Federal Trade Commission v. Lakhany, et al., SACV 12-0337-CJC, U.S. District Court, Central District of California

Defendants operated a loan modification call room in Santa Ana, California using a thinly disguised illegal advance fee collection process. Defendants claimed their businesses were “non-profits” which offered a “forensic audit” (for a fee) followed by a “free” loan modification. For a period of about eight months, the offerings to consumers evolved into “mass joinder” lawsuits. A number of mass joinder lawsuits were actually filed, but aside from a very brief period of time, there was no licensed attorney involved. All the mass joinder cases were dismissed by the courts for failure to serve the complaint on the defendant banks or for failing to respond to motions filed by the banks. At the time of the FTC’s action, defendants were telling consumers that they were actively looking to “merge” the mass joinder business with an actual law firm and were back to actively pursuing loan modification clients using the non-profit forensic audit as a teaser.

After appointment, we took over the call room with approximately 20 active telemarketers, suspended operations and communicated with the consumer customers. After court approval, we closed the facilities and liquidated the on-site furniture and equipment. We were able to employ the on-site data base and identify approximately 1,100 paying loan modification customers, some 10% of whom actually secured some form of modification, and approximately 700 consumers who made payments to become included in a mass joinder litigation. Orders for Permanent Injunction were entered February 28, 2013.