A caricature of David J. Stern, the once-mighty foreclosure attorney, that he printed on T-shirts used to woo potential investors.
By the end of the month, the Law Offices of David J. Stern, the once-mighty foreclosure mill in southeastern Florida, will be no more. According to a terse, two-sentence filing with the Securities and Exchange Commission, the firm—the subject of a Mother Jones investigation published last August—"will be ceasing the practice of law with respect to all pending foreclosure matters in the State of Florida" by March 31.
The reversal of fortune for David Stern and his law firm has been swift and breathtaking. A little over a year ago, the Stern's operation reigned king in the foreclosure business. Its clients included Wall Street powerhouses such as JPMorgan Chase, Bank of America, and Citgroup; the firm was also cozy with government housing corporations Fannie Mae and Freddie Mac, which hand-picked Stern's firm operation to process foreclosure cases for them. In 2009, the firm handled 70,000 foreclosure cases, and employed more than 1,000 people—paralegals, attorneys, paper-pushers, secretaries, and more. From 2006 to 2008, revenue generated by the non-legal, foreclosure-related parts of Stern's operations spiked from $40 million to $200 million. But the big payoff didn't come until January 2010, when Stern spun off those lucrative non-legal operations into a separate, publicly-traded company, netting him $58.5 million.
Through the staggering success of his businesses, Stern amassed great personal wealth. Over the years he purchased many multi-million-dollar waterfront properties in southeastern Florida, including a beachfront condo in the Ritz Carlton Fort Lauderdale. He bought Italian-made, jet-powered yachts and plenty of sports cars: at the time I published my story, he owned four Ferraris, four Porsches, a pair of Mercedes-Benzes, and a Bugatti. While secretive in his personal and professional life, Stern's wealth was conspicuous enough that Fort Lauderdale's Water Taxi boat captains made sure to point out his $15 million, 16,000-square-foot mansion on the Atlantic Intracoastal Waterway.
But last fall, the business empire that allowed Stern to live like a king began to crumble. Days after Mother Jones published my investigation into Stern and the world of foreclosure mills, the Florida attorney general announced a probe into Stern's firm and two others to determine whether "improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved." It's all been downhill since then for Stern: Fannie and Freddie dropped him from their "designated counsel" program, and many big banks and mortgage servicing companies stopped hiring his firm. Citing MoJo's reporting, members of Congress demanded investigations into why Fannie and Freddie ever did business with Stern's firm and others like it. Soon, no one, it seemed, wanted to do business with the Law Offices of David J. Stern.
The publicly traded company he helped start, DJSP Enterprises, floundered as well. After opening in January 2010 at $9.25 a share, DJSP's stock has plummeted to rock bottom: At midday on Monday, it was worth 16 cents a share. In November, facing a mountain of criticism, Stern himself resigned as president and CEO of the company. In December, the company received a warning from NASDAQ that it would be delisted unless it boosted its per-share price to $1 by mid-June.
And as his business empire crumbled, so, too, has his personal fortune. Stern is reportedly offloading a pair of prime properties in the Fort Lauderdale area, believed to be worth tens of millions of dollars. According to the South Florida Sun-Sentinel, he's also trying to sell his 130-foot Mangusta yacht, named Misunderstood.
Stern's law firm currently employs around 50 or so employees, after shedding the majority of the staff over the past five months due to the drop in referrals. It's unclear how DJSP Enterprises, the publicly traded company, will fare as Stern's firm prepares to shut down; as the company admitted in early SEC filings, Stern's law firm was the primary source of business for DJSP. Without it, it's hard to see how DJSP stays afloat.
Stern is still under investigation by the Florida AG, which is looking at the past practices of his law firm. Which is to say, while the Law Offices of David J. Stern will soon be gone, today's news isn't the last we'll hear of David J. Stern.
Below is a letter obtained by Mother Jones that Stern sent to Judge Lee Hayworth in Florida's Sarasota County, outlining his law firm's plans to close its doors and remove itself from all pending foreclosure cases:
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