Ocwen accuses California settlement monitor of fraudulent strip club, casino expenses

Claims Fidelity Information Services engaged in ‘fraudulent, abusive billing scheme’

Gavel scales of justice

Fidelity Information Services perpetrated a “fraudulent and abusive billing scheme” and engaged in gross dereliction of duty in its role as the independent monitor of Ocwen Financial’s 2015 settlement with the state of California, Ocwen said in a bombshell lawsuit filed recently.

In the suit, filed in California state court, Ocwen states that FIS made “fraudulent or negligent misrepresentations” in the invoices it sent to Ocwen, claiming that money spent at strip clubs and casinos, among other things, were legitimate business expenses. In its defense, FIS tells HousingWire the lawsuit is baseless, more on that below.

Ocwen also claims that FIS significantly overcharged Ocwen for its monitoring services, including claims that FIS employees worked “implausible amounts of time” on given work days. Ocwen also claims that FIS billed it for “every minute its associates were onsite, regardless of whether they were actually working.”

According to Ocwen, FIS employees “took breaks as often as 14 times a day, or were observed watching videos instead of doing their jobs,” even though FIS billed Ocwen as if the associate spent the entire time working.

In its lawsuit, Ocwen claims that it repeatedly questioned FIS about the legitimacy of the charges it levied on the nonbank, but said that FIS claimed that all invoices were for appropriate charges.

“Whenever Ocwen questioned the legitimacy of FIS’s invoices, or confronted FIS about their increasing enormity, FIS reiterated its misrepresentations that the hours and expenses reflected on the invoices were legitimately worked and incurred,” Ocwen said in its lawsuit. “By continuing to represent to Ocwen that its invoices were legitimate, FIS induced Ocwen to continue to pay millions of dollars for work that was not performed.”

Ocwen goes on to claim that FIS believed it had “free reign” to lie about its actions without fear of any consequences.

Ocwen originally engaged FIS in 2015 to monitor its settlement with the California Department of Business Oversight, which stemmed from accusations that Ocwen failed to turn over documentation showing that it complies with California’s laws.

FIS served as the monitor of the settlement for two years, with its term as the California monitor ending when Ocwen reached a new settlement with California earlier this year.

That settlement involved Ocwen making a cash payment of $25 million and being required to provide an additional $198 million in debt forgiveness through loan modifications to existing California borrowers over a three-year period.

Over the two years that FIS served as the settlement’s monitor, Ocwen claimed that its mounting monitor costs, which totaled $147.5 million from Jan. 1, 2014 through June 30, 2016 from its various settlements with regulators, were a significant drag on its business.

Back in July 2016, Ocwen disclosed that the CDBO monitor believed that “certain onboarding activities” relating to new California originations in 2015 were prohibited by the terms of the consent order, and represented a material breach of the settlement.

That led to the February 2017 settlement, in which the CDBO claimed that Ocwen committed “hundreds” of violations of state and federal law over the last 18 months, including violations of the California Homeowner Bill of Rights.

And while all that was going on, Ocwen claims that FIS was abusing its business relationship with Ocwen and overcharging the company on many different fronts.

Per Ocwen’s lawsuit, its original agreement with FIS established a $44.8 million budget for a 24-month review, including a loan-by-loan review of 50,000 loan files for California loans serviced by Ocwen.

But Ocwen claims that FIS “ran through” the $44.8 million budget for the two-year review in 11 months, while “delivering less than half of the work it was hired to do.”

Ocwen claims that FIS was on pace to charge Ocwen $120 million for the project, which would have been almost triple the project’s original budget.

Ocwen then claims that FIS “had every incentive to inflate the invoices it submitted to Ocwen,” because the company reimbursed its employees for their expenses out of its own pocket before billing Ocwen for the expenses.

Therefore, Ocwen believes that FIS intentionally ignored the “inappropriate nature of associate expenses” so it could pass them off to Ocwen and avoid its own financial loss.

“On information and belief, FIS exploited its position to enrich itself at Ocwen’s expense,” Ocwen said in its lawsuit. “It viewed this engagement as a license to steal from Ocwen.”

Ocwen’s lawsuit goes on to lay out several specific examples of “FIS’s rampant fraud,” including:

  • Submitting expense reimbursements for charges from strip clubs and casinos
  • Billing Ocwen for artificially inflated hours during which no actual work was performed
  • Submitting improper expense reimbursements that FIS associates were using as a form of supplemental income

And here’s a sample of Ocwen’s claims:

In a brazen example of timesheet fraud, FIS associates at the Coppell, Texas facility were caught watching videos on company time and leaving the office up to 14 times a day without “clocking out.” Ocwen expressed its concern to FIS and asked to see “key-swipe” data for FIS associates, which would enable Ocwen to identify timekeepers who left worksites excessively during each work day and to determine how long they were gone. FIS refused to provide the data and continued to charge Ocwen for the improper hours.

Ocwen also claims that FIS employees expensed meals at strip clubs and casinos, including expenses incurred at establishments such as: The Lodge: America’s Best Gentlemen’s Club; WinStar World Casino; Spearmint Rhino Gentleman’s Club; Buck’s Cabaret; and Harrah’s Casino.

Ocwen claims that even though such expenses are prohibited by FIS policy, the company billed Ocwen for the expenses nonetheless.

Ocwen also states that FIS employees “abused their rights to expense meals” by treating their $65 daily meal allowance as a $65 per diem, using the money to “buy groceries, personal items, and even alcohol—trying to get as close as possible to the $65 allowance.”

Ocwen claims that it brought these concerns to FIS management on many occasions, but was repeatedly rebuffed or told that the expenses were indeed legitimate.

In a statement provided to HousingWire, FIS denies Ocwen’s claims, stating that Ocwen’s lawsuit is without merit.

“The complaint filed by Ocwen Loan Servicing against FIS is completely baseless and we plan to defend ourselves vigorously against these false allegations and to pursue collection of the invoices this litigation was filed to avoid,” FIS said in a statement.

An Ocwen spokesperson, on the other hand, said that company’s lawsuit “speaks for itself.”

In a statement to HousingWire, Ocwen spokesperson John Lovallo said: “Our complaint speaks for itself, and documents that Fidelity Information Services exploited its position by submitting fraudulent, false, and improper invoices to Ocwen relating to FIS’s services and expenses. Ocwen intends to vigorously pursue all remedies stemming from FIS’s fraudulent and abusive billing scheme.”

And if you’re interested in reading Ocwen’s full filing for more of the company’s bombshell accusations against FIS, click here.

https://www.housingwire.com/articles/40235-ocwen-accuses-california-settlement-monitor-of-fraudulent-strip-club-casino-expenses

8 Responses

  1. Reblogged this on California freelance paralegal and commented:
    As the old saying goes, “There is no honor among thieves.”

  2. On whose balance sheet did these loans ever lie? In order to be a security, there must first be a financial asset reflected on a balance sheet. This never happened. That is the true reason for “toxic” securities.

  3. so didnt they screw a whole lot of ppl out of there happiness i rec,letters from them on my indymac 2006 ar2 mbs trying to collect or forclose

  4. @ Scot ,

    OCWEN actually owns the notes that came from AHMSI (in the 2012 assumption) . They were bought from Bank of America on April 30,2008 by AHMSI (although BAC used Option One as a strawman seller in the deal) … The problem is that there is a 9+ year history of forged docs creating a false but plausible chain of title that contradicts the known ownership details…

    Bank of America was found to be the underwriters and funders of at least one complete trust sold to AHMSI on 4/30/2008 ,, Option One Mortgage Loan Trust 2007-FXD2 in 11cv10549 the infamous AIG v. BAC case in Federal Court , central district Los Angeles… THEY ARE THE LENDER AND THE NOTES ARE VOID NOT VOIDABLE.

    The cherry on top is that for Wilbur Ross to get his money back out of the deal he took a position at OCWEN and was handed a $60MM golden parachute when he left as he couldn’t be compensated directly when OCWEN bought AHMSI’s assets 5 years ago. To me that spells RICO in giant neon letters that should be apparent to any prosecutor.

  5. Scot, that is the big question: Who are the creditors or the actual owners of the notes and mortgages? What is in the trust? The servicers are pocketing the money. That is what is going on.

  6. “you reap what you sow, Ocwen”….lmfao

  7. Everyone is missing the point regarding Ocwen and all the other Servicers. The fact that Ocwen had to pay a fine of $25M and had to provide another additional $198M in debt forgiveness should be raising BIG QUESTIONS!!!

    If Ocwen is only a servicer how can they issue debt forgiveness They cannot if they are only a servicer. Ocwen as well all the other Servicers need to take their orders/directions from their Employer. They party that retained them as a servicer.

    The order to issue debt forgiveness should not be issued to the servicers but to the Entities that hired the servicers to service their loans. The servicers are acting on behalf of their Employers. So why are not the Employers being listed in these Suits and Orders? Or is the Government admitting that the Servicers own the alleged notes. That the Servicers are acting on their own because they own the Notes. If this is the case the Government is also admitting the Trust Own nothing.

    Why only fine the Servicers. Why only order the Servicers to issue debt forgiveness when the Servicers are allegedly just following orders from their Employers. Fine the people behind the Servicers also.

  8. Unlimited disappointment

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