Millionaire facing US investment fraud suit is Malta’s newest citizen

One of the multi-millionaires lining up for a Maltese passport has run into trouble back in the United States, having to face a securities fraud lawsuit.

William Charles Erbey was a billionaire worth $2.5 billion and a regular in Forbes’ list of the global rich, but his worth was drastically reduced to ‘just’ over $400 million when his mortgage giant Ocwen Financial was found responsible for serious conflicts in the way it carried out its business.

But far from the ‘talent’ that Prime Minister Joseph Muscat shills for in his international roadshows with Henley & Partners flogging off Malta’s golden €650,000 passport, William Erbey is accused by critics of having built an empire on mortgage misery, and who saves tax by sheltering his companies in the Virgin Islands, Luxembourg and the Caymans.

Earlier this month, US District Judge William Dimitrouleas said Erbey would have to face a securities fraud lawsuit, after the plaintiffs had successfully alleged that he and his company Home Loan Servicing Solutions had misrepresented to investors that the company had controls over Erbey’s conflicts of interest.

In 2011, Ocwen was investigated by New York’s Department for Financial Services for incomplete documentation and record-keeping, falsification of evidence through “robo-signing” and pursuit of foreclosures without legal standing.

Ocwen was found having pushed homeowners into foreclosure and profiting by funnelling default-related business to William Erbey’s associated companies. For example, one subsidiary hosted Ocwen’s online auctions; another handled post-foreclosure real estate transactions.

Mortgage servicers like Ocwen are essentially debt collectors, collecting monthly principal and interest from homeowners.

Prosecutor Benjamin Lawsky accused Ocwen of making decisions intended to benefit Erbey’s affiliated companies and their share price, “resulting in harm to borrowers, mortgage investors or Ocwen shareholders as a result.”

In addition to Ocwen Financial – which collected monthly mortgage payments – Erbey was also the chairman and the largest shareholder of four other real estate companies that step in when a lender has his property loan foreclosed. Altisource Portfolio Solutions ran the auction site Hubzu.com for foreclosed properties to go for a quick sale; Altisource Residential Corporation re-purposed a home as a rental property after acquiring it through a foreclosure auction; Altisource Asset Management offered reinsurance; and Home Loan Servicing Solutions was a holding company that purchases assets from… Ocwen.

In 2014, the New York Department of Financial Services reached a $150 million settlement with Ocwen, that included the resignation of executive chairman William Erbey from Ocwen and its four publicly traded affiliates.

Investors who own 25% in Ocwen-serviced trusts have now accused the company of forcing them to pay the cost of the settlements, saying Ocwen’s practices enriched its corporate affiliates while harming the trusts and their investors.

Ocwen has countered that its own independent investigation proves that those accusations hold no water.

Also in 2013, some 9,500 homeowners complained about how their mortgages had been serviced. The Consumer Financial Protection Board (CFPB) teamed up with authorities from 49 states to force Ocwen into a $2 billion settlement for in loan reductions to homeowners struggling to stay afloat and $127.3 million in refunds for 185,000 people whose properties had already been foreclosed upon.

According to Richard Cordray, head of the CFPB, “Ocwen took advantage of borrowers at every stage of the process.”

In an interview with The New Republic in 2014, the former prosecutor Benjamin Lawsky said: “When a corporation does wrong, it has to be that individuals who work at the corporation have done wrong.”