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The former head of a company where workers forged signatures on mortgage documents pleaded guilty to a federal charge in Florida on Tuesday, the same day a plea agreement on related state charges was announced in Missouri.
The agreements were reached with Lorraine Brown, 56, of Alpharetta, Ga., who was an executive for DocX LLC. Prosecutors said workers who weren't authorized to sign mortgage-related documents forged and falsified signatures, at the direction of Brown and others, allowing DocX to create and file more documents and therefore earn more money.
More than a million fraudulently signed and notarized documents from DocX were filed with property recorders nationwide between 2003 and 2009, during which time DocX generated about $60 million in gross revenue, according to the U.S. Department of Justice.
Prosecutors said Brown concealed the practice from clients and DocX's parent company, Lender Processing Services Inc.
"The robo-signing practices of DocX were the worst in the country, the most notorious in the country and crossed the threshold into criminal activity," Missouri Attorney General Chris Koster said.
Koster said the Missouri plea deal calls for Brown to plead guilty to felony forgery in Boone County and to perjury in Jackson County, with a prison sentence of between two to three years. Sentencing will be delayed pending the federal case.
According to federal court documents, Brown pleaded guilty in U.S. District Court in Florida to conspiracy to commit mail and wire fraud. The maximum federal sentence is five years in prison and a $250,000 fine, or twice the gross gain.
Her sentencing date has not been set in the federal case.
Her attorney, Mark Rosenblum, said Tuesday in a statement that negotiating a legal settlement will allow Brown to begin moving on with her life.
"Lori didn't expect to be in this position. But now that she is, she's facing it with grace and dignity," Rosenblum said. "Without doubt, this is a difficult day for Lori, but it's also a good day."
DocX's main clients were residential mortgage servicers that generally undertake duties for lenders such as accepting and recording mortgage payments, paying taxes and insurance from borrower escrow accounts and conducting or supervising the foreclosure process when necessary, according to the federal plea agreement.
The criminal charges in Missouri were filed against Brown earlier this year.
Koster said Tuesday he knows of no other senior executive facing a prison sentence because of actions during the country's mortgage crisis. He said Missouri's investigation demonstrated a criminal violation occurred.
Koster, who announced his plea agreement at his office in Jefferson City, said the case sends a signal to the financial services industry.
This summer, the Missouri attorney general's office announced it reached a legal settlement with Lender Processing Services that called for it to pay Missouri $1.5 million and another $500,000 to reimburse for the cost of the investigation.
Lender Processing Services spokeswoman Michelle Kersch said Tuesday that the company immediately stopped the practice when it discovered the surrogate signing, terminated Brown and shut down DocX. She said the company has remediated the documents and cooperated with all governmental investigations.
"LPS is committed to ensuring that all employees operate with integrity and compliance in everything they do on behalf of the company," spokeswoman Michelle Kersch said.
Robert E. O'Neill, the U.S. attorney for the Middle District of Florida, said buying a house is lengthy and intimidating and that consumers rely on others' integrity and due diligence throughout the process.
"When the integrity of this process is compromised, illegally, public confidence is eroded," O'Neill said. "We must work to assure the public that their investments are sound, worthy and protected.
Associated Press writer Gary Fineout contributed to this report from Tallahassee, Fla.