange, the loan officers referred settlement-service business for federally
related mortgages to Genuine Title by recommending Genuine Title to borrowers (the “Marketing Services
Scheme”).
16. Through the Marketing Services Scheme, Genuine Title and the loan officers involved in the
scheme took advantage of a hot mortgage refinancing market and very low interest rates. Genuine Title
provided substantial amounts of marketing services to loan officers as part of the scheme, and it resulted in
referrals of business on a large number of loans to Genuine Title, as described below.
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 5 of 14
6
17. Loan officers typically are paid by commission. Through the Marketing Services
Scheme, Genuine Title offered loan officers valuable services to increase the amount of business
they generated, and thus the commissions they would earn. The scheme was also intended to
increase the amount of business generated by the participating loan officers and, through referrals,
to increase Genuine Title’s profits.
18. Through the Marketing Services Scheme, Genuine Title provided and paid for a
variety of marketing services to loan officers. For example, Genuine Title purchased marketing leads
– data on consumers likely to refinance a mortgage – from a third-party vendor and provided the
leads to loan officers at Wells Fargo and Chase. In exchange, the loan officers referred loans for
closing to Genuine Title.
19. For other loan officers, Genuine Title provided additional marketing services. For
these loan officers, Genuine Title not only analyzed and purchased leads from a third-party vendor,
it also paid for marketing letters directed to the consumer leads to be printed, folded, stuffed into
envelopes, and mailed.
20. Although different loan officers worked out slightly different arrangements with
Genuine Title, loan officers participating in the Marketing Services Scheme did not pay for the full
cost of the leads, the printing and processing of the marketing materials, or the cost of postage to
mail the materials to the leads.
B. Wells Fargo loan officers participated in the Marketing Services Scheme.
21. More than 100 loan officers from at least 18 Wells Fargo branches participated in the
Marketing Services Scheme. Genuine Title provided marketing services to these loan officers under
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 6 of 14
7
agreements or understandings that the loan officers would, in exchange, refer real-estate closings to Genuine
Title.
22. Genuine Title provided Wells Fargo loan officers marketing leads that it had analyzed and
purchased from a third-party vendor. The loan officers, in turn, submitted the leads to Wells Fargo’s
advertising department for approval.
23. When submitting the leads to the advertising department, the loan officers also submitted an
additional form required by Wells Fargo’s internal procedures, known as a List Services Request (“LSR”)
form. The form required the loan officer to identify the source of the leads and the preapproved marketing
letter the loan officer intended to use. Through the LSR form the loan officers informed Wells Fargo that
the leads were obtained from Genuine Title.
24. Once Wells Fargo’s advertising department approved the list of leads and the loan officer’s
marketing letter, the loan officer provided the marketing letter and Wells Fargo-branded stationery and
envelopes to Genuine Title. Genuine Title then caused the leads to be “merged” with the marketing letter,
printed onto Wells Fargo stationery, and folded and inserted into envelopes.
25. In some cases, Genuine Title then returned the ready-to-mail letters to the loan officer and
the loan officer used the postage machine in his or her Wells Fargo branch. In other instances, Genuine
Title paid for first-class postage for the letters.
26. Some Wells Fargo branch managers were aware that loan officers at their branches were
receiving marketing services from Genuine Title. For example, one branch manager knew that marketing
materials for loan officers at his branch were paid for by Genuine Title because some loan officers told him
of the arrangement directly, because he reviewed LSR forms identifying Genuine Title as the source of the
leads submitted by the loan officers, and because the branch manager, at the request of the loan officers,
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 7 of 14
8
ordered the Wells Fargo-branded stationery and envelopes that the loan officers used for the mailers
created by Genuine Title.
27. Eventually this branch manager told the loan officers there that they could no longer
use the postage machine because the branch no longer wanted the expense of funding the mailers.
The branch manager did not tell the loan officers to discontinue accepting Genuine Title’s
assistance, and the loan officers continued to submit leads to the advertising department and to
order Wells Fargo stationery through the branch manager.
28. When the loan officers at this branch no longer had access to the branch postage
machine, Genuine Title began paying for the cost of postage as well as the other costs of preparing
the mailers.
29. Genuine Title and participating Wells Fargo loan officers knew that the Marketing
Services Scheme violated applicable laws. In October 2011, a Genuine Title employee emailed one
of the printing and mailing companies used by Genuine Title for the Marketing Services Scheme and
wrote,
I need you to provide me with some invoices that we will ultimately not use. This is so our
clients have records. The true invoices will be sent to [Genuine Title] and we will still pay on
Friday’s [sic]. Please just put their names in the BILL TO: Section. They will not actually be
paying the invoice to you, as [Genuine Title] will do that.
Later that same day, the same Genuine Title employee again emailed the mailing-and-printing company and
wrote,
Can we also have “Invoices” for [certain loan officers] Printed, Stuffed, Folded & Posted for
500 each? They would be individual “Fake” invoices for the job you did for them last week.
You did a few jobs for them, so we just need fake invoices BILLED TO: [certain loan
officers] stating that you Printed, Folded, Stuffed, Posted & Mailed 500 for each.
30. In December 2012, Wells Fargo was named as a defendant in a proposed class
action. The action alleged that:
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 8 of 14
9
Genuine Title and others offered Wells Fargo … something of great value …: leads
for new mortgage business. These leads consisted of individuals whom title
companies, including Genuine Title, had reason to believe were in the market for
mortgage loans.
To sweeten the deal for [Wells Fargo] … title companies including Genuine Title
also “sold” those valuable leads to the banks for less than their fair market value as
part of an understanding or agreement that, in return, Wells Fargo … would refer
title/closing business to title companies including Genuine Title.
31. Despite having multiple warnings of the illegal arrangements between its loan officers and
Genuine Title – including a federal lawsuit alleging the existence of such agreements – Wells Fargo took no
action to stop the Marketing Services Scheme.
32. From 2009 through 2013, Wells Fargo loan officers participating in the Marketing Services
Scheme referred to Genuine Title settlement-service business on thousands of loans.
33. Wells Fargo did not have an adequate system in place to identify violations of RESPA
resulting from the Marketing Services Scheme.
C. Chase loan officers participated in the Marketing Services Scheme.
34. The Marketing Services Scheme also operated at Chase. Genuine Title purchased leads from
a third-party vendor and caused marketing materials branded with Chase’s logo and the loan officer’s
contact information to be printed and mailed to the leads from the vendor. In addition to purchasing the
leads, Genuine Title paid for the cost of the printing and postage.
35. Loan officers at three Chase branches received marketing services paid for or subsidized by
Genuine Title.
36. From 2010 through 2013, six Chase loan officers participating in the Marketing Services
Scheme referred settlement-service business to Genuine Title on nearly 200 loans.
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 9 of 14
10
37. Chase did not have an adequate system in place to identify violations of RESPA
resulting from the Marketing Services Scheme.
D. While Todd Cohen worked for Wells Fargo, he participated in the
Marketing Services Scheme.
38. From April 2009 to August 2010, Todd Cohen worked for Wells Fargo as a loan
officer.
39. Todd Cohen participated in the Marketing Services Scheme while working at Wells
Fargo.
40. In exchange for valuable marketing services, Todd Cohen referred Wells Fargo
borrowers to Genuine Title for settlement services.
41. Wells Fargo did not have an adequate system in place to identify Todd Cohen’s
participation in the Marketing Services Scheme.
42. In addition to Todd Cohen’s participation in the Marketing Services Scheme,
Genuine Title also made cash payments to Todd Cohen for Wells Fargo loans he referred to
Genuine Title for settlement services.
43. Genuine Title did not pay Todd Cohen directly. Instead, to disguise the payments
and make them appear more “compliant,” Genuine Title paid Todd Cohen’s wife, Elaine Oliphant
Cohen.
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 10 of 14
11
E. Todd Cohen engaged in similar conduct while he worked at Unnamed Financial
Institution.
44. In August 2010, Todd Cohen left his job at Wells Fargo, and in February 2011 he began
working at Unnamed Financial Institution as a loan officer.
45. As he had done at Wells Fargo, Todd Cohen participated in the Marketing Services Scheme
at Unnamed Financial Institution.
46. While Todd Cohen was employed at Unnamed Financial Institution, Genuine Title paid cash
payments to Elaine Oliphant Cohen for loans from Unnamed Financial Institution that Todd Cohen
referred to Genuine Title for settlement services.
47. Before the Bureau initiated the investigation underlying this Complaint, Unnamed Financial
Institution became aware that Todd Cohen was using unauthorized marketing materials and conducted its
own thorough investigation. Following its investigation, Unnamed Financial Institution recognized that
Todd Cohen’s participation in the scheme may violate RESPA and, in April 2012, terminated Todd Cohen’s
employment.
CAUSES OF ACTION
Count I: Violations of RESPA
(By the Bureau against All Defendants)
48. The allegations in paragraphs 1-47 are incorporated by reference.
49. Wells Fargo, Chase, Todd Cohen, and Elaine Oliphant Cohen gave and received fees,
kickbacks, or things of value under agreements or understandings that business incident to or a part of a
real-estate-settlement service involving federally related mortgage loans would be referred to Genuine Title,
in violation of RESPA, 12 U.S.C. § 2607(a).
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 11 of 14
12
Count II: Violations of the CFPA
(By the Bureau against Wells Fargo, Chase, and Todd Cohen)
50. The allegations in paragraphs 1-47 are incorporated by reference.
51. Wells Fargo’s, Chase’s and Cohen’s RESPA violations, described in Count I,
constitute violations of § 1036 of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
Count III: Violations of the CPA
(By the CPD against Wells Fargo, Chase, and Todd Cohen)
52. The allegations in paragraphs 1-47 are incorporated by reference.
53. Wells Fargo, Chase, and Todd Cohen participated in the Marketing Services Scheme
and made implicit representations in any such scheme. Participation in the Marketing Services
Scheme constitutes a false or misleading statement of material fact which has the capacity, tendency,
or effect of deceiving or misleading consumers and constitutes an unfair and deceptive trade
practices as defined by §§ 13-301(1) of the CPA and is prohibited under § 13-303 of the CPA.
54. Wells Fargo, Chase, and Todd Cohen’s failure to disclose to consumers that they
were participating in the Marketing Services Scheme constitutes the omission of a material fact
which deceives or tends to deceive consumers and constitutes an unfair or deceptive trade practice,
as defined by § 13-301(3) of the CPA and is prohibited under § 13-303 of the CPA.
55. Wells Fargo, Chase, and Todd Cohen’s failure to advise consumers that in offering
and selling mortgage services they were violating RESPA constitutes the omission of a material fact
which deceives or tends to deceive consumers and constitutes an unfair or deceptive trade practice,
as defined by § 13-301(3) of the CPA and is prohibited under § 13-303 of the CPA.
56. Wells Fargo, Chase, and Todd Cohen’s practices are unfair because they have caused
and are likely to cause substantial injury to consumers, which consumers cannot reasonably avoid.
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 12 of 14
13
The injuries that consumers have suffered as a result of the Marketing Services Scheme are not offset by any
benefit to consumers or to competition.
57. Wells Fargo, Chase, and Todd Cohen’s unfair and deceptive trade practices as described
herein have been numerous and ongoing.
DEMAND FOR RELIEF
Plaintiffs request that the Court, as permitted by 12 U.S.C. § 5565 and 12 U.S.C. § 2607:
a. permanently enjoin Defendants from giving or receiving money or any thing of value
pursuant to an understanding that any real-estate-settlement service business will be
referred to any person;
b. permanently enjoin Defendants from engaging in unfair or deceptive trade practices,
including but not limited to violations of the CPA, as permitted by § 13-406 of the CPA;
c. award damages or other monetary relief against Defendants;
d. order Defendants to pay redress to consumers, as permitted by § 13-406 of the CPA;
e. order disgorgement of ill-gotten revenues by Defendants;
f. impose civil money penalties on Defendants under the CFPA;
g. impose civil money penalties on Defendants under the CPA, as permitted by § 13-410 of
the CPA;
h. order Defendants to pay the Bureau’s costs incurred in connection with prosecuting this
action;
i. order Defendants to pay the CPD’s costs incurred in connection with prosecuting this
action, as permitted by § 13-409 of the CPA; and
j. award additional relief as the Court may determine to be just and proper.
Case 1:15-cv-00179-RDB Document 1 Filed 01/22/15 Page 13 of 14
14
Respectfully submitted,
ANTHONY ALEXIS
Enforcement Director
JEFFREY PAUL EHRLICH
Deputy Enforcement Director
JOHN C. WELLS
Assistant Litigation Deputy
_____/s/_________________
GENESSA STOUT, Bar No. 801353
LAWRENCE D. BROWN, Bar No. 801343
Enforcement Attorneys
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552
Telephone (Stout): 202-435-7920
Telephone (Brown): 202-435-7116
Facsimile: 202-435-7722
e-mail: genessa.stout@cfpb.gov
e-mail: lawrence.brown@cfpb.gov
For the Consumer Financial Protection Bureau
DANIEL L. BARNETT
Deputy Attorney General of Maryland
_____/s/_________________
(signed by Genessa Stout with permission of Jeffrey S. Evans)
JEFFREY S. EVANS, Bar No. 26447
LUCY CARDWELL, Bar No. 7311
Assistant Attorneys General
Office of the Attorney General
Consumer Protection Division
200 St. Paul Place, 16th Floor
Baltimore, MD 21202
Telephone (Evans): 410- 576-6407
Telephone (Cardwell): 410-576-6337
Facsimile: 410-576-6566
e-mail: jevans@oag.state.md.us
e-mail: lardwell@oag.state.md.us
For the State of Maryland, Office of the Attorney
General, Consumer Protection Division

http://files.consumerfinance.gov/f/201501_cfpb_complaint_wells-fargo-chase-cohen.pdf

 

 

 

 

HOME