More lawyers lose their licenses over loan modification activities
By Nancy McCarthy
Staff Writer
Four southern California lawyers who handled hundreds of foreclosure cases throughout the country have admitted extensive misconduct that will lead to their disbarment. Attorneys for the State Bar’s Loan Modification Task Force filed stipulations from all four with the State Bar Court, which approved them.
The bar’s Office of Chief Trial Counsel has obtained the resignations of 12 attorneys involved in loan modification misconduct since creation of the task force in April 2009. Six loan modification trials are pending and another 1,800 active investigations related to loan modification are underway; more than 4,000 complaints have come through the task force since it was formed.
The four, who were placed on involuntary inactive status and are prohibited from practicing law, are:
- ERIC THEODORE SMITH [#133287], 57, of Irvine
- DEIDRE JOY PROZINSKY [#222591], 39, of Anaheim
- ERIC DOUGLAS JOHNSON [#224065], 55, of Los Angeles
- MATTHEW MICHAEL McCORMICK [#182543], 43, formerly of Los Angeles
Together, they were charged with and stipulated to dozens of counts of misconduct, including collecting and not refunding illegal fees, not doing the work for which they were hired, forming partnerships with nonlawyers and aiding others in the unauthorized practice of law, and practicing outside California in jurisdictions where they are not licensed. Many of their activities involved acts of moral turpitude. All four agreed to make substantial restitution to their former clients, some of whom lost their homes.
“Our office has given a very high priority to allegations of attorney misconduct in connection with loan modification service,” said newly appointed Chief Trial Counsel Jim Towery. “I have been very impressed by the successful work of the Loan Modification Task Force — to date, 12 lawyers have surrendered their licenses, and four stipulated disbarments have been approved by the State Bar Court. I intend to maintain the office’s aggressive stance with respect to attorneys that have engaged in loan modification misconduct.”
In addition, Attorney General Jerry Brown announced a $1.1 million judgment against longtime Los Angeles attorney MITCHELL ROTH [#77962], 59, for conning 2,000 homeowners into paying him thousands of dollars to file “frivolous and phony” lawsuits to reduce their mortgage debt. Last February, State Bar prosecutors obtained a Superior Court order effectively shutting down Roth’s offices in Sherman Oaks, San Diego and Riverside and he was ordered inactive in April 2009.
And based on complaints from clients seeking loan modifications, two other lawyers were placed on inactive status by the bar in August. The State Bar Court found that ZACHARY I. GONZALEZ JR. [#259663], 30, of Riverside and JOHN MICHAEL HARRISON [#144964], 57, of Santa Ana, pose a threat to the public and ordered that they be placed on inactive status. Bar prosecutors are seeking their disbarment.
Smith opened a loan modification office called “Modify Law Group” in 2008, advertising on the internet and radio stations across the country and he sent mass mailings in various markets throughout the U.S. He was not entitled to practice in other jurisdictions, however. Clients were told they would receive a full refund if Smith could not obtain a loan modification for them.
By mid-2009, Smith knew he had accepted more cases than he could handle, yet he continued to take on new clients. He also was suspended for about a month but didn’t inform his clients that he could not practice. By the end of the year, he disconnected his office phones.
The bar filed charges against Smith based on complaints from 32 clients in 13 states who did not obtain a loan modification or a refund of their fees, which ranged from $1,247.50 to $4,500. Those clients paid a total of nearly $68,000 in advance fees.
Johnson, who resigned from the bar last November but later withdrew the resignation, partnered with three businesses, all owned by non-lawyers, that either offered loan modifications or collected loan documents from lenders. He allowed the businesses to solicit clients and accept fees, enabling non-lawyers to practice law. One business owner claimed Johnson would do the legal work but in fact did the work herself without Johnson’s supervision.
He also personally handled three loan modification matters but did not obtain a modification for the clients or refund the advanced fees, which totaled $34,700.
Johnson stipulated to 24 acts of misconduct, including three acts of moral turpitude for making misrepresentations to the court. He was placed on inactive status May 21 by State Bar Court Judge Richard Honn, who cited cases in which homeowners, who were promised their homes would not be foreclosed, lost them anyway after making significant payments to the companies with which Johnson partnered.
Prozinsky, who carried $180,000 in student loan debt and another $30,000 of credit card debt, associated in 2009 with Illinois attorney Peter F. Zullo, setting up an office in Irvine. She allowed the staff to distribute marketing literature listing Zullo as part of her law firm but not disclosing that he wasn’t licensed in California.
She had retainer agreements with 38 clients who filed complaints with the State Bar that promised a full refund if she was unable to obtain a home loan modification. Some agreements offered a full refund, and others offered partial repayment. Prozinsky collected more than $91,000 in advance fees from the complaining clients, but did not obtain a loan modification for any of them, nor did she provide a refund. The clients resided in California and eight other states where Prozinsky is not licensed.
She stipulated to seven counts of misconduct, including moral turpitude as a result of breaching her fiduciary duty to her clients. The firm handled about 1,000 loan modification matters, and Prozinsky obtained modifications or other forms of relief in about half the cases. However, several clients lost their homes.
Prozinsky’s financial problems were compounded when a credit card company refused to release more than $170,000 in collected fees because she stopped taking new clients and thus was considered a credit risk by the credit card company. As part of her stipulation, Prozinsky agreed to make restitution of more than $80,000 to the former clients.
McCormick set up several law firms, including Christian Lawyers of American (CLA) and Freedom Law Center and was employed by negotiate with his clients’ lenders or creditors to settle or restructure their mortgage payments or to settle their debt. In many contracts, his firm explicitly promised a 70 percent refund if he did not obtain a satisfactory loan modification or debt settlement. Many clients also were told that the work should be completed within three to six months, they were instructed to stop paying their mortgages and they were told McCormick would refund their advance fees if the work wasn’t completed.
Even when it became clear that McCormick had more cases than he could handle, he continued to start new law firms and accept more clients. One client’s file was given to an outside firm that asked the client for payment to handle his case.
McCormick, who now has a Sacramento address, was charged with misconduct in 77 cases and admitted that he violated seven rules of professional conduct, including failing to supervise non-lawyers, abandoning clients, failing to return their files or refund unearned fees and failing to preserve confidential information.