Sue Your Bank, Keep Your Home, Repeat

Inside a deeply suspect mortgage-relief operation in L.A.
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Photo illustration: Stephanie Davidson; Photograph: Getty Images

Four years ago, Robert and Joan Potter were facing a crisis. The monthly payments on their two-bedroom home in the coastal suburb of Laguna Niguel, Calif., had ballooned from $2,000 to $5,000 in the decade since they bought it for about $360,000. Now the retirees were rapidly falling behind.

“It was my parents’ dream home,” said their son, Derrick, 43. Derrick, who works as a mortgage consultant, said Robert and Joan got suckered into the kind of inflationary deal known as a negative amortization loan, since outlawed by state legislators. “They had some sleazy mortgage broker who said my mom, who hasn’t worked in 25 years, made $10,000 a month.”

Still, there was hope. The Potters heard about a firm called Brookstone Law, which was pioneering a novel strategy for challenging allegedly predatory banks. The best part: As long as Brookstone was representing Robert and Joan, the bank would hold off on collecting mortgage payments or foreclosing.

In 2011, Robert and Joan paid Brookstone $6,000 to become the lead plaintiffs in a “mass joinder” lawsuit against their lender, JPMorgan Chase Bank. Similar to class actions, mass joinders allow large numbers of people to collectively sue one defendant, except that in a mass joinder the plaintiffs do not have identical claims. Settlements, if there are any, get sorted out individually, depending on each plaintiff’s circumstances.

Brookstone’s case against Chase alleged mortgage-related misconduct such as wrongful foreclosure and breach of contract. It demanded that the bank pay for lost home equity, lowered credit scores, and further damages. It claimed that when the Potters refinanced in 2006, the bank manipulated them into taking a loan they couldn’t afford and hid its true interest rate. The suit was filed in Los Angeles County Superior Court on April 15, 2011. Eventually, Brookstone signed up more than 250 clients to join it.

Casting itself as defending the little guys caught up in the subprime crisis, Brookstone, founded by a 41-year old attorney named Vito Torchia Jr., has represented at least 4,000 clients in a dozen mass joinder lawsuits against big banks, including Wells Fargo and Bank of America. Court documents indicate Brookstone’s earnings during 2011 and 2012 could be in the tens of millions of dollars. Yet the firm has yet to win a single one of these cases on the merits.

“I think, generally speaking, these mass joinder cases are a new twist on an old scene,” said California Assemblyman Mike Gatto, a Democrat and former lawyer who chairs the state’s privacy and consumer protection committee and sits on its banking committee.  After the financial crisis, a cottage industry cropped up offering relief to people with subprime loans. In many cases, however, these companies only subjected borrowers to a second round of abuse. “Somebody is in trouble, they get a call, and say ‘you’ll get relief if you sign onto our lawsuit.’ It’s a small price to pay to keep my biggest asset. But these are all just variations of fraud.”

Is Brookstone the con that banks and former clients allege? Or is Torchia, already halted from practicing law by the California state bar, outmatched and getting smeared as he wages what he claims is a lonely, David-vs.-Goliath fight for homeowner rights?

Brookstone Law’s website features a Manhattan address. Click the “Our History” tab, and you’ll see a bullet-pointed timeline that starts back in the 1990s. That’s when the firm’s employees “launched their careers working for Wall Street Firms, Institutional Investors and entered the legal profession.” Then, scrolling down to 2009: “Brookstone Law, P.C. was founded by Vito Torchia, Jr. He began to recruit top Wall Street Insiders and banking industry leaders to assist homeowners through the largest corporate fraud in history.”

In reality, Brookstone’s is headquartered in a plain three-story office building wedged between the 405 Freeway and a Hooter’s restaurant in Costa Mesa, Calif. In the 1990s, Torchia was working not on Wall Street but toward an undergraduate degree in marketing and film at the University of Miami. A native of New Rochelle, N.Y., Torchia headed to L.A.’s Southwestern Law School after graduation with the idea of becoming a movie producer.

“You either move to L.A., become a [production assistant] for 400 bucks a week and get coffee for five or 10 years,” Torchia said, or you study law. “Most producers out there are former attorneys. If producing doesn’t work out, you have a law degree to fall back on. So that’s kind of what I did.”

Torchia is slight, maybe 5-foot, 10-inches, with neatly parted brown hair and a boyish face. Even the close-cropped beard and tortoise-frame glasses don’t age him much. In conversation, he’s self-effacing. “I just don’t want to look like an idiot,” he worried aloud at the start of an interview. He suggested meeting at a Marriott Hotel a few miles from Brookstone’s offices, saying it was convenient, thanks to a meeting he’d be coming from. Inside the hotel, Torchia entered a quiet, rental-only conference room without a reservation, and took a seat. “They can kick us out,” he said.

Torchia’s journey from aspiring producer to antagonist of several of the world’s most powerful banks started with a bout of unemployment in summer 2009. He’d done stints at 20th Century Fox and a small law firm in L.A. Having been laid off, he was running out of money. Torchia took a job at a company called United Law Group in Irvine, some 50 miles south of his mid-city apartment. United Law offered mortgage modifications and debt settlement services. Torchia claims the place didn’t sit right with him from the start. “I just didn’t like the owner at all; he was sketchy.” But, Torchia said, “They were paying me well, so I was like: Let me milk this for as long as I can.”

At United Law, Torchia said, he had nothing to do with the company’s main lines of work. Instead, he claims he helped with defamation lawsuits United Law filed against large banks, the ones warning consumers that United Law was “a scam.” Whatever his reservations about United Law, they didn’t stop Torchia from forming what would turn out to be a lasting business partnership with the firm’s chief operating officer, a man named Damian Kutzner. Torchia claims they stopped working together earlier this year, but said that he and Kutzner started Brookstone and designed its business model together.

Kutzner, 40, is not a lawyer. According to his LinkedIn profile and personal website, he’s president and chief executive officer of an “extreme lifestyle” clothing company called Serious Pimp and of Serious Pimp Records. The latter, a music label, is based out of an Orange County studio that Kutzner's website says is owned by rapper Snoop Dogg. A representative for the rapper, however, says Snoop doesn't own the studio and has no connection to Serious Pimp or Kutzner. An image of the World War I Army General John J. Pershing serves as Kutzner’s profile picture on both sites. Kutzner did not respond to several interview requests, but one afternoon I received a call on my cellphone from someone claiming to be Vito Torchia but who didn’t sound like Torchia. Later, I asked Torchia about it. “[Damien] plays tricks; he goofs around sometimes,” he said. “It’s his way of having fun.”

In 2002, the Federal Trade Commission sued Kutzner for running a mortgage-related e-mail scam. Kutzner and a company called Global Mortgage agreed to pay a $60,000 settlement and abstain from similar actions. In a separate FTC action in 2009, Kutzner was banned from telemarketing for five years. Torchia says he knew about Kutzner’s history when they worked together at the United Law Group but admired Kutzner’s business acumen and overlooked it. “He’s a very bright guy,” Torchia said. “When he was at ULG, he was there every day, working eight to 10 hours a day, every day … and he was just very professional. … I’m just going to judge someone on what I see and what they do to me.”

Torchia and Kutzner had been working together at United Law Group for seven months when the U.S. Postal Inspection Service and F.B.I. raided its offices on March 11, 2010. The affidavit for the search warrant prepared for the raid claims that United Law charged clients $1,500 to $12,000 for loan modification services but did nothing to help them. United Law Group ended up in bankruptcy, where it remains today. Its original president, Sean Rutledge, surrendered his license to practice law in California. Rutledge’s successor, Robert Buscho, was disbarred. 

United Law’s business didn’t die altogether. In addition to mortgage modification, the firm also offered debt settlement services, consolidating bills from credit cards to car loans and working out payment plans for clients. Before the raid, those services had been farmed to an outside company, Morgan Drexen, which was allowed to keep running its clients from United Law after the bankruptcy. The debt settlement business continued to generate income—$40,000 to $50,000 a month, Torchia once testified in court.

During United Law’s final days, Torchia took ownership of the firm’s debt settlement operation, overseeing Morgan Drexen. He felt a moral obligation to do so, he said. “There’s money to be made, don’t get me wrong, but I can’t let 1,000 clients just go by the wayside,” he said. “And so that’s how Brookstone really got started. That’s what funded Brookstone when I opened up the firm.”

Earlier that fall, even before the raid and a lawsuit brought against the United Law Group’s founders and employees (more on that in a moment), Kutzner had come to Torchia with an idea. He had had met an attorney named Philip Kramer, Torchia said, and Kramer was working on a case called Ronald v. Bank of America, a mass joinder case that had been wending its way through Los Angeles Superior Court for about a year. “Kramer and Damien talked about maybe working together,” Torchia said, “and he came to me and said, you know, this is the business model that these guys are doing. We ought to do it.”

Once he incorporated as Brookstone law, Torchia hired Kutzner to be his chief operating officer, working under him and overseeing all the non-legal aspects of Brookstone, including marketing and logistics. “He handled all the vendors, phones, computers, stuff like that,” Torchia said. In February 2011, Torchia, Kramer, Kutzner, and Mitchell J. Stein, another attorney who was collaborating with Kramer, got together to file a new complaint modeled after Ronald, titled Wright v. Bank of America. “Oh, they were carbon copies,” Torchia said of the lawsuit, dismissing questions about the ethics of using paragraphs word-for-word from Kramer’s complaint against Bank of America. “You’re not stealing, you’re not plagiarizing. It’s not copyrightable.”

It didn’t take long for the partnership among Brookstone, Kramer, and Stein to sour. As Torchia tells it, he did things the right way, while everyone else around him was willing to bend the rules. In August 2011, California Attorney General Kamala Harris sued Kramer and Stein for false advertising of mortgage mass joinders, among other allegations, and won court orders allowing the state bar to take over their law practices. In a press release, Harris said the move was based on “false and misleading representations” the lawyers used to lure clients, not “the legal merits of any claims asserted in the mass joinder lawsuits filed by defendants.”

Stein sued back. In a lawsuit filed against Harris in September 2011, he denied the attorney general’s allegations and accused her of being “the pawn of America’s most powerful banks.” His suit was dismissed a year later. Stein was ultimately suspended from practicing law in California in 2013 after a conviction in an unrelated fraud case. He’s currently serving a 17-year prison sentence in Florida.

Kramer admitted to several counts of misconduct, including collecting illegal fees, and was disbarred in September 2012. He did not return phone calls.

Torchia recalls sitting around a conference room table with other Brookstone principals when they got the initial news that Kramer and Stein had been sued and raided. “We get a phone call and it was like, ‘yay!’ he said. “It couldn’t have happened to a better person.”

After Stein and Kramer went down, Torchia said, he “scrubbed” Brookstone to make sure he wasn’t repeating their mistakes, and he hired outside lawyers specializing in ethics at L.A.’s Kehr, Schiff and Crane to go through “our mailers, our advertising, our website, everything.” Lawyer Robert Kehr confirmed that Brookstone was a client but declined to comment. “It hasn’t been easy to do things the right way,” Torchia said. “It wasn’t an easy road to take, but it was the only road to take.”

Jeffrey Golden, 52, is large and affable, and he talks so fast he occasionally stumbles over his own words. When asked what he likes about bankruptcy law, his voice jumps up a note. “It’s creative!” he says. A bankruptcy attorney for more than 20 years, Golden works in a  private practice and is an occasional expert witness for the U.S. Attorney’s office.

Back in 2010, Golden was appointed by the court to oversee United Law Group’s liquidation, scour its finances, figure out what assets were still there, and make a plan for paying back creditors. After going through the company’s accounts and interviewing employees and ex-employees, Golden reached a conclusion. He is reluctant to elaborate, but it is all laid out in a lawsuit he filed against Torchia and Brookstone about six months after the raid.

In it, Golden claimed that Damian Kutzner, of Serious Pimp, masterminded Brookstone as a vehicle to funnel more than $200,000 and future income out of the reach of United Law’s creditors. Golden asked the court to let him take over administering United Law’s remaining debt clients from Torchia. The court eventually did.

“Jeff Golden is a piece of shit,” said Torchia. “He ruined my life.”

Golden’s suit — and a second one filed against the United Law Group by California’s Lakeshore Law Center and Spencer Law Firm — kept Torchia and Kutzner occupied, but it didn’t slow Brookstone. By the fall of 2012, Torchia claims, the firm was working up several new mass joinder cases and had 13 lawyers, plus 48 additional attorneys who either consulted part-time or worked in other states. As recently as August 2014, Brookstone had about 4,000 clients, according to state bar records.

The pay model for those clients has changed over the years. At times it has included an upfront fee, plus a monthly charge to remain attached to the cases, and at other times, simply a flat rate. Torchia won’t divulge the details, but Brookstone clients reached for this article, as well as those cited in State Bar records, typically paid the firm $5,000 to $6,000. A very modest estimate of 2,000 mass joinder plaintiffs, each paying $5,000, adds up to $10 million in four years. Torchia claims he’s brought in far less than that, but he won’t say how much. “I wish it was in those ballparks,” he said. “Put it this way: I don’t even own a home.”

Banks' responses to Brookstone suits have varied. Some voluntarily halted foreclosures and even mortgage demands as long as the cases were active, as JPMorgan Chase did with the Potters. As the cases dragged on or got dismissed, however, banks again started demanding payments. Today, all but a few of Brookstone’s dozen mass joinders have been mostly or entirely dismissed, including one against OneWest and IndyMac banks that was filed in November 2013. Increasingly, Torchia is dealing with angry clients who say they’re no better off than when they started.

Retired radiology technician Jose Velasco, 69, borrowed money from his sister a few years ago to pay Brookstone a $6,000 fee to join a case against OneWest and IndyMac banks, filed in November 2013. He and his wife, Beatrice, had already been foreclosed on when they heard about the firm. “They told us we could get some money,” Velasco said through a thick Salvadorian accent. “The value of the home and some punitive charges … you know, stress caused by it.” Until I told him, Velasco had no idea that the court had dismissed all the plaintiffs in the case (except for the lead one) last year.

Other homeowners did track their cases, however. Many ended up filing complaints about Brookstone.  In August 2014, a State Bar Court judge found that Torchia had committed 16 counts of misconduct, including failing to communicate with seven clients. The details of the allegations paint Torchia as the hapless leader of a firm at which lawyers regularly flouted professional standards. In one instance, a Brookstone attorney guided clients through what turned out to be an illegal bankruptcy to dodge foreclosure. In another, Brookstone somehow signed a couple in Idaho up for a mass joinder against Bank of America, despite being able only to represent California property owners. Torchia told the court he didn’t know how it happened and that he had eventually refunded the couple’s $6,000.

Bar Court Judge Richard A. Platel recommended that Torchia be suspended from practicing law in California for two years, put on probation for an additional two years, and pay $19,000 in restitution to five clients. Torchia appealed. The punishment was put on hold pending a final decision. In the meantime, the bar filed two new rounds of charges against Torchia, describing more of the same: adding clients to mass joinders and doing nothing to help them, as well as not providing clients with documents or returning their phone calls. Torchia didn’t respond sufficiently to the new claims, resulting in default judgments against him and a ban from practicing law in California until further notice.

Torchia missed his deadline to fight at least one of those judgments around the beginning of July. That alone is grounds for state bar prosecutors to seek his disbarment, according to a bar spokeswoman, though they haven't moved yet. Should they do so, the process typically takes months.

Is Torchia afraid he'll get disbarred? “Yeah,” Torchia said softly earlier this year. “Very worried.” He sounded wistful. “I want to just get these cases, like, wound down and start living again.” Nonetheless, he noted, he is licensed in New York and Florida, so disbarment in California, he said, “doesn’t affect my ability to own" Brookstone.

These says, however, Torchia said he's not worried at all. 

His confidence has been bolstered by good news in one of Brookstone’s very first cases, Wright v. Bank of America/Countrywide. The 3,000-page lawsuit was originally dismissed in January 2013 on the grounds that its 965 plaintiffs, with their different mortgage terms, never should have been joined in one suit to begin with. Then, in December, a three-judge panel in California’s Fourth Appellate District reversed the dismissal and remanded the case back to the lower court. Bank of America asked the California Supreme Court to review the case. None other than the U.S. Chamber of Commerce, one of the country's most influential lobbying groups, also urged the state's highest court to consider overturning the appeal court's decision. The organization's lawyers argued in a legal brief that allowing the case to proceed would give plaintiffs' lawyers a field day and clog California's already overburdened courts. In April the California Supreme Court declined the request, leaving Brookstone free to keep pursuing its case. Following this procedural victory for Brookstone, the parties can move on to litigating the claims of homeowners in the lawsuit.

Torchia said his firm is in the process of refiling several mass joinders previously dismissed on similar grounds.

He also claims that since he earned the right to appeal in Wright, he has fielded interest from several high-profile plaintiffs’ lawyers, including Thomas Girardi, a personal injury attorney in L.A. Cases that Girardi has worked on include the toxic tort action that inspired the film Erin Brockovich. Girardi did not return phone calls seeking comment. Torchia told me he is expanding and recently hired five lawyers, with “approximately another 13 in the works.”

Later, asked for an exact head count, Torchia said, "I'd rather not say what the size of our firm is."

For some Brookstone clients, the outcomes of the cases hardly matter.

Aaron Sebagh, 63, is one of the plaintiffs in the Wright case. He lives in a two-story, beige stucco house on a hilly street in the wealthy suburb of Thousand Oaks, Calif. “I’m like everybody else with this economy,” said the Paris native, through a thick French accent. “Everybody got hurt.”

Sebagh said he got the same type of negative amortization loan the Potters did when he bought his place in 2005. He managed to stay current with his payments and eventually worked out a modification he’s pleased with. Yet he’s happy to be attached to Brookstone’s lawsuit, not because he particularly needs relief but for the priceless satisfaction of sticking it to the bank.

“They don’t care less about you,” said Sebagh, whose black eyebrows arch dramatically above the matching black frames of his glasses. “There’s no sympathy, no nothing.  That’s the reason I did it. They need to be punished for everything.”

The Potters aren’t as pleased as Sebagh. Their case officially died when it was dismissed in January. They filed a complaint against Torchia with the state bar, one of the many that ultimately resulted in charges.

“Vito called me and said it was dismissed because the judge didn’t like all these plaintiffs in the case,” said Robert Potter, now 79. “Well, that didn’t make any sense.”

 He and Joan, 74, drove nearly 60 miles to the Los Angeles Superior Court in downtown L.A. to check the case file. “A very nice lady there punched up the case on the computer and showed us how he didn’t file what he was supposed to,” Robert says of Torchia. “Suffice to say, everything is down the drain.” 

Chase again started demanding payments after the case was thrown out. The Potters sold their home in March for $700,000. Despite fetching nearly twice what they bought it for, the Potters’s debt on the property had grown so large that the deal was a short sale, said Bob Gottuso, the agent who handled the deal. Gottuso doesn’t know how that happened, and the Potters didn’t return follow-up phone calls. “It’s a sad situation,” said Gottuso. 

Torchia admits he could’ve been more communicative with the Potters and the others who joined their suit. “They didn’t get as timely updates as we’d like to,” he said. Still, on the bright side, “None of them had made payments on their homes for years.” 

(Correction: The original version of this story misstated the year Wright v. Bank of America was filed. It was filed in 2011, not 2001.) 

(Corrects the year that Wright v. Bank of America was filed in the 21st paragraph.)
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