One Way to Dance Toward a Judgeship

About eight weeks ago, New York State Assemblyman Dan Quart, who had recently been hired as an associate by the law firm McManus, Ateshoglou, Adams, Aiello & Apostolakos, which is located on the 25th floor at 48 Wall Street, attended a fundraiser, which his new firm had organized to support future Quart political campaigns.

A flyer for the fundraiser  prominently featured Athanasia Apostolakos, one of the name partners at McManus Ateshoglou, asking donors to purchase tickets at a price of $250, $500 or $1,000 to support “Dan Quart For New York City,” a political fundraising vehicle created under New York City’s Campaign Finance Law. According to filing, required by the law, Quart for NYC raised $31,000 in March and April of this year.

That would have been unexceptional but for the fact that just a few weeks later, Suzanne Adams, who is also a name partner of the McManus firm, would appear for an interview with a screening panel set up by the Lexington Democratic Club, seeking its approval to run for one of two seats open this year within the 9th Civil Court District in Manhattan.

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My Joining a Group Founded by Accomplished Investigative Reporter Russ Baker

Dear Followers and Friends of WiseLawNY,

I am pleased to inform you that I have been invited to join WhoWhatWhy.org, a consortium of 100 reporters, editors and other professionals with the skills necessary to produce hard-hitting, meticulously-sourced investigative journalism. My first article, which was published today on WhoWhatWhy’s website is a collaboration with Russ Baker, the group’s founder and guiding light.

Over the course of two decades, prior to founding WhoWhatWhy, Russ did work for many of the world’s leading news outlets, including the New Yorker, Village Voice, Nation, Columbia Journalism Review, Times of London, Esquire, Vanity Fair, etc. He’s also the author of the best-selling investigative history of the Bush dynasty, Family of Secrets.

I very much look forward to working with Russ and the other journalists he has brought together at WhoWhatWhy on stories of national interest. I will continue to write stories on WiseLawNY of interest to judges, lawyers and interested observers of the legal scene in the New York metropolitan area.

Russ’ and my collaboration draws upon two stories that WhoWhatWhy and WiseLawNY published within four days of each other in late March. The WhoWhatWhy story sifted through many coincidences and relationships suggesting that the Trump organization had often been in close proximity to both Mafia families and Russian criminals in New York. It also further identified, Felix Sater, a convicted felon, who was a government informant for more than a decade starting in 1998, as having both business dealings with Trump and deep ties to Russia where he was born.

The WiseLawNY post added to that mix a statement made by a prosecutor in a sealed 2011 court proceeding, which only recently became public, that the informant Sater had produced valuable information about “Russian organized crime.”
Click here to read the story: http://whowhatwhy.org/2017/04/27/government-must-tell-trump-associate-russian-mob-ties/

Regards,
Dan

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Prosecutor Told 2nd Circuit in 2011 Sater Cooperation Included ‘Russian Organized Crime’

Forbes magazine  and one of its top investigative reporters late Wednesday, March 22, asked the U.S. Court of Appeals for the Second Circuit to unseal its records in the case of a government cooperator, Felix Sater, who acted as a go-between for a rogue Ukrainian legislator, who was promoting a pro-Russian peace plan to end the fighting in eastern Ukraine, and President Donald Trump’s personal counsel.

In seeking the release of the records, Forbes’ unsealing motion at p.2 cites “significant public interest in understanding President Trump’s connection to Sater and Sater’s connections to Russia,” especially so because of the ongoing investigations into Russian interference in the 2016 presidential election.

“Documents critical to the public understanding [of those connections] sit sealed on [the Second Circuit’s] docket, wrote Forbes’ lawyers from the prominent First Amendment law firm, Levine Sullivan Koch & Schulz, and a student  clinic at Yale Law School, specializing in prying loose documents hidden from public view.

Moreover, Forbes’s motion reveals at p. 9 that, when the Second Circuit first reviewed the sealing of Sater’s criminal file in 2011, the government’s lead prosecutor informed the court during an oral argument, conducted under a shield of court-ordered secrecy, that Sater’s cooperation “involves violent organizations such as Al Qaeda, it involves foreign governments, it involves Russian organized crime.”

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Did OCA Place Top Prudenti Aide With Legal Services Agency?

On July 28, 2015, the Office of Court Administration swiftly swung into action to accommodate one of its own when then Chief Administrative Judge A. Gail Prudenti announced her plan on July 28, 2015 to retire two days later to head up a student clinic at Hofstra University School of Law. A month later Prudenti’s chief of staff, Eugene Myers, was in place as the top non-lawyer administrator at Mental Hygiene Legal Service for the Second Department, whose 80 lawyers represent persons confined in mental institutions and sex offenders the state wants to civilly commit after they have served their prison terms.

Unlike many of Prudenti’s staffers who either retired or sought work elsewhere with her departure pending, the former Chief Administrative Judge said Myers wanted to remain with OCA until he could qualify for a full pension. Also, tired of the lengthy commute to OCA headquarters in lower Manhattan, she added, he wanted a post closer to his home in Suffolk County.

The Mental Hygiene Legal Service (MHLS), which has its headquarters in Mineola, had an opening for a deputy director, but there was one very substantial obstacle: the job could only be filled by a lawyer and Myers is not an attorney.

To clear that hurdle, court administrators reclassified the deputy director position to eliminate the requirement that the applicant be admitted to the bar, according to a document released in response to my Freedom of Information Law (FOIL) request. In a cover letter, Shawn Kerby, OCA’s FOIL officer explained that the new position was designated as “Special Programs Coordinator” rather than as Deputy Director, Mental Health Legal Service. Despite that designation, Mr. Kerby stated that Myers currently uses the working title of “Deputy Director of Administration.”

The last time the deputy director position was posted in 2011, the job posting required that applicants be admitted to the New York bar.

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Ukrainian “Peace” Emissary Coasts Free While Lawyers Who Outed Him Face Contempt Charges

During the last few days, Felix Sater, whom I have written about extensively since 2012, has surfaced in the national news as an unlikely intermediary, who connected a rogue Ukrainian legislator with President Donald Trump’s personal counsel to hatch a proposal for “peace” in the Ukraine on terms highly favorable to Russia.

Much has been written since the New York Times broke that story about Sater’s unsavory past three days ago, which has included articles on his ties to the Russian mob and his past extensive relationship with Trump as a finder of possible real estate projects in Russia.

What has gone unremarked upon, however, has been the subject of my many articles revealing how the Second Circuit and its surrogate Eastern District Judge Brian M. Cogan have sought to have two New York lawyers cited for contempt. One of them is Richard Lerner, the son of now deceased Justice Alfred Lerner, who  was a presiding justice of the Appellate Division in Manhattan after serving as administrative judge in Queens for many years. The other is Frederick Oberlander, a Long Island lawyer, who had received information from a sealed criminal file in a case where Sater was a defendant and cooperator in a $42 million stock fraud case.

Oberlander used the information from the sealed file to commence a civil action charging Sater with using the protection of court-ordered secrecy to carry out a second real estate fraud, which netted $500 million in illicit gains from investors, who were unaware of his criminal past.

U.S. Judge I. Leo Glasser, who presided over the stock fraud case in the federal court in Brooklyn, was outraged by the disclosures as was the U.S. Court of Appeals for the Second Circuit, both of whom slapped a series of gag orders on Oberlander and Lerner, who was defending him. The Second Circuit was so upset that it ordered the appointment of a judge to make sure its orders are enforced. The Circuit even took the highly unusual step of barring both attorneys from filing a petition with the U.S. Supreme Court for review of its orders without first getting the Second Circuit’s permission.

The Second Circuit panel specifically voiced its “exaspera[tion]” with the two lawyers and took the additional unusual step of threatening to treat them as pro se litigants (meaning the court would require them to get its permission before filing any more papers) unless they came to heal.

Oberlander and Lerner bypassed the Second Circuit’s order and filed a request directly with the Supreme Court, which granted them permission to seek review in the Court as long as any sensitive material was redacted. That was the subject of my first article (WiseLawNY, Aug. 8, 2012).

Five Year Battle

What ensued was a five year battle to hold the two lawyers in contempt even though any rationale for keeping the information secret had long since past. Much of the information in the real-estate fraud suit, as Lerner and Oberlander demonstrated to the Supreme Court, was already in the public record. Six months later, any claim to secrecy became laughable when the clerk of the court in Brooklyn mistakenly made the entire sealed file public, causing even Judge Glasser to recognize that “the cat is out of the bag.”

Indeed, all the basic facts had been in the public domain since 2007 when the New York Times published an extensive article revealing Sater’s dealings with Trump and his unsavory past. A book, written by a co-defendant in the stock swindle, Salvatore Lauria—The Scorpion and the Frog—detailed Sater’s extensive contacts with the Russian mob (Sater’s father was a Russian gangster) . But what Oberlander’s suit offered was proof of the reporting in the Times.

With Trump’s presidential quest kicking into high gear last winter, that proof was of paramount interest to the press, prompting the Associated Press to seek an order from Judge Cogan, authorizing the release of the sealed documents. Judge Cogan ordered the release of some of the documents, but insisted that the contempt investigation, now being conducted by the U.S. Attorney’s Office in Syracuse, continue, despite a show of lack of enthusiasm from the Northern District prosecutor at a hearing on May 10, 2016.

When Cogan pressed the prosecutor about how much time his office would need to wrap up its investigation, the prosecutor asked for six months. Cogan gave him there weeks. On the adjourned date, May 31, no one appeared in court and when I inquired I was told that the hearing had been canceled with no future date having been set.

At the May 10, hearing Cogan offered a bizarre theory that allowed him to order the release of some sealed documents to the AP but nonetheless justified his specifically enjoining Lerner and Oberlander from commenting upon them, even though he had just made them public.

The bottom line is 20 years after Sater agreed to cooperate and eight years after he pleaded guilty to a $42 million stock swindle, significant portions of his court file remain under court seal, and the two lawyers who battled to make the court records public remain under investigation.

As late as last May, I was made painfully aware that the Northern District was still pursuing its contempt investigation. Through an intermediary, I was informed that a prosecutor in the Northern District wanted to speak to me about my reporting on Lerner and Oberlander. The prosecutor, Richard Belliss, relayed his contact information and asked that I call him. Feeling strongly that contacts with any confidential sources are legally protected from disclosure (I am not acknowledging that there were any) I did not make the requested call and I have not heard anything further related to the inquiry.

Meanwhile, Lerner and Oberlander continue to have a criminal investigation hanging over their heads, while Sater, who continues to maintain that his life would be endangered by the release of the sealed information, has lived in the U.S. and not complained of any threatening incident arising out of the disclosure of such information. His claims of danger from his role as a cooperator and as a national security asset have not been born out. To the contrary, he became involved in an unauthorized attempt at a back-channel negotiation with the Trump Administration. This has resulted in publicity a gazillion times more massive than could have stemmed from the Second Circuit’s pique at him over the release of sealed information. Not only that, but apparently he has voluntarily talked to the New York Times about his role in the affair.

©DanielWise2017

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Judge Nixes Lender Move to Escape 6 Year Bar in Foreclosure Cases

A Supreme Court justice in Brooklyn has forcefully rejected a bid by one of the nation’s largest mortgage lenders to avoid application of New York’s six-year statute of limitations in foreclosure cases.

In a 42-page opinion, Justice Dawn Jimenez-Salta ruled that Wells Fargo bank could not use a Brooklyn homeowner’s participation in a federal program created to help financially strapped homeowners to escape the six-year bar on new foreclosure lawsuits.

Frenkel Lambert Weiss Weisman & Gordon, the firm that represented Wells and its client, U.S. Bank, in the litigation over the statute of limitations did not respond to an inquiry as to whether the decision would be appealed. Neither did Woods Oviatt Gilman, the firm that now represents the two.

Unless reversed, the Oct. 31 ruling leaves Wells Fargo’s client with no recourse to collect on the $639,000 loan at a 7.5 percent interest rate, which was issued to Alberto Martinez in 2005 to finance the purchase of his home in the Ditmas Park section of Brooklyn. In this instance, the owner of the loan was a mortgage-backed investment fund and Wells was acting as its agent in its dealings with Martinez. Most of the nation’s largest banks have affiliated businesses handling dealings between lenders and property owners whose home purchases they have financed.

The ruling is one of a handful of trial-court rulings  to hold that homeowners’ ultimately unsuccessful efforts to obtain lower monthly mortgage payments under the federal Home Affordable Modification Program (HAMP) do not provide lenders with a way to escape New York’s statute of limitations.

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Courthouse Confidential: Brooklyn Dems’ Chief Boosted Lawyer for Court Job

According to knowledgeable sources, Kings County Democratic Leader Frank R. Seddio is referring job seekers for positions at the Supreme Court at 360 Adams Street in downtown Brooklyn. Information to that effect has leached out and become widely known within the courthouse in the case of a lawyer, who was recently appointed as a law assistant to a judge handling civil cases, including foreclosures.

The lawyer, whom Seddio is said to have helped, was Alexis Riley, who had spent the last two years as a “court appearance attorney” handling foreclosure cases for one of the most active lender firms, Rosicki, Rosicki & Associates, according to her LinkedIn profile, and for a second real-estate firm, now known as Friedman & Bartolo. I am aware of at least two persons, who have spoken to Riley about the help that Seddio gave her.

As recounted to me, Riley, who was accompanied by a court officer, had a chance encounter with Seddio at the courthouse earlier this year. Upon bumping into Seddio, the court officer introduced Riley and told Seddio that she would like to work for the courts. Seddio responded by asking whether she would like to work for Justice Kenneth Sherman and asked her to meet him at party offices soon afterwards.

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Panel Sources: One Member Balked at Applying Correct Standard for Review of Ling-Cohan

Update: Ling-Cohan was elected without opposition at the Manhattan Democrats judicial nominating convention Thursday night’s (Sept.22).

 

The screening of Manhattan Justice Doris Ling-Cohan for a second term on the bench was marred by a panel member who openly stated that, rather than following the 22-member panel’s rules, she would vote “my conscience.”

One panelist, who requested anonymity, had a firm recollection of what happened. In response to the reading of the standard that applied to the panel’s deliberations, a second panelist, whom the source identified as Brenda Gill, quoted her as saying, “I don’t care what the standard is, I am voting my conscience.”

Gill declined to comment upon the other panelists’ remarks, stating this matter “has been blown way out of proportion with political factions pushing their agenda, misstating facts and coloring things to support their versions of the facts.”

Under the Manhattan Democratic Party’s rules, the panel must measure judges against their own record and determine that it “merits continuation in office.” Candidates, vying for an open seat, face a more exacting test in that they must show that they are the most highly qualified within the pool of aspirants for the post.” NY Co. Dems Rules, p.6. Highlighted para. (4).

A second panelist confirmed the essential outlines of what the first reported Gill as saying. The second panelist reported checking with yet a third panelist, who recalled the incident with more specific detail.

The second panelist, however, described Gill’s remarks as “off-hand” and “inconsequential.” Gill consistently voted against candidates, who had temperament problems, that source said, warning that some factions were spinning what happened during the deliberations to their advantage.

The two panelists, who spoke to me directly, also reported that Cyril K. Bedford, the panel’s administrator, let Gill’s remark stand uncorrected and made no effort to ascertain whether she would, in fact, follow the applicable standard. Bedford did not respond to requests for comment.

Normally, panel deliberations are confidential, but after the controversy over the disapproval of Ling-Cohan on Aug. 30 became public, and the source of heated controversy, Manhattan’s Democratic Party County Leader Keith Wright and Curtis Arluck, the chair of the Manhattan Judiciary party, issued statements releasing the panelists from their confidentiality obligation.

These latest developments have surfaced with the party’s nominating convention poised to vote this evening on which of 21 eligible candidates will receive the party’s nomination for six open seats on the Manhattan Supreme Court. In  a rare move tacitly accepted to by the party’ executive committee, Ling-Cohan’s name is being permitted to be put before the convention’s 84 delegates even though she has not received the screening panel’s approval.

Clear-Cut Violation of Rule

Whether Gill’s remark was casual or reflected an intent to defy the correct standard for evaluating an incumbent candidate is inconsequential. Here’s why.

What makes Gill’s reported statement so significant is that it runs directly afoul of a clear-cut party rule, forbidding the appointment of a panelist, who “shall not have agreed to follow the guidelines established by the Committee.” NY Co. Dems Rules, p. 5 Highlighted para. (2). The rule is stronger than a “guideline” issued by the County Party’s Committee because it is a part of the New York County Democrats official rules on file with the New York City Board of Elections.

Further, under the official rules, the panel’s report must be submitted to the Judiciary Committee “immediately” for a determination that the report complies with “these Rules and the Guidelines established by the Committee.”NY Co. Dems Rules, p.6, Highlighted para. (5) .

The Judiciary Committee promptly accepted the panel’s report, and a public rally was held on Sept. 6 denouncing Ling-Cohan’s rejection. Curtis Arluck, a co-chairman of the party’s Judiciary Committee, was quoted in news articles published the next day, Sept. 7 that the decision was final but that the Judiciary Committee would explore whether it could be overturned.

Over the next two weeks, the Judiciary Committee took no action to overturn the ruling, and, to the contrary, relied upon a party rule that expressly states that the panel “shall have no power to make any change in its report after the final meeting.” NY Co.Dems Rules p.6, Highlighted para. (5).

The problem here is that the Judiciary Committee DID ACCEPT the report and has steadfastly refused to examine the merits of many of the improprieties alleged by Ling-Cohan and a substantial majority of the panel members in letters written to the Judiciary Committee in letters dated Sept. 7Sept. 11 and Sept. 14.

Further, the party’s rules are quite clear that the report may not be accepted unless they “comply” with all applicable rules. NY Co. Dems Rules, p.6. Highlighted para. (5). Many alleged departures from the rules have been cited in the three letters sent by panel members to the Judiciary Committee. The Sept. 7 letter, which contains the substance of the panelists’ concerns, mentions that at “least one panel” member, who was not identified, stated he or she would not follow the guidelines.

Not following the required standard for review stands in direct and unambiguous conflict with members’ required commitment to follow the rules. The convention will vote as planned tonight and party insiders are confident that Ling-Cohan will be elected without opposition.

That is good for her, but not good for the panel system, which is pretty much in tatters after more than two-weeks of heated controversy. There is no time to conduct an inquiry before the vote takes place, which makes it all the more imperative that the party conduct a full investigation and make public its findings and recommended remedial measures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Majority Protests Panel’s Disapproval of Ling-Cohan; Dems Response Remains Murky

Fifteen of the members of the screening panel, which found Manhattan Justice Doris Ling-Cohan unqualified for a second term, have written to the Democratic Party’s judiciary committee to demand that panel’s initial finding be reversed. Curtis Arluck, the chairman of the Manhattan Democrats’ judiciary committee confirmed the receipt of the letter in an interview yesterday.

Arluck called the letter “very significant,” and stated that in his personal view the Judiciary Committee should be reconvened to consider how to respond to it. Because today is Election Day, he said, he would attempt to reconvene the committee, possibly as early as tomorrow. Arluck declined to comment upon the contents of the letter or whether they should be made public.

My sources, however, report that the letter is very wide ranging in detailing instances of impropriety, including conflicts of interest, during the committee’s deliberations. Under party rules, the Judiciary Committee is required to adopt the findings of the 22-members of the panel unless it finds improprieties in the screening process or that the committee failed to follow its own rules.

Without the release of the full contents of the letter, the outlook for a full examination of the information it has brought to the party’s attention remains in doubt. Without full disclosure, Ling-Cohan quest to clear her name may fall short even though a majority of the panel has objected to the way it went about its work. Likewise, the public will lack meaningful assurance that whatever flaws marred its work will be remedied.

Should the Judiciary Committee follow Arluck’s suggestion, this will be the second time the committee will have reviewed the panel’s work to determine whether it should accept the panel’s findings. The panel voted on Aug. 30 in a report signed by 20 of the committee’s 22 members. Two apparently did not attend the meeting.

 

Ling-Cohan’s Objections

Shortly after the panel completed its work, and before the Judiciary panel met to decide that it was acceptable, Ling-Cohan wrote to the committee to demand a new review, claiming that “people with clear conflict of interest at the meeting surely influenced the process,” according to an article published in the Gay City News on Sept. 6. To a similar effect, the Post’s article published yesterday paraphrased Arluck as saying that Ling-Cohan had suggested in her letter “there were a few people on the panel, who had a personal axe to grind because of her unfavorable rulings toward them.”

Ling-Cohan has enormous appeal in Manhattan’s political environment, which is heavily Democratic and distinctly liberal. She not only was the first Asian- American woman elected to the Supreme Court. She was also the first judge in New York State to have ruled that same-sex marriage is constitutionally protected and has been a staunch supporter of tenant’s rights as both a trial judge and a member of the Appellate Term in Manhattan.

Last week the Manhattan party leaders back-pedaled and made significant concessions to Ling-Cohan at the expense of party rules setting up the panel system in 1977 as a bulwark against allowing political considerations to compromise the selection of the party’s candidates for judgeships.

Despite its ironclad rule that the party could not endorse candidates not approved by the panel, the party’s executive committee last week agreed to condone the submission of Ling-Cohan’s name for nomination at the party’s judicial convention, which will be held on Sept. 22, even though she had failed to gain the panel’s approval.

 

Lingering Questions Remain

Yesterday’s article in the New York Post quoted Arluck as conceding that the panel had failed to adhere to its standards, which require that incumbent judges get the benefit of the doubt. But that leaves the lingering question of whether improprieties need to be examined. Late yesterday evening, the New York Law Journal posted an article on line, with today’s date (Sept. 13) on it, quoting extensively from the letter that Arluck had referred to earlier in my interview with him yesterday evening. The Law Journal also reported the committee members had emailed their objections to Arluck on Sunday.

The Law Journal further reported that it had obtained copies of two letters written by different groups of panelists and one from Ling-Cohan. In the version of the Law Journal article I read on line last night, there was no indication that the article linked to the full documents, as is its usual practice.

The Law Journal article did not use the words “impropriety” or “conflict,” but quoted from a letter sent by panel members to Arluck, which referred to a panel member who “apparently had an unfavorable outcome” from Ling-Cohan, as having “vigorously and insistently pushed an issue” that was germane to the panel’s decision to disapprove Ling-Cohan. The writers of the letter specifically noted that some members of the panel were unfamiliar with the issue the panelist had so forcefully raised but were given no time to research it before the panel voted.

Moreover, Ling-Cohan may not be satisfied with a resolution that does not clear her name. The New York Post’s article, breaking the news that the panel had found Ling-Cohen unqualified, reported that the panel had rejected her because she was “lazy” and “slow” in handling her cases. The Ling-Cohan camp did not immediately respond to an email asking whether she would insist upon a full-scale inquiry into the panel’s handling of her review.

The Manhattan Democratic party adopted its screening procedures nearly 40 years ago to assure the public that the old ways of Tammany Hall were dead and long gone. The screening process was specifically designed by Upper West Side reformers, led by former Corporation Counsel Victor Kovner, to assure the public that the party’s judicial nomination process is free from outside influences.

The Manhattan Democrats must conduct a full investigation of Ling-Cohan’s and 15 panel members’ claims and issue a public report detailing any irregularities uncovered and the remedies devised to prevent their re-occurrence. Without those steps, the public will not have confidence that the type of tampering Ling-Cohan and some members have complained about will never again taint future reviews of judicial candidates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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New York Gives Owners a Second Chance to Save Their Homes From Foreclosure

The New York State Legislature voted to give thousands of homeowners facing foreclosure a second chance to fight for a deal to save their homes as it rushed towards its summer recess in June.

 

The second-chance provision (p.33, lines 26-49) was the product of deals hammered out in the final days and hours of the session by the three men in a room: Governor Andrew Cuomo, Senate Majority Leader John Flanagan and Assembly Speaker  Carl Heastie. The second-chance legislation was tucked into a 44-page bill, which was a part of a larger piece of legislation, dubbed as the “Big Ugly,” which addressed numerous topics, including ethics legislation and control of public schools in New York City. The omnibus 44-page bill, which also dealt with dozens of topics, took second place, with many legislators and staffers referring to it as the “Little Ugly.” Both the Assembly and the Senate passed the “Little Ugly” on June 17.

 

Six days later, on June 23, Governor Cuomo signed the measure, and it officially became known as Chapter 73 of the Laws of 2016.

 

The second-chance law was vitally important to homeowners, who, unable to meet their mortgage payments, were left to their own devices to fight lenders’ lawsuits to take back their homes. Failure to attend to legal niceties came with disastrous consequences: an inability to raise any defenses to lenders’ demands for the surrender of their homes. The problem was seriously aggravated by an iron rule handed down by an appeals court in Brooklyn. The second-chance amendment overrode the Appellate Division, Second Department’s rule.

The legal nicety, which stymied homeowners, was a requirement that homeowners file a legal document, called an “answer,” within 30 days of receiving the lenders’ foreclosure papers. Failure to do so meant that the homeowner was in “default,” a status that precluded the homeowner from mounting any defense.

 

The enormity of the problem is apparent from statistics cited by the New York State Office of Court Administration (OCA) in its 2010 report.  According to that report (p.8), prior to the state’s passage in 2008 of a law requiring good-faith negotiations to determine whether homeowners monthly mortgage payments could be lowered, nearly 90 percent of homeowners failed to file answers. By way of contrast, the report noted that, after enactment of the mandatory conferencing law, 80 percent of homeowners showed up for the court-supervised settlement conferences required by the 2008 law.

 

But, showing up for a settlement conference had no bearing upon whether there would be relief from the default. That meant that, if the homeowner and lender could not work out a modification, the homeowner was without redress in opposing foreclosure. That was often the case as illustrated by the $26 billion settlement wrested from five of the nation’s largest banks in 2012 for failing to comply with federal protocols for determining when a modification is in order and, if so, how much.

According to the latest statistics available from OCA, there were more than 100,00 settlement conferences held in the 12-month period that ended in October 2014. All but 11,800 homeowners responded to notices that they could avail themselves of the opportunity to seek a loan modification, which reflected a response rate of 88 percent.

But applying the 10 percent rate at which “answers” were filed prior to the adoption of the good-faith law, as noted in the 2010 report (p.8), more than 89,000 homeowners statewide were in default during the 12 months ending in October 2015 (2015 Report, p.9) and without any ability to oppose foreclosure upon their homes should the “good faith” negotiation fail to pan out.

A veteran foreclosure lawyer, Lynn Armentrout, provided a graphic description of the minefield posed by the requirement that homeowners file an answer in an article published in the New York Law Journal[1] in March of this year.

She cited the example of an architect, who was facing foreclosure because of the steep decline in his business as a result of the Great Recession of 2007-8. When asked whether he had filed an answer, the architect asked, “What do you mean, by serve an answer?…I have no idea how to do that. But I did call the attorney [for the lender] whose name is on the summons.” By the time, the architect had found his way to Armentrout, who worked with a New York City Bar Association project offering free legal services to persons facing foreclosure, the architect was already in default and at the mercy of the lender if a modification could not be agreed to.

 

Armentrout noted that she had “scores” of similar conversations with other clients over the years, adding that she was using the illustration of the architect to demonstrate that “it is not just the uneducated or unsophisticated, who are stymied by the notion of preparing a legal pleading.”

 

Armentrout, who is a now deputy director of housing at South Brooklyn Legal Services, also laid out her legal research demonstrating how the Appellate Division, Second Department’s approach to defaults imposes a strait jacket upon owners’ ability to fight foreclosures. Her research found that, with one exception (law office failure), the Second Department has refused to relieve homeowners of the consequences of their defaults. Even more telling, she reported that the Brooklyn based-court “routinely” reverses lower court orders granting homeowners relief from their default. Her research found 13 examples of such rulings as of the date her article was published  on March 16, 2016.

Once in default, homeowners lost the right to assert their defenses to foreclosure under the Second Department’s rule. The amended  law allows homeowners a chance to answer the complaint during the settlement conference process, and to assert any defenses that would otherwise have been barred because of their initial default.

Likewise, homeowners, on their second chance, can require lenders to prove that they own the homeowner’s mortgage loan. Previously, once a homeowner was in default, lenders were not even obligated to prove facts essential to their cases, such as their ownership of the  loan.

The Second Department’s rulings are particularly important in the field of foreclosure law because four of the counties it covers —Suffolk, Nassau, Queens and Brooklyn—consistently have, by far, the highest foreclosure caseloads in the state. According to OCA, as of the end of May, those four counties accounted for nearly two-thirds of all foreclosure cases pending in the state.

Other positive changes for homeowners enacted as a part of the “Little Ugly:”

Housing lawyers, present in Albany at the end of the session, credited “tireless work” by Assemblywoman Helene Weinstein, chair of the Assembly’s Standing Committee on the Judiciary, and her counsel, Nadia Gareeb, with spearheading the effort to enact the changes discussed in this article.

 

Specifically, the advocates said that Weinstein had sponsored a bill, which was passed by the Assembly in May that contained many of the protections included in the Little Ugly package.

The advocates also praised the New York State Department of Financial Services for formulating a bill, which incorporated many of the protections that survived the legislative deal-making process. They also credited Governor Andrew Cuomo’s office as being instrumental in pushing for the changes.

Representative Annette Robinson, the head the Assembly Banking Committee, credited the New York State Foreclosure Defense Bar, whose members made three trips to Albany during the legislative session, with moving the second-chance measure forward by providing “very specific and vivid examples of how owners were losing their homes because of the sloppy and nitpicking way in which lenders dealt with requests for loan modifications.”

In response to my question as to whether OCA was involved in the adoption of the new protections, OCA spokesman Lucien Chalfin responded, “While we were not directly involved with the passage of the legislation, we are familiar with its provisions and will make it work.”

 

 

 

 

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