Illinois Deserves the Truth

Madigan Strikes Another Blow to Countrywide

Illinois Attorney General Lisa Madigan files a lawsuit today against Countrywide Financial, the nation's biggest mortgage lender.

"Unfair and deceptive advertising, marketing and sales practices were utilized to push mortgages, while hiding the real costs and risks to borrowers, including enticing borrowers with low teaser rates, low monthly payments and 'no closing cost' loans that failed to make clear and conspicuous," according to the lawsuit, which also names Countrywide Chairman and Chief Executive Angelo Mozilo as a defendant.

Among other things, Madigan wants Countrywide to pay restitution to all affected consumers who lost their homes or loans. She also asks for 90 days to review any loans that are in or near foreclosure to see if borrowers can pursue affordable options.

Madigan has long had her eye on Countrywide, even going beyond allegations of mere corruption to accuse them of racial discrimination.  This lawsuit just adds to her reputation as one of our most important consumer watchdogs.  It could also be a big deal for Illinois consumers, if it goes our way.  So far, the government hasn't done enough to aid struggling homeowners.  Let's hope the Office of the AG gets the job done for everyone who has been scammed by Mozilo's Countrywide.

Casualties of Tort War: Consumers

Cross posted from The Pop Tort by John Guyette

With few exceptions, like Stephanie Mencimer’s piece in the Washington Monthly a few years ago, the media have a terrible tendency to spit back talking points provided to them by corporate groups and to talk about so-called “tort reform” like the whole thing is just a money battle between lobbyists – instead of dealing with the constitutional rights that are at stake or the impact on average people of weakening this system, not to mention our health and safety as a nation. 

The New York Times sometimes stood apart from this and actually used to challenge industry groups that orchestrated this so-called “tort reform” movement to serve their rich and powerful corporate members, many of whom have been found liable for egregious misconduct. (See here or here)

But no more.

Yesterday the Times ran a lengthy article entitled, "To the Trenches - The Tort War Is Raging On," citing without comment brazenly-biased and bogus corporate surveys and insurance industry consultant “reports” that have been widely trashed (for instance here, here and here), and making it seem like the only people affected by laws that take away rights of injured consumers are the attorneys who represent them, or to the extent attorneys are affected, the only thing they care about are their fees.  What an outrage.

Here's what goes on in the life of most trial lawyers: A legitimately injured person walks into their office.  The attorney looks into it and makes an offer to an insurance company, usually forced to leave a message on voice mail.  What happens?  Nothing.  No one even calls back. Welcome to the world of most trial lawyers. That’s why they are forced to file most cases, as insurance companies drag out these cases to egregious lengths.  Where is that scenario described?

(It should be noted that the Center for Justice & Democracy twice asked to speak to this Times reporter and was blown off, receiving not so much as a courteous “no thanks” to two emails.  That’s a first.)

From the story:

In a Washington ballroom bedecked with flags honoring explorers who overcame oceans and mountains to pursue international trade, Thomas J. Donohue congratulated the assembled modern merchants — a group of executives, lobbyists and lawyers — for challenging a more mundane adversary.

"It took guts, bravery and vision to get behind what must have seemed like an insurmountable task — taking on the powerful trial bar," said Mr. Donohue, the chief executive of the United States Chamber of Commerce. "We have succeeded beyond our expectations."

Yes "a group of executives, lobbyists and lawyers" sitting around congratulating themselves for limiting the rights of catastrophically-injured children truly does take "guts" and "bravery."

The story goes on to paint a picture of uncertainty as to who the winners and losers are in the tort war, once again leaving average consumers out of it.

Hello, where are the normal everyday people in all of this?  We're over here! Hello?

Mortgage Fraud Crackdown Hits Home

Finally, more is being done to track down mortgage insiders responsible for defrauding the public of millions.  The Justice Department just unveiled the perfectly-named Operation Malicious Mortgage, an effort which targets perpetrators of crimes as wide-ranging as bankruptcy fraud, foreclosure rescue scams, identity theft, and falsified loan applications and real estate appraisals.  Here in Illinois, authorities arrested 67.

In Chicago, authorities said the centerpiece of their investigation involved one of the largest mortgage fraud schemes ever prosecuted in federal court here.

The ring run by Bobbie L. Brown Jr. fraudulently obtained loans on some 183 homes in Illinois, Nevada and California, authorities said, and lenders lost more than $24 million.

In several instances, Brown allegedly bought homes using stolen Social Security numbers. In other cases, Brown and his co-defendants used straw purchasers to buy homes, gaining the straw purchasers' cooperation with promises of "no money down" and "cash back at closing," according to the charges.

Brown and others allegedly told the straw purchasers that they did not have to make any mortgage payments and that the homes would be rented out. Instead, federal authorities said, Brown, several co-defendants and their friends and relatives moved into the homes and didn't make payments.

"These fraudulent loan packages overstate income, they overstate assets," said Gary Shapiro, first assistant U.S. attorney in Chicago. " They had phony tax returns in them prepared by their cooperating tax accountant. The defendants supplied the down payments for these loans and falsely verified in the loan applications that the borrowers who were allegedly purchasing these homes were making the down payments."

God knows there are more than 67 of these scam artists out there, so let's hope we see more of this accountability.

Anti-Consumer Arbitration

Companies like to claim that mandatory arbitration is easy and unbiased (is this why they like to hide in it in so many contracts?).  This Business Week article pokes some big holes in that myth.  It focuses on credit companies and banks that use arbitration to collect debts from ordinary citizens, in particular one of the country’s largest arbitration firms, the National Arbitration Forum (NAF).  While the system is supposed to be neutral, consumers going up against a panel of NAF arbiters have virtually no chance of winning.

Some current and former NAF arbitrators say they make decisions in haste—sometimes in just a few minutes—based on scant information and rarely with debtor participation. Consumers who have been through the process complain that NAF spews baffling paperwork and fails to provide the hearings that it promises. Corporations seldom lose. In California, the one state where arbitration results are made public, creditors win 99.8% of the time in NAF cases that are decided by arbitrators on the merits, according to a lawsuit filed by the San Francisco city attorney against NAF.

Worst of all is how the NAF pitches its services to creditors.

Behind closed doors, NAF sells itself to lenders as an effective tool for collecting debts. The point of these pitches is to persuade the companies to use the firm to resolve clashes over delinquent accounts. JPMorgan Chase (JPM) and Bank of America (BAC) are among the large institutions that do so. A September, 2007, NAF PowerPoint presentation aimed at creditors and labeled "confidential" promises "marked increase in recovery rates over existing collection methods." At times, NAF does this kind of marketing with the aid of law firms representing the very creditors it's trying to sign up as clients.

Consumers who lost unfairly share some pretty shocking stories.  So do former NAF employees who left their posts because they had ethics.

William A. Gould Jr., a Sacramento lawyer with a general private practice, says he stopped handling arbitrations for the company after doing several in 2003 and 2004 because the process "just seemed to be pretty one-sided." He says he didn't observe specific instances of bias but became concerned about the imbalance between creditors and their law firms—which were highly sophisticated about NAF procedures—and most consumers, who were naive and lacked legal representation. "The whole organizational mechanism was set up to effect collections," Gould says.

This a must-read for anyone who has ever been in debt, so if you haven’t already clicked on it, do it here.  News like this just reminds us why the court system is so critical to keeping a level playing field for consumers.

Subjective journalism in Madison County

At The Record we hope to provide an objective view of the playing field as well as an active forum for both sides of the argument so that all of us can decide for ourselves.

~Introduction to the Madison County - St. Clair Record, inaugural edition

For those who aren't familiar, the Madison County Record is a downstate newspaper owned by the U.S. Chamber of Commerce, one of the largest "tort reform" lobby groups in the country (check out CJ&D's Madison County Record 'Spotlight on Justice').  They may call themselves an objective newspaper, but "The Record" is almost entirely devoted to attacking the Illinois civil jury system.  Ever since they opened for business, this paper has offered a one-sided voice on local civil justice issues.  Recently, the Construction Safety Act of 2008 has been one of their favorite targets.  This act failed to pass the house last week, and the newspaper was quick to print a one-sided commentary on why it would've "crippled the economy".  As we know, this bill was about protecting workers, and it certainly never crippled the economy during the 88 years it was on the books in Illinois.

We sent a letter to the editor in response.  I was sure it would find the wastebasket as soon as they got it, but then I read this:

To that end, we need your help. If you have an opinion, please let us hear it. Don't hesitate to send us your story ideas, press releases, letters-to-the-editor, or guest columns. We will print them.

Really?  We'll find out.

Enough with the pharma ads!

I wanted to share an insightful editorial from this morning's St. Louis Post-Dispatch.  Everyone knows how crazed drug manufacturers are over advertising to consumers.  It's no surprise, since their efforts are successfully undermining physician authority and bloating the industry.

One recent medical study found that advertising is creating markets for drugs that would otherwise not exist. It's one reason that more than half of all insured Americans are taking at least one prescription medication for chronic health problems.

The number of direct-to-consumer ads more than doubled between 2003 and 2007. Among them was a campaign for the cholesterol drug Vytorin...

Ads for the drug, made jointly by Merck and Schering-Plough, were pulled in January after release of a study that showed Vytorin is no more effective at reducing cholesterol build-up than a cheaper drug called Zocor, which is available as a generic.

Merck and Schering-Plough sat on that study for two years, advertising heavily the whole time. Last year, after data had been collected but before it was released, Vytorin rang up sales of $5.1 billion.

The editorial goes on to stress the importance of efforts currently on the legislative agenda.

U.S. Rep. Rosa DeLauro, D-Conn., has sponsored a bill that would ban consumer advertising for the first three years a new drug is on the market. That would give regulators time to better assess its potential risks. The idea is endorsed by Consumers Union, publisher of Consumer Reports.

A Senate committee today will is scheduled to hear testimony on a proposal to require that all drug ads list a telephone number where consumers can file reports about drug side-effects...

The FDA must do a better job of policing drug ads. But it won't until Congress gives it the tools it needs. Lawmakers should do so without delay.

Kudos to the Post-Dispatch editorial board for such a strong endorsement.

Small claims courts: "The Great Leveler"

Reading the paper yesterday I came across an article about an unheralded consumer tool: small claims courts.  When most people hear those words, they probably think of TV shows like Judge Judy, but small claims courts are an essential part of our judicial system and can be an important tool for anyone who has been wronged.  The writer called them the "Great Equalizer" (that's what I might call the civil justice system as a whole, but it's not far off).

Unfortunately, the article only briefly mentions Big Business’ attacks on this institution--not to mention the entire civil justice system.  Credit card companies and others use mandatory arbitration agreements to take away our right to seek a trial by jury when we are scammed.  Learn more about the pitfalls of binding arbitration agreements from Public Citizen’s report, “The Arbitration Trap: How Credit Cards Companies Ensnare Consumers”

Earth Day, Environmentalism and the Civil Justice System

Today is Earth Day 2008!  On Earth Day, we are bombarded by messages that talk about the need to protect and conserve our planet. We hear about groups of school children starting recycling programs in their communities, or new technologies that create less pollution or assists us with cleaning up old problems.  What you don't usually hear about is one of the most effective tools we have in this country to protect our environment: The Civil Justice System. 

A report released earlier this year, by The Center for Justice & Democracy, details many situations where private citizens brought civil cases and made polluters clean up their mess.  One of the cases highlighted is the "Love Canal" case:

In the early 1970's, a young mother named Lois Gibbs became concerned by her children's recurring illnesses, including rashes, respiratory difficulties and a serious blood disorder.  She began talking to her neighbors about it, and her informal survey suggested that there were a high number of babies with birth defects in homes near Love Canal on the outskirts of the City of Niagara Falls, New York. This spurred the State Department of Health to study the area.

Between 1942 and 1952, Hooker Chemicals & Plastics Corp. buried more than 21,000 tons of hazardous chemical wastes in a 3,000-feet long trough called Love Canal.  Over the next 20 years, chemicals from the site seeped into people's basements, contaminating underground sewer pipes and soil, and polluting the indoor air. The Department found an unusually high number of miscarriages among women living near Love Canal, and an elevated number of birth defects - including cleft palate, deformed ears and teeth, and other significant abnormalities. Approximately 950 families were evacuated from a 10-square block surrounding the landfill.

By February 1982, more than 600 personal injury cases had been filed against Hooker (which was bought by Occidental Chemical Co.).  In January 1985, 1,336 residents agreed to a $20 million settlement with Occidental that established a $1 million medical trust fund.  Thirteen years later, the last of the Love Canal cases brought by 899 victims settled for $6.75 million.8 Funds from the settlements have helped pay medical expenses of former Love Canal residents who have illnesses that have been linked to the contamination.

This case spurred passage of the Comprehensive Environmental Remediation, Liability and Compensation Act (CERCLA), also known as “the Superfund law,” which mandates cleanup of toxic sites.  In March 2004, the federal EPA declared cleanup at the site complete, despite lingering concerns of some community leaders, and removed Love Canal from the “Superfund list” of hazardous waste sites.

Citations Omitted.  Click here to view full report.

Because of cases like Love Canal, and others, many individuals have gotten justice and redress.  However, these cases not only benefit them, but benefit all of us.  While the civil courts have been a major tool in the fight for environmental justice and accountably it is under attack by the organizations that commit much of the harm: Big Business.

Big Business and their "tort reform" movement has taken aim at the civil justice system, to limit the access to justice for millions of Americans.  Not only have they tried to limit access, but through lobbying efforts they have tried (and succeeded) in passing legislation that limits their liability (and accountability) when they do harm.  We need to send a clear message to our legislators that we need open access to our civil courts to hold wrongdoers accountable for their misdeeds. 

On this Earth Day let us remember how, among many other tools, the Civil Justice System has helped protect people and the environment. 

Another Record Year for Tort "Deform" Lobbying

Unfortunately, we in Illinois know this scenario all to well. 

Cross posted from The Pop Tort by Amanda,

If there were a group of people that shouldn't be afraid of the purported recession, it would probably be lobbyists.  We are not saying all lobbying is bad, but just take a look at who outspent the rest in their efforts to have their way with Washington:   

According to information released last week from the Center for Responsive Politics, the U.S. Chamber of Commerce, the tort deform "champion", was victorious this past year in spending more money ($52.8 million) than any other lobbying group. 

The industries that dolled out the biggest of the big bucks: drug and health care product companies ($227 million) and insurance industries ($138 million).

Grisham's nightmare came true

Earlier we posted on a race for the Wisconsin Supreme Court.  It turned into a real life John Grisham novel when "tort reform" lobbyists heavily funded the challenger in hopes of shifting the court's balance.  They  complained that Wisconsin's high court contributed to an "anti-business" environment.  Well they got their way because their man won Tuesday's election.  The crazy thing is, the Wisconsin civil justice system was never that anti-business to begin with.  A Wisconsin law professor pointed out how silly these complaints were.

Over the years that I have studied the patterns and effects of civil litigation, I have never encountered any evidence that actual Wisconsin businesspeople (as opposed to their lobbyist spokesmen) are despairing about the state's civil justice system.

Although a fraction of business people cite civil justice issues as a general problem, only a vanishingly small minority identify the civil justice system as a significant problem for their own businesses.

How's this for evidence? Last year the U.S. Chamber of Commerce surveyed corporate attorneys across the country and ranked Wisconsin the nation’s 10th best (i.e. pro-business) liability system.

It's too bad the small minority that actually sees this as an issue has such big influence and deep pockets.

We won't find out how Gableman turns out until later this year.  You never know.  Let's just hope he doesn’t represent the interests of the "tort reformers" who backed him.

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