Chapter 17

Misrepresentation by Foreclosure Assistance Company

Benjamin Diehl is a 1997 graduate of the University of Pennsylvania Law School. Diehl worked as Deputy Attorney General in the Consumer Law Section of the California Attorney General's Office since 2002. Prior to that, he worked at Bet Tzedek Legal Services as a Skadden Fellow and Staff Attorney from 1997-2002, where he specialized in predatory lending and related home ownership protection matters. California Attorney General Bill Lockyer on July 29, 2004 announced his office won a court order freezing the assets of Garden Grove-based Housing Assistance Services, Inc. (HAS) after filing a lawsuit alleging the firm has illegally and deceptively sold mortgage assistance services to homeowners in foreclosure.1 The complaint centers on the "Fresh Start Program," which HAS marketed via mail. In its advertising materials, HAS said it could help homeowners in foreclosure negotiate with mortgage lenders a loan modification or loan forbearance. Specifically, the HAS materials said if homeowners participated in Fresh Start, HAS could "stop your current foreclosure by rewriting your existing loan. " To participate in Fresh Start, consumers paid HAS an upfront, base fee of between $750 and $1,250. Additionally, consumers paid separate fees for "reinstatement processing," "docusave" services, "financial education materials," and credit reports. The Attorney General's Office received complaints from consumers who said that, after they paid the upfront, base fee, HAS never provided them the promised foreclosure assistance services. Further, said the complainants, HAS refused to provide refunds when the firm failed to deliver on its promise. The alleged violations include taking consumers' money before HAS provided the promised services; failing to include in contracts required disclosures of cancellation rights; and attempting to limit the defendants' liability in contracts. Additionally, the complaint alleged the defendants' statements that the Fresh Start Program could save consumers' homes from foreclosure violated laws prohibiting false or deceptive advertising. HAS also violated those statutes in statements posted on Internet web sites, according to the complaint. In those statements, the complaint alleged, defendants misled consumers by representing they provided free services, and by boasting they had 25 years combined experience helping homeowners avoid foreclosure. "Consumers facing foreclosure should be wary of companies that solicit them with offers to help them avoid the loss of their home," said Lockyer. "Foreclosure consultants often charge high fees, but take the money and run." Section 17.1 is an Application for a TRO and preliminary injunction based on Cal. Business and Professional Code 17200 for misrepresenting its services and for violating the California regulation of foreclosure consultants, Cal. Civil Code 2945, section 17.2 is a memorandum of law in support of the application, and sections 17.3 to 17.5 are supporting affidavits of victims of the scam. Section 17.6 is the amended complaint, section 17.7 is the memorandum in support of the preliminary injunction and section 17.8 is the permanent injunction and final judgment.

See http://caag.state.ca.us/newsalerts/2004/04-079.htm.

17.1 Application for a TRO and Preliminary Injunction

SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF ORANGE CASE NO. THE PEOPLE OF THE STATE OF CALIFORNIA, APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO Plaintiff, SHOW CAUSE RE: PRELIMINARY INJUNCTION; MEMORANDUM OF v. POINTS AND AUTHORITIES; SUPPORTING DECLARATIONS HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 1-50, inclusive, Hearing Date: Time: Defendants. Dept.: Judge:

TO DEFENDANTS AND THEIR ATTORNEYS OF RECORD: Pursuant to Business and Professions Code sections 17203 and 17535 and Rule 379 of the California Rules of Court, Plaintiff the People of the State of California applies ex parte for a Temporary Restraining Order, and Order to Show Cause re: Preliminary Injunction, enjoining Defendant Housing Assistance Services, and its agents, servants, employees, officers, representatives, successors, partners, assigns, and any and all persons acting in concert or participating with them, including but not limited to Defendant Marc Sheckler (collectively, Defendants), from: (A) Failing to include in contracts they provide to prospective customers all provisions required by law to be included in contracts for the provision of mortgage foreclosure consultant services, including but not limited to all provisions required under each subdivision of section 2945.3 of the Civil Code; (B) Failing to provide consumers who enter into a mortgage foreclosure consultant contract with a separate notice, in duplicate, of their right to cancel their foreclosure

consultant contract, in violation of subdivisions (e) and (f) of Section 2945.3 of the Civil Code; (C) Engaging in any conduct barred by section 2945.4 of the Civil Code; (D) Including terms in mortgage foreclosure consultant contracts that purport to limit Defendants liability; (E) Violating any California laws regulating mortgage foreclosure consultants, as codified at Section 2945 et seq. of the Civil Code; (F) Representing that Defendants have been providing mortgage foreclosure counseling services for longer than they have been in business; (G) Representing that Defendants provide mortgage foreclosure counseling services at no cost; and (H) Spending, transferring, disbursing, encumbering, or otherwise dissipating any of the following funds, without first obtaining approval from this Court after a hearing of which Plaintiff is given at least 15 days written notice: (1) all money Defendants have received from California consumers who paid any funds to Defendants for the purchase of mortgage foreclosure consultant services; (2) all bank, savings, and checking accounts in which any Defendant deposited any of this money; (3) all profits derived from this money; and (4) any property purchased or maintained, in whole or in part, by any of this money. This application is based on violations of Business and Professions Code section 17200 et seq., as Defendants have violated and are violating multiple provisions of Californias laws regulating mortgage foreclosure consultants. (Civil Code section 2945 et seq.) These violations constitute unlawful business practices within the meaning of Business and Professions Code section 17200. Specifically:

(A) Defendants violate subdivision (a) of Section 2945.3 of the Civil Code by not fully disclosing in writing the exact nature of the services they will provide to consumers; (B) Defendants fail to include in mortgage foreclosure consultant contracts the notice required by subdivision (b) of Section 2945.3 of the Civil Code; (C) Defendants fail to include in mortgage foreclosure consultant contracts the notice of right to cancel required by subdivision (c) of Section 2945.3 of the Civil Code; (D) Defendants fail to include in their contracts the address where a consumer may send notice that he or she is canceling a mortgage foreclosure consultant contract with Defendants, in violation of subdivision (d) of Section 2945.3 of the Civil Code; (E) Defendants fail to provide consumers with a separate notice of their right to cancel their foreclosure consultant contract, in violation of subdivisions (e) and (f) of Section 2945.3 of the Civil Code; (F) Defendants claim, demand, charge, collect, and/or receive payment from consumers prior to providing all services they contracted to, or represented they would, perform, in violation of subdivision (a) of Section 2945.4 of the Civil Code; (G) In violation of subdivision (g) of Section 2945.4 of the Civil Code, Defendants induce or attempt to induce consumers to execute contracts that do not fully comply with Sections 2945.2 and 2945.3 of the Civil Code; and (H) In violation of Sections 2945.9 and 2945.10 of the Civil Code, Defendants induce consumers to sign mortgage foreclosure consultant contracts that purport to limit Defendants liability to the total amount of fees paid by that consumer. This application is also made on the grounds that Defendants engage in false advertising in violation of Section 17500 of the Business and Professions Code (by advertising that they provide services at no cost when in fact they do not and by advertising that they have over 25 years of foreclosure consulting experience when in fact they have been in business only since 2000); and that such relief is necessary to protect vulnerable consumers from being harmed by Defendants illegal and deceptive conduct.

Further, pending the hearing on the OSC re: Preliminary Injunction, and on the same grounds for which Plaintiff is applying for the Preliminary Injunction, Plaintiff requests that Defendants be temporarily enjoined from: (A) Failing to include in contracts they provide to prospective customers all provisions required by law to be included in contracts for the provision of mortgage foreclosure consultant services, including but not limited to all provisions required under each subdivision of section 2945.3 of the Civil Code; (B) Failing to provide consumers who enter into a mortgage foreclosure consultant contract with a separate notice, in duplicate, of their right to cancel their foreclosure consultant contract, in violation of subdivisions (e) and (f) of Section 2945.3 of the Civil Code; (C) Engaging in any conduct barred by section 2945.4 of the Civil Code; (D) Including terms in mortgage foreclosure consultant contracts that purport to limit Defendants liability; (E) Violating any California laws regulating mortgage foreclosure consultants, as codified at Section 2945 et seq. of the Civil Code; (F) Representing that Defendants provide mortgage foreclosure counseling services at no cost; and (G) Spending, transferring, disbursing, encumbering, or otherwise dissipating any of the following funds, pending the hearing on Plaintiffs application for a Preliminary Injunction: (1) all money Defendants have received from California consumers who paid any funds to Defendants for the purchase of mortgage foreclosure consultant services; (2) all bank, savings, and checking accounts in which any Defendant deposited any of this money; (3) all profits derived from this money; and

(4) any property purchased or maintained, in whole or in part, by any of this money. This application is based on this application and memorandum of points and authorities, the complaint on file herein, the declarations of [Consumer 1], [Consumer 2], [Consumer 4], and [Consumer 6], and exhibits thereto, any reply that may be filed, and such evidence and argument as the Court may hear at the time of the hearing, or of which the Court may take judicial notice. Dated: July __, 2004 Respectfully submitted, BILL LOCKYER Attorney General of the State of California ALBERT NORMAN SHELDEN Acting Senior Assistant Attorney General

BENJAMIN G. DIEHL Deputy Attorney General Attorneys for Plaintiff

17.2 Memorandum of Law in Support of TRO Application

MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION: DEFENDANTS UNLAWFUL BUSINESS PRACTICES The People make this application to prevent Defendant Housing Assistance Services, and its agents, servants, employees, officers, representatives, successors, partners, assigns, and any and all persons acting in concert or participating with it, including but not limited to Defendant Marc Sheckler (collectively, Defendants), from operating their mortgage foreclosure consultant business without complying with California law, to bar Defendants from engaging in unlawful business practices and unfair or misleading advertising while this action is pending, and to prevent dissipation of Defendants assets, so that consumers who have already been victimized can receive restitution and therefore obtain funds that they may be able to use to save their homes from foreclosure. Defendants market their services to consumers who are in default on their mortgages, purporting to be able to help them stop the foreclosure process and reinstate their loans, and identify themselves as foreclosure counseling coordinators. (Declaration of [Consumer 2] ([Consumer 2] Decl.), para. 4, ex. 1.) Therefore, Defendants operate as foreclosure consultants, as that term is defined in Civil Code section 2945.1, subdivision (a). In violation of the laws regulating mortgage foreclosure consultants, Defendants often do not include required provisions in their contracts. For example, Defendants often do not include notice to consumers that, as mortgage foreclosure consultants, they cannot collect payment until they perform all services they agree to provide, and, further, fail to provide notice to consumers of their right to cancel. (Civil Code 2945.3.) Defendants induce consumers to sign contracts that unlawfully purport to limit Defendants liability, and unlawfully take money from consumers prior to performing all services they agree to or represent they will perform. (Civil Code 2945.4, 2945.9.) Defendants also operate or advertise on two websites, www.hasus.com and www.foreclosureassistancehotline.com, which both suggest that Defendants provide free services and have over 25 years of experience, when in fact Defendants charge

substantial fees and have only been in business since 2000. In addition to violating the mortgage foreclosure consultant laws, Defendants conduct violates California laws barring false advertising and unfair business practices, as codified in Business and Professions Code sections 17500 et seq. and 17200 et seq., respectively. Defendants ongoing and overt violations of Californias foreclosure consultant laws pose a continuing threat to consumers who are at risk of losing their homes through foreclosure and are desperately seeking assistance to avoid homelessness. As the California legislature recognized when it enacted the mortgage foreclosure consultant law, foreclosure consultants . . . often charge high fees . . . and perform no service or essentially a worthless service. Homeowners, relying on the foreclosure consultants promises of help, take no other action, are diverted from lawful businesses which could render beneficial services, and often lose their homes. . . . (Civil Code 2945, subd. (a).) Here, consumers who fall victim to Defendants

unlawful activity face the loss of their homes and the resulting immeasurable economic and emotional harm. Therefore, Plaintiff requests that the Court exercise its statutory authority under Business and Professions Code sections 17203 and 17535, and issue the proposed temporary restraining order and order to show cause re: preliminary injunction to protect additional consumers from being harmed by Defendants illegal conduct pending the resolution of this action. II. STATEMENT OF FACTS A. In Their Solicitations, Defendants Represent That They Will Be Able to Assist Consumers Facing Foreclosure, Offer Free Services, And Have Been in Business For Over 25 Years.

After their mortgage went into foreclosure in the early summer of 2003, [Consumer 2 and Consumer 3] received a solicitation letter from Housing Assistance Services. In the letter, Housing Assistance Services claimed that it operated a Fresh Start program under which [Consumer 2 and Consumer 3] would be able to resume payment on their mortgage and bring their loan current, and stop the foreclosure sale of their home. ([Consumer 2] Decl., para. 4, ex. 1.) The letter urged [Consumer 2 and Consumer 3] to call their Housing Assistance 8

Services foreclosure counseling coordinator. (Ibid.) Similarly, when [Consumer 4 and Consumer 5] faced foreclosure in approximately September, 2002, they received a postcard from Housing Assistance Services, describing H.A.S. as a loss mitigation firm which helps homeowners enter into repayment plans with their lender and urging them to call to obtain information on how to enter a repayment plan and stop their foreclosure. (Declaration of [Consumer 4] ([Consumer 4] Decl.), para. 3, ex. 1.) Defendants also advertise their purported services on the Internet. Defendants maintain the Internet site http://www.hasus.com, which prominently displays the logo for Housing Assistance Services, advertises free telephone counseling, and claims that the H.A.S. team has over 25 years of combined experience helping homeowners in trouble. (Declaration of [Consumer 1] ([Consumer 1] Decl.), para. 2, ex. 1.) Also, when she faced foreclosure in the Spring of 2002, [Consumer 6] searched the Internet for a company that could help her save her home, and found an Internet site, http://www.foreclosureassistancehotline.com, that promised Free professional counseling and advice on how people facing foreclosure could save their homes. (Declaration of [Consumer 6] ([Consumer 6] Decl.), para. 3.) [Consumer 6] filled out and electronically sent a brief form outlining her situation, and shortly thereafter received e-mails from an H.A.S. representative stating that [Consumer 6] had filled out Defendants form, and that Defendants could assist her. ([Consumer 6] Decl., paras. 3-5, exhs. 1-2.) As of July, 2004, the foreclosureassistancehotline.com site prominently displayed the logo for Housing Assistance Services on the top left corner of each page of the site, promised free, professional, unbiased counseling as part of a free service of a nationwide loss mitigation firm contracted by major lenders to enter homeowners into affordable payment plans, and claimed that Defendants have 25 years of combined experience in getting homeowners out of foreclosure. ([Consumer 1] Decl., para. 3, ex. 2.)

Both the hasus.com and foreclosureassistancehotline.com sites include identical on-line questionnaires, and both sites urge consumers to call the same toll free number, 1-800-454-2903. ([Consumer 1] Decl., paras. 2-3, exhs. 1-2.) B. The Form Contracts Used By Defendants Are Vague And Do Not Include Notice That Foreclosure Consultants May Not Collect Payment Prior to Performing Services, Or Notice of Consumers Right to Cancel Foreclosure Consultant Contracts.

[Consumer 2], [Consumer 4], and [Consumer 6] all contacted Housing Assistance Services. After Defendants representatives assured them that H.A.S. would be able to help them stop their foreclosures, each consumer decided to hire H.A.S. to help them save their homes. ([Consumer 2] Decl., paras. 5-6; [Consumer 4] Decl., paras. 4-6; [Consumer 6] Decl., paras. 67.) After [Consumer 2], [Consumer 4] and [Consumer 6] decided to hire Defendants, Housing Assistance Services sent them form contracts and Re-Instatement Services Acceptance Agreements by facsimile, for them to sign and return, and required them to provide debit or credit card numbers to pay Defendants fees. ([Consumer 2] Decl., paras. 6-8; [Consumer 4] Decl., paras. 5-7; [Consumer 6] Decl., paras. 8-10.) The contracts that Defendants sent to each consumer were vague and did not specify in detail the services that Defendants agreed to provide, in violation of Civil Code Section 2945.3, subdivision (a). Instead, the contracts stated only that H.A.S. would package and arrange . . . information and communicate with Clients lender or lenders representative and [t]he actions Housing Assistance Services performs involved with packaging Clients information constitute performance. The contracts do not explain how a clients information will be packaged and arranged, or the means or content of any communications that H.A.S. would make or attempt to make with the consumers lenders or loan servicer. ([Consumer 2] Decl., para. 8, exhs. 2-3; [Consumer 4] Decl., para. 9, exhs. 2-3; [Consumer 6] Decl., para. 8, exhs. 3-4.) Additionally, the forms that Defendants used in their transactions with each of these consumers did not include notice that Defendants could not collect any payment prior to performing all services they agreed to provide, as is required by Civil Code Section 2945.3,

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subdivision (b). The forms also omitted both notice that consumers have a three day right to cancel mortgage foreclosure consultant contracts, as required by Civil Code Section 2945.3, subdivision (c), and the name and address to which consumers may send their notice of cancellation, as required by subdivision (d). ([Consumer 2] Decl., para. 8, exhs. 2-3; [Consumer 4] Decl., para. 9, exhs. 2-3.; [Consumer 6] decl., para. 8, exhs. 3-4.) Defendants also did not provide cancellation forms in duplicate (or at all) to [Consumer 2], [Consumer 4], or [Consumer 6], in violation of Civil Code Section 2945.3, subdivision (e). ([Consumer 2] Decl., para. 7; [Consumer 4] Decl., para. 8; [Consumer 6] Decl., para. 9.) C. Defendants Collect Payment Before Performing All Services They Agree To Provide, In Violation of California Law.

Under California law, mortgage foreclosure consultants may not claim, demand, charge, collect or receive any compensation until they complete each and every service [they] contracted to perform or represented [they] would perform. (Civil Code sec. 2945.4, subd. (a) [emphasis added].) Nevertheless, Defendants unlawfully collected payment of $750 from [Consumer 6], $1,050 from Mr. and Mrs. [Consumer 4], and $1311 from [Consumer 2] prior to completing the services they agreed to perform on behalf of these consumers. ([Consumer 2] Decl., paras. 6,14, ex. 5; [Consumer 4] Decl., paras. 5-6, 12, ex. 4; [Consumer 6] Decl., paras. 6, 10.) Defendantss sales representatives specifically told [Consumer 2], [Consumer 4], and [Consumer 6] that they needed to make an initial payment before H.A.S. would be able to assist them. ([Consumer 2] Decl., para. 6; [Consumer 4] Decl., para. 5; [Consumer 6] decl., para. 6.) The Re-Instatement Services Acceptance Agreement form often used by Defendants makes clear that Defendants charge fees prior to the completion of all services they agree to provide: these documents provide that Upon completion of HASs services, consumers must pay additional fees. ([Consumer 2] Decl., para. 8, ex. 3; [Consumer 4] Decl., para. 9, ex. 3.; [Consumer 6] decl., para. 8, ex. 4.) [emphasis added].) Defendants would not state they charge additional fees unless they had already charged initial fees, prior to the completion of the services they had agreed to provide. Defendants blatantly ignore that California law expressly

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bars foreclosure consultants from collecting any fees prior to completing all work on behalf of a consumer. D. Defendants Induce California Consumers To Sign Foreclosure Consultant Contracts That Do Not Comply With California Law.

As set forth in Section B, above, Defendants induced [Consumer 2], [Consumer 4] and [Consumer 6] to sign contracts which did not disclose the exact nature of the work Defendants claimed they would provide, did not include provisions required by subdivisions (b) through (d) of Civil Code section 2945.3, and did not provide the cancellation form required by subdivision (e) of that section. Therefore, in violation of subdivision (g) of Section 2945.4 of the Civil Code, Defendants impermissibly required consumers to sign contracts that did not include numerous terms required by law. E. The Form Contracts Used By Defendants Unlawfully Purport To Limit Defendants Liability

The form contracts that Defendants required [Consumer 2], [Consumer 4], and [Consumer 6] to sign purport to limit Defendants liability to the total amount of fees paid to H.A.S. ([Consumer 2] Decl., para. 8, ex. 2; [Consumer 4] Decl., para. 9, ex. 2.; [Consumer 6]

Decl., para. 8, ex. 3.) This provision violates Civil Code section 2945.9, which specifies that a foreclosure consultant is liable for all damages resulting from their conduct, and section 2945.10, which specifies that such purported waivers of liability in foreclosure consultant contracts are void. F. Defendants Charge Reinstatement Fees Even When They Do Not Negotiate Forbearance Agreements or Loan Modifications.

Although Defendants agents assured [Consumer 2] and [Consumer 6] that H.A.S. would be able to assist them, Defendants ultimately were unable to assist either consumer. ([Consumer 2] Decl., paras. 23, 25-26; [Consumer 6] Decl., para. 11.) Defendants did not notify [Consumer 2] that H.A.S. would not be able to assist her family until mere days before the scheduled foreclosure sale of her home, and both the [Consumer 2] and [Consumer 6] families were forced to file bankruptcies to try to save their homes. Nevertheless, Defendants charged supplemental 12

fees of $150 to [Consumer 6] and $225 to [Consumer 2], under the provisions of their contract that purportedly authorized H.A.S. to impose a reinstatement fee. ([Consumer 6] Decl., paras. 8, 12, exhs. 3-4; ; [Consumer 2] Decl., paras. 8, 24, exhs. 2-3, 9.) [Consumer 4]s lender contacted her directly to attempt to implement a forbearance agreement. When [Consumer 4] advised Defendants that she therefore would not need their services, they nevertheless also charged her a further fee of $150. ([Consumer 4] Decl. para. 13, ex. 5) After she protested the charge, Defendants refunded the $150 reinstatement fee to [Consumer 6], but Defendants did not honor [Consumer 4]s request for a refund. ([Consumer 6] Decl., para. 12; [Consumer 4] Decl., para. 14) Ultimately, neither the [Consumer 4] nor the [Consumer 6] families were able to afford their loans, and were forced to sell their homes. [Consumer 2] saved her home only after filing for bankruptcy, with the help of an attorney she and her husband found through their church. ([Consumer 2] Decl., para. 26; [Consumer 4] Decl., para. 16; [Consumer 6] Decl., para. 15.) G. Defendants Are Not Exempt From California Law Regulating Foreclosure Consultants.

Californias law defining and regulating mortgage foreclosure consultants includes exceptions for attorneys licensed to practice law in California who are rendering foreclosure consultant services in the course of providing legal services, and for persons registered as real estate brokers in California who are engaging in acts that require a brokers license, provided, among other things, that the broker is not paid until the completion of his or her services. (Civil Code sec. 2945.1, subd. (a), (b).) While Defendant Sheckler is an attorney licensed to practice law in California and is also a licensed real estate broker, neither of these exemptions apply here, nor do any of the other exceptions set forth in subdivision (b) of Section 2945.1 of the Civil Code. Defendants solicitations do not advertise legal services, or claim that Defendants will serve as a consumers real estate broker. Defendants only claim to be able to help consumers avoid foreclosure by talking with their lender or loan servicer, and their website simply claims

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that Defendant H.A.S. helps people save their homes through repayment plans. ([Consumer 2] Decl., paras. 4-7, ex. 1; [Consumer 4] Decl., paras. 3-8, ex. 1; [Consumer 6] Decl., paras. 3-8, exhs. 1-4; [Consumer 1] Decl., paras. 2-3, exhs. 1-2.) Neither [Consumer 2], nor [Consumer 6], nor [Consumer 4] ever signed a contract for (or hired) Mr. Sheckler to represent them as their attorney or real estate broker. They never met Defendant Sheckler (or any other representative of Defendants) in person, and never consulted with Defendants for legal advice or for assistance in obtaining a mortgage refinance, or a second mortgage. ([Consumer 2] Decl., paras. 10, 28; [Consumer 4] Decl., para. 15; [Consumer 6] Decl., paras. 13-14.) Rather, these consumers only hired H.A.S. to help them avoid foreclosure by negotiating a modification or forbearance agreement with their current lender. (Ibid.; [Consumer 1] Decl.) No legal authority provides that only attorneys may offer such services, or holds that providing such services constitutes the practice of law.2 Thus, Defendants do not provide foreclosure consultant services in the course of providing legal representation to consumers, and the attorney exception provided under subdivision (b)(1) of Section 2945.1 does not apply. Further, Defendants do not negotiate or broker new loans. Defendants only claim to assist consumers in negotiating modifications of or forbearance agreements for existing loans, and, under the terms of their form contract, agree only to contact consumers lender or loan servicer. ([Consumer 2] Decl., paras. 4-8, exhs. 1-3; [Consumer 4] Decl., paras. 3-9, exhs. 1-3; [Consumer 6] Decl., paras. 3-8, exhs. 1-4; [Consumer 1] Decl., paras. 2-3, exhs. 1-2.) Such work is not within the scope of a Real Estate Broker as defined under California law and therefore may be performed without a brokers license. (See Bus. & Prof code 10131 et seq.) In any event, the exception granted to licensed brokers does not apply, because, as set forth above, Defendants collect payment prior to completing all services they agree to or represent they will perform. (Civil Code sec. 2945.1, subd. (b)(3)(C).)
2

If Defendants foreclosure consulting business did constitute the provision of legal services, Defendants would be liable for engaging in and conspiring to engage in the unauthorized practice of law, unless Defendant Sheckler or another attorney supervised each and every loan modification or forbearance agreement that Defendants even attempted to negotiate. (See Bus. & Prof. code 6125.)

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Therefore, this Court should disregard any argument by Defendants that their business is not subject to the mortgage foreclosure consultant law. III. THIS COURT SHOULD ISSUE A TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE RE: PRELIMINARY INJUNCTION. A. This Court Has The Authority To Issue An Injunction Under Business And Professions Code Sections 17203 and 17535.

Due to Defendants clear and multiple violations of the foreclosure consultant laws, this Court has the equitable power to enter the restraining order and injunction requested by Plaintiff. Business and Professions Code section 17203 specifically empowers the Court to issue orders as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition. Similarly, Business and Professions Code section 17535 empowers the Court to issue an injunction to prevent false or misleading advertising . . . . (People v. Columbia Research Corp. (1977) 71 Cal.App.3d 607, 610, cert. denied (1977) 434 U.S. 904.) An action filed by the People seeking injunctive relief . . . is fundamentally a law enforcement action designed to protect the public . . . . (People v. Pacific Land Research Co. (1977) 20 Cal.3d 10, 17.) Once the trial court invokes its equitable jurisdiction, it is within the courts broad discretion to determine the scope or type of relief that should be granted. (People ex rel. Mosk v. Natal Research Co. of Cal. (1962) 201 Cal.App.2d 765, 775, 779.) Such relief may be as varied and diversified as the means that have been employed by the Defendant to produce the grievance complained of. (Wickersham v. Crittenden (1892) 93 Cal. 17, 32; Roman v. Ries (1968) 259 Cal.App.2d 65, 70.) B. Plaintiff Will Succeed on the Merits at Trial and the Interim Harm Plaintiff Will Suffer If An Injunction Is Not Issued Is Presumed.

Generally, a court determining whether to issue a preliminary injunction applies a twopronged test. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70.) First, the Court considers the likelihood that the plaintiff will prevail on the merits at trial. (Id. at p. 69.) Then,

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the Court balances the interim harm that the plaintiff is likely to sustain if an injunction is denied with the harm that the defendant may suffer if the injunction is issued. (Id. at pp. 69-70.) In a public action, like here, where the Attorney General is prosecuting a defendant for violating the law and injunctive relief is prescribed by the law, harm to the public is presumed: Where a legislative body has enacted a statutory provision proscribing a certain activity, it has already determined that such activity is contrary to the public interest. Further, where the legislative body has specifically authorized injunctive relief against the violation of such a law, it has already determined (1) that significant public harm will result from the proscribed activity, and (2) that injunctive relief may be the most appropriate way to protect against that harm. (IT Corp. v. County of Imperial, supra, 35 Cal.3d at p. 70.) In other words, a rebuttable presumption that the potential harm to the public outweighs the potential harm to the defendant arises when: (1) a governmental entity seeks to enjoin a violation of a statute; (2) that statute specifically provides for injunctive relief; and (3) the governmental entity establishes a reasonable probability that it will prevail on the merits at trial. (Id. at p. 72.) By authorizing injunctive relief to remedy violations of the Unfair Competition Law, and the law regarding untrue and misleading advertising, the Legislature has already determined that such violations harm the public interest and that an injunction is the proper way to protect against that harm. Thus, if plaintiff demonstrates a reasonable probability that it will prevail on the merits at trial, then plaintiff need not prove public harm. Instead, the burden is on Defendants to show that they would suffer irreparable harm if a temporary restraining order and preliminary injunction were issued. (IT Corp. v. County of Imperial, supra, 35 Cal.3d at p. 72.) As discussed below, more than a reasonable probability exists that Plaintiff will establish violations of Business and Professions Code sections 17500 and 17200. 1. Plaintiff Is Reasonably Likely To Prevail On The Merits At Trial. a. Defendants Have Violated Californias Laws Regulating Mortgage Foreclosure Consultants.

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Defendants have committed clear and egregious violations of Californias laws regulating mortgage foreclosure consultants. The form contracts often used by Defendants do not fully disclose the exact nature of the foreclosure consultant services they will provide, in violation of Civil Code Section 2945.3, subdivision (a). Likewise, Defendants form contracts typically do not state that Defendants may not collect or ask for any payment until completing all services they agree to perform, do not provide notice that foreclosure consultant contracts may be cancelled, and do not specify the address where a consumer may deliver notice that he or she is canceling the contract, all in violation of subdivisions (b) through (d) of section 2945.3. Additionally, Defendants do not provide, in duplicate (or at all), a form notice of cancellation, in violation of Section 2945.3, subdivision (e). Also, in violation of subdivisions (a) and (g) of Section 2945.4 of the Civil Code, Defendants unlawfully charge and collect payment prior to completing all foreclosure consultant services they agree to, or represent they will, perform, and induce consumers to sign contracts that do not comply with Civil Code Section 2945.3. Further, in violation of Civil Code sections 2945.9 and 2945.10, Defendants unlawfully include provisions in their form contracts that purport to limit their liability as foreclosure consultants. ([Consumer 2] Decl., para. 8, exhs. 2-3; [Consumer 4] Decl., para. 9, exhs. 2-3; [Consumer 6] Decl., para. 8, exhs. 3-4.). Because Defendants conduct expressly violates California laws regulating mortgage foreclosure consultants and Defendants are not exempt from those laws, Plaintiff is more than reasonably likely to prevail on the merits at trial. b. Defendants Violated Business and Professions Code Section 17500.

Business and Professions Code section 17500 makes it unlawful for any person to make any statement that such person knows or by the exercise of reasonable care should know to be untrue or misleading in order to sell goods or services. Under Section 17500, a statement is untrue or misleading if the statement is likely to mislead members of the public. (Chern v. Bank of America (1976) 15 Cal.3d 866, 876.) Untrue or misleading statements in violation of Section

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17500 also constitute unfair competition as defined in section 17200. (Committee On Childrens Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 210.) Defendants assured [Consumer 2] and [Consumer 6] that they would be able to assist them in avoiding foreclosure, when in fact they were not. Defendants also advertise on the Internet that they provide free services. ([Consumer 1] Decl., paras. 2-3, exhs. 1-2.) However, Defendants charge initial fees ranging between $750 and $1200, as well as additional credit report, reinstatement and other fees. ([Consumer 2] Decl., paras. 6, 11, 14, 16, 19, 24, exhs. 2-3, 5, 6, 8, 9; [Consumer 4] Decl., paras. 5, 9, 12, 13, exhs. 25; [Consumer 6] Decl., paras. 6, 10, 12.) In fact, Defendants did not provide, or offer to provide, any free services to [Consumer 2], [Consumer 4], or [Consumer 6]. (Ibid.) Defendants also advertise on their website that they have over 25 years of combined experience in getting homeowners out of foreclosure, suggesting that they have been in business for at least that length of time. ([Consumer 1] Decl., paras. 2-3, exhs. 1-2.) However, records available on the Internet websites maintained by the California Secretary of State and Westlaw establish that Housing Assistance Services did not incorporate as a business until the year 2000. ([Consumer 1] Decl., paras. 4-5, exhs. 3-4.) Thus, Defendants have made multiple untrue and misleading statements. Moreover, Defendants knew or should have known by the exercise of reasonable care that their statements were false and misleading. Therefore, Defendants have violated, and continue to violate, section 17500 of the Business and Professions Code, and Plaintiff is more than reasonably likely to prevail on the merits at trial. c. Defendants Violated the Unfair Competition Law.

By violating the Foreclosure Consultant Laws as set forth above, Defendants are violating Section 17200. To prove a violation of Section 17200, it is only necessary to prove that Defendants engaged in a business practice that was either unlawful, unfair or fraudulent. (State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1102.) An unlawful business act or practice includes any business activity that is forbidden by law, be it civil or

18

criminal, federal, state or municipal, statutory, regulatory, or court-made [law]. (Saunders v. Superior Court (1994) 27 Cal. App.4th 832, 838-839.) In other words, Section 17200 borrows violations of other laws and makes them actionable as unlawful business practices. (State Farm, supra, 45 Cal.App.4th at p. 1103.) Therefore, Defendants violations of Civil Code Sections 2945 et seq. and Section 17500 of the Business and Professions Code constitute violations of the Unfair Competition Law under Section 17200. Because Defendants have committed, and continue to commit, numerous violations of California law, including failing to comply with the laws regulating mortgage foreclosure consultants and violating Section 17500, Plaintiff respectfully requests that this Court exercise its statutory authority and issue a temporary restraining order and preliminary injunction to protect the public. 2. Defendants Should Be Enjoined From Dissipating Money Collected From Their Unlawful Practices And Their Assets Should Be Frozen.

Defendants have violated numerous California consumer protection laws to obtain money from consumers facing the loss of their homes from foreclosure. Moreover, Defendants unlawful conduct deprives those consumers of funds they may be able to use to save their homes from foreclosure, or to try to obtain new housing. Pursuant to Business and Professions Code sections 17203 and 17535, this Court is expressly empowered to make such orders or judgments . . . as may be necessary to restore to any person the money which was acquired by means of such unfair competition or use of practices which violate section[s] 17200 or 17500. In applying this provision, the California Supreme Court has recognized that [t]he purpose of injunctive relief is to prevent continued violations of law and to prevent violators from dissipating funds illegally obtained. (People v. Pacific Land Research Co., supra, 20 Cal.3d at 17.) Thus, in Pacific Land Research, the Supreme Court affirmed a preliminary injunction that prohibited unlawful property subdividers from dissipating money collected from members of the public through violations of law. (Id. at pp. 15, 24.)

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Additionally, the Government Code recognizes the duty of the Court to prevent the dissipation of money or property that was collected through unlawful business practices and thus will be returned as restitution to victims in cases such as this. Government Code section 12527 provides specific power to appoint a receiver in cases brought by the Attorney General on behalf of the People. If, as here, the Attorney General does not request a receiver and the Court determines the Attorney General has a reasonable probability of prevailing on the merits, the Court shall issue any necessary orders to assure that the defendant does not transfer or encumber any property which may be used to satisfy a judgment in the action. (Gov. Code, 12527, subd. (g) [emphasis added].) Such an order is extremely important here, to preserve funds that victimized consumers may be able to use either to help save their homes from foreclosure, or, if necessary, to obtain a new residence. Since Plaintiff has shown that it is probable that it will prevail at trial on the claim that Defendants have obtained money from consumers based on their unlawful and deceptive practices, the People urge this Court to grant Plaintiffs request and enjoin Defendants from spending, transferring, disbursing, encumbering, or otherwise dissipating such money or property without Defendants first obtaining approval from this Court after a hearing of which Plaintiff is given at least 15 days written notice.

3.

California Consumers Will Suffer Injury If The Court Does Not Issue An Injunction; Defendants Will Not Suffer Irreparable Injury If It Does.

Defendants ongoing violations of the law pose a continuing threat to consumers. As the legislature specifically found when enacting the mortgage foreclosure consultant law, consumers who fall victim to unscrupulous foreclosure consultants face extreme economic hardship and the likely loss of their home. (Civil Code 2945.) Defendants blatantly flout their obligations to comply with the law, and their continued defiance of explicit statutory requirements must be brought to a halt. Plaintiff is simply requesting this Court enjoin Defendants from engaging in

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unlawful business practices. Defendants cannot plausibly argue that their interest in continuing to operate without complying with California law and dissipating funds obtained by their violation of the law outweighs the interest of the general public in being protected from such unlawful business practices and in obtaining restitution. Even if Defendants could offer evidence demonstrating that they would suffer grave or irreparable harm from a preliminary injunction, and assuming that Defendants could prevail in the balancing of the harms, the Court may nonetheless issue a preliminary injunction. As long as it appears fairly clear that the plaintiff will prevail on the merits, a trial court might legitimately decide that an injunction should issue even though the plaintiff is unable to prevail in a balancing of the probable harms. (IT Corp. v. County of Imperial, supra, 35 Cal.3d at pp.72-73.) It is more than fairly clear that Plaintiff will prevail on the merits at trial because Defendants are openly and directly in violation of California law. Despite any alleged harm Defendants might suffer, a temporary restraining order and order to show cause re: preliminary injunction should be issued to stop their illegal practices.

CONCLUSION Plaintiff respectfully requests that the Court issue a temporary restraining order, and order to show cause re: preliminary injunction to show why the temporary restraining order should not be extended during the pendency of this action as a preliminary injunction. Dated: July __, 2004 Respectfully submitted, BILL LOCKYER Attorney General of the State of California ALBERT NORMAN SHELDEN Acting Senior Assistant Attorney General

BENJAMIN G. DIEHL Deputy Attorney General Attorneys for Plaintiff

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17.3 Homeowners Affidavit Supporting Complaint

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE

CASE NO. THE PEOPLE OF THE STATE OF CALIFORNIA, DECLARATION OF [CONSUMER 2] IN SUPPORT OF PLAINTIFFS EX PARTE Plaintiff, APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO v. SHOW CAUSE RE: PRELIMINARY INJUCTION HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 1-50, inclusive, Defendants. DECLARATION OF [CONSUMER 2] I, [Consumer 2], declare under penalty of perjury under the laws of the State of California as follows: 1. I am 51 years old, and married to [Consumer 3]. We live in a condominium in Santa

Ana, California. We purchased the condominium in October 1999, and before that had rented it from the prior owner since late 1997. During the period of time discussed in this declaration, we had a mortgage on our condominium from Chase Manhattan. 2. In about January 2002, my husband lost his job. Then, in late September 2002, I lost

my job as well. Because of this, my husband and I could not afford to make our January and February 2003 mortgage payments. In March 2003, even though I had found a new job, we were not able to meet Chases demand that we pay the full amount due and bring our loan current. 3. In late June 2003, my husband and I received a Notice of Default from a company

called Loanstar Mortgagee Services. The notice said that Loanstar was going to foreclose on our home on behalf of Chase.

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4.

On or about July 16, 2003, I received a letter from a company called Housing

Assistance Services. The letter said that Housing Assistance Services could help us save our home from foreclosure, which my husband and I were desperate to do, and listed a toll free number for the company. Because we wanted to save our home and I was impressed with the professional appearance of Housing Assistance Servicess letter, I decided to call them. A true and correct copy of the letter that we received from Housing Assistance Services is attached as Exhibit 1 and incorporated by reference. 5. The same day I received the letter, I called Housing Assistance Services and spoke

with a man who said his name was Jeremy Buttke. I told Mr. Buttke that I had received a letter from Housing Assistance Services, and asked if Housing Assistance Services could help us save our home. We talked about my familys situation, and Mr. Buttke said that he would fax me a contract and a list of the information that Housing Assistance Services would need in order to help us. He told me that I had to fax the documents back to him immediately. 6. Also during my first call with Mr. Buttke, he asked me for a credit or debit card

number, and I gave him the number for my Visa Debit Card. Mr. Buttke told me that I would have to pay Housing Assistance Services an initial fee of $1250, which would be charged when Housing Assistance Services received my signed contract. Mr. Buttke also told me that Housing Assistance Services would be sending me a video tape regarding financial education every month for a year, and that Housing Assistance Services would charge me a monthly fee for this service. Mr. Buttke said that as soon as Chase Manhattan worked out a payment plan with Housing Assistance Services, he would send me paperwork to sign, and that Housing Assistance Services would assign a representative to work on my file. He did not tell me who my representative would be, though. 7. That same day, I received a fax from Mr. Buttke including the contract and the list of

documents I needed to send to him, as well as a Re-Instatement Services Acceptance Agreement. However, neither Mr. Buttke nor anyone else from Housing Assistance Services

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ever sent me a notice that I could cancel my contract with them, or ever gave me a form to fill out if I did decide to cancel the contract. 8. I faxed the signed contract and Re-Instatement Services Acceptance Agreement back

to Mr. Buttke the next day, approximately July 17, 2003. Although I had provided it to him over the phone the day before, I also included my Visa debit card number on the Re-Instatement Services Acceptance Agreement. When I talked with him on July 16, Mr. Buttke told me that he only needed one signature to begin helping us, and also that my husband did not need to sign the contract because his name was already on our mortgage loan. Therefore, I did not have my husband sign it. True and correct copies of the signed contract and Re-Instatement Services Acceptance Agreement that I faxed to Mr. Buttke are attached as Exhibits 2 and 3, respectively, and incorporated by reference, except that my debit card number has been blacked out for my protection. 9. At the time I faxed the contract and Re-Instatement Services Acceptance Agreement, I

also faxed many of the documents that Mr. Buttke said Housing Assistance Services needed in order to help me, including copies of pay stubs and bank statements, a financial analysis, a mortgage statement, income tax records for the past two years, and a hardship letter explaining why we fell behind on our mortgage payments. 10. Because my husband speaks only limited English and Mr. Buttke had said that my husband did not have to sign the contract, I handled all of our familys transactions with Housing Assistance Services. However, during the entire time I dealt with them, I never met anyone from Housing Assistance Services in person. The company handled everything by phone, fax or mail. 11. About two days later, on or about July 19, 2003, I received a copy of my and my husbands credit report, along with two documents that had the Housing Assistance Services logo in the top left corner. The documents were all printed in Spanish, even though all my conversations with Mr. Buttke had been in English, and nobody at Housing Assistance Services had asked me if I speak Spanish. The document appeared to identify a Mr. Louie Cadena at Housing Assistance Services as my representative, and listed a toll free number to call Housing

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Assistance Services. The number was the same phone number printed on the first letter I had received in June, but a different extension. True and correct copies of the Spanish language documents I received on approximately July 19, 2003, are attached as Exhibit 4 and incorporated by reference. 12. Approximately two days later, on or about July 21, 2003, I called Mr. Cadena at the phone number and extension printed on the letter I had received on the 19th, and left a message on his voice mail. I also called Mr. Buttke at his extension to complain that the documents I had received from Housing Assistance Services were in Spanish, not English. Later that day, Mr. Cadena returned my call and told me that the documents were not very important and contained essentially the same information I had already received. Neither Mr. Cadena nor anyone else at Housing Assistance Services ever provided me with an English language version of the Spanish language documents that I received on July 19th. 13. During our July 21, 2003, phone conversation, Mr. Cadena told me he would contact Chase Manhattan on my behalf, to try to negotiate a payment plan or other agreement that would save my home from foreclosure. Mr. Cadena advised me to save all my money because he did not know what type of payment plan my lender would require. Mr. Cadena reassured me that Housing Assistance Services had more than three months to help me, and told me to call him if we received a notice of sale regarding our home. Mr. Cadena also told me that Housing Assistance Services dealt with these problems all the time, and that there was no need for me to call Chase because Housing Assistance Services would take care of everything. 14. On or about July 21, 2003, Housing Assistance Services placed three separate charges on my Visa debit card, one for $1245, one for $61, and a third for $5, for a total of $1311. True and correct copies of my on-line bank transaction histories showing these charges, which I downloaded from the Internet on approximately June 30, 2004, are collectively attached as Exhibit 5 and incorporated by reference, except my account number is blacked out for my protection.

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15. In early August 2003, I received a video tape and pamphlet from Housing Assistance Services. I believe these were the financial education materials that Mr. Buttke had mentioned in my initial call with him. 16. On or about August 20, 2003, Housing Assistance Services placed another $9 charge on my Visa debit card. A true and correct copy of my on-line bank transaction history showing this charge, which I downloaded from the Internet on approximately June 30, 2004, is attached as Exhibit 6 and incorporated by reference, except my account number is blacked out for my protection. 17. On or about September 19, 2003, I received a Notice of Sale from Loanstar Mortgage Services, stating that our condominium was to be auctioned on October 10, 2003. A true and correct copy of the Notice of Sale is attached as Exhibit 7 and incorporated by reference. 18. On or about September 22, 2003, I contacted Mr. Cadena at Housing Assistance Services, and told him that we had received the Notice of Sale. I also faxed a copy of the Notice of Sale to Mr. Cadena, at the same fax number that I used to send documents to Mr. Buttke. 19. Also on September 22, 2003, Housing Assistance Services placed another $9 charge on my Visa debit card. A true and correct copy of my on-line bank transaction history showing this charge, which I downloaded from the Internet on approximately June 30, 2004, is attached as Exhibit 8 and incorporated by reference, except my account number is blacked out for my protection. 20. I tried to call Mr. Cadena again several times over the next few days, but could not reach him. I left several messages on his voice mail, but he never returned my calls. 21. On or about September 26, 2003, I called Mr. Buttke at Housing Assistance Services and informed him that I could not reach Mr. Cadena and that Mr. Cadena never returned my calls. Mr. Buttke reassured me not to worry. Later that day, Mr. Cadena called me, and told me not to worry because Housing Assistance Services had saved homes up to the day of a scheduled foreclosure sale.

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22. On or about October 1, 2003, a woman from Housing Assistance Services who I believe was named Natalia Lopez called me. She said that she was taking over my account and that she wanted to go over my financial assistance documents, so that she could get familiar with them. I asked her if she could help me and told her that if possible I did not want to file for bankruptcy, and she told me not to worry. 23. On or about October 7, 2003, I called Ms. Lopez and told her that I was worried because the foreclosure sale was coming up very soon. Ms. Lopez told me that she had called Chase Manhattan and asked them to postpone the foreclosure sale, but did not tell me what the new date was, or who she had talked to at Chase. I asked Ms. Lopez for a letter from Chase confirming that the foreclosure sale had been postponed, or told her that if she could not get the letter, my husband and I would have to file for bankruptcy to protect our home. Ms. Lopez told me that Chase Manhattan did not provide letters confirming postponements, but assured me that the foreclosure sale had been postponed, and not to worry about filing for bankruptcy. 24. On or about October 8, 2003, Housing Assistance Services placed a $255 charge against my Visa debit card. A true and correct copy of my on-line bank transaction history showing the $225 charge, which I downloaded from the Internet on approximately June 30, 2004, is attached as Exhibit 9 and incorporated by reference, except my account number has been blacked out for my protection. 25. I spoke with Ms. Lopez again on or about October 8, 2003, and she told me that Housing Assistance Services had completed its services, because I was going to be filing for bankruptcy. I told her once again that actually, my husband and I wanted to avoid filing for bankruptcy. Ms. Lopez told me she would speak with the accounting office and find out what happened, but she never called me back. Despite all the money we paid them, Housing Assistance Services was not able to help my husband and me. 26. Because Housing Assistance Services did not help us, my husband and I hired a bankruptcy attorney, Mr. Peter Rasla, who we found through our church bulletin. Mr. Rasla filed a bankruptcy for us on October 9, 2003. However, Chase went ahead and held the

27

foreclosure sale on October 10, 2003. Thankfully, Mr. Rasla was able to reverse the sale and help us save our home. 27. In late Fall, 2003, I filed a complaint about Housing Assistance Services with the Better Business Bureau, and in March 2004, I filed a lawsuit against Housing Assistance Services in Small Claims Court. After I filed the lawsuit, a man who identified himself as Marc Sheckler from Housing Assistance Services called me, and asked if we could settle our case. I agreed to dismiss the small claims action in exchange for payment of $1,000. Although Housing Assistance Services did send me a check and I dismissed my Small Claims complaint, I never signed a settlement agreement. 28. I never hired anyone from Housing Assistance Services as my attorney or real estate broker, never signed a real estate broker or legal services contract with Housing Assistance Services, and never sought legal advice from anyone at Housing Assistance Services. I declare under penalty of perjury under the laws of the state of California that the facts set forth in this declaration are true and correct, that they are of my own personal knowledge, and if called and sworn as a witness, I could and would competently testify to the above facts, and that this declaration was signed on , 2004, at Santa Ana, California.

[CONSUMER 2]

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17.4 Second Homeowners Affidavit Supporting Complaint

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE

CASE NO. THE PEOPLE OF THE STATE OF CALIFORNIA, DECLARATION OF [CONSUMER 4] IN SUPPORT OF PLAINTIFFS EX PARTE Plaintiff, APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO v. SHOW CAUSE RE: PRELIMINARY INJUCTION HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 1-50, inclusive, Defendants. DECLARATION OF [CONSUMER 4] I, [Consumer 4], declare under penalty of perjury under the laws of the State of California as follows: 1. I am 44 years old. As of Fall 2002, my husband, [Consumer 5], and I lived in a home

we owned in Santa Clarita, California, with our two small children. We purchased our home in Spring 1999, and during the period of time discussed in this declaration, we had a mortgage from Chase Manhattan. 2. In early Fall 2002, my husband and I were behind on our mortgage. Although we were

working with Chase to try to reinstate our loan, Chase sent us a Notice of Default, which said that they were going to foreclose on our home. 3. On or about September 11, 2002, my husband and I received a postcard from Housing

Assistance Services. The postcard said that Housing Assistance Services could help us save our home from foreclosure. A true and correct copy of the postcard we received is attached as Exhibit 1 and incorporated by reference. I wrote notes on the postcard when I called Housing Assistance Services the next day, and all the handwriting on the postcard is mine.

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4.

The next day, approximately September 12, 2002, I called Housing Assistance

Services at the toll-free number printed on the postcard and spoke with a man who said his name was Jeremy Buttke. During that initial call, Mr. Buttke told me that Housing Assistance Services could help us, and that he would fax me a contract and a list of the information that Housing Assistance Services needed to help us. He told me that I had to fax the documents back to him immediately, and I gave Mr. Buttke our home fax number. 5. During our September 12 phone conversation, Mr. Buttke told me that before

Housing Assistance Services could begin assisting us, I had to pay a fee of $1,050. He said that this fee would cover the cost of reviewing our documents, the phone calls that Housing Assistance Services needed to make to our lender, and other business related expenses. I gave Mr. Buttke my Visa debit card number to cover the fee. 6. Also during our September 12 call, Mr. Buttke told me that a man named Dylan would

be handling our account, but did not tell me his last name or title. He then transferred my call to a man who said his name was Dylan. Dylan told me not to contact our lender because he would take care of our mortgage problem. Dylan also told me that I had to pay Housing Assistance Services before Housing Assistance Services would do any work on our behalf. 7. Shortly after my call with Mr. Buttke and Dylan, I received a fax from Housing

Assistance Services, including the list of documents that Housing Assistance Services wanted me to send to them, a contract and a Re-Instatement Services Acceptance Agreement. 8. Neither Mr. Buttke, Dylan, nor anyone else from Housing Assistance Services ever

sent us a notice that my husband and I could cancel our contract with them, or ever gave us a form to fill out if we did decide to cancel the contract. 9. On or about September 13, 2002, my husband and I signed the contract and Re-

Instatement Services Acceptance Agreement, and faxed them back to Housing Assistance Services. True and correct copies of the signed contract and Re-Instatement Services Acceptance Agreement that I faxed back to Housing Assistance Services are attached as Exhibits 2 and 3, respectively, and incorporated by reference.

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10. On or about September 17, 2002, I received a letter from Chase Manhattan Mortgage, offering to reinstate our loan. I immediately called Chase, and spoke to a woman who identified herself as Ms. Lori Bitting, from the Loss Mitigation Department. I told Ms. Bitting that my husband and I were very interested in working out an agreement with Chase to reinstate our loan. 11. Immediately after my phone conversation with Ms. Bitting, I called Mr. Buttke from Housing Assistance Services. I told Mr. Buttke about my conversation with Ms. Bitting, and Chases offer to reinstate our loan. Mr. Buttke transferred my call to Dylan. I told Dylan that we would not need Housing Assistance Services to help us because our lender had contacted us directly about reinstating our loan, and I told him about my conversation with Ms. Bitting. Dylan told me that he already spoke with Ms. Bitting, but did not tell me what about. I wanted to find out if Dylan really called our lender, so I called Ms. Bitting sometime later. Ms. Bitting told me that Dylan never called her. 12. On or about September 18, 2002, Housing Assistance Services placed two charges against our Visa debit card: one for $500, and another for $550, for a total of $1,050. A true and correct copy of our bank statement showing these charges is attached as Exhibit 4 and incorporated by reference, except that my personal information has been blacked out. 13. On or about September 30, 2002, Housing Assistance Services placed an additional $150 charge against our debit card. A true and correct copy of our bank statement showing this charge is attached as Exhibit 5 and incorporated by reference, except that my personal information has been blacked out. I wrote notes on the statement attached as Exhibit 5, and all the handwriting on the statement is mine. 14. I made several attempts to get Housing Assistance Services to refund my money, but they refused. On or about October 1, 2002, I received a letter from Mr. Sheckler of Housing Assistance Services, which said that the company has a no refund policy. A true and correct copy of the letter I received from Mr. Sheckler is attached as Exhibit 6 and incorporated by reference.

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15. My husband and I never hired anyone from Housing Assistance Services as our attorney or real estate broker, never signed a real estate broker or legal services contract with Housing Assistance Services, and never sought legal advice from anyone at Housing Assistance Services. Also, I never met anyone from Housing Assistance Services in person; they handled everything by phone, fax, or mail. 16. Although my husband and I worked with Chase to try to bring our loan current, after several months we realized that we needed to sell our home because my husband was still unemployed and we could not keep up with our mortgage. We sold our home on or about May 2003, and on the following month, we moved to New Mexico. We are now considering moving back to California. I declare under penalty of perjury under the laws of the state of California that the facts set forth in this declaration are true and correct, and of my own personal knowledge, and that if called and sworn as a witness, I could and would competently testify to the above facts, and that this declaration was signed on July , 2004, at .

[CONSUMER 4]

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17.5 Third Homeowners Affidavit Supporting Complaint

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE

CASE NO. THE PEOPLE OF THE STATE OF CALIFORNIA, DECLARATION OF [CONSUMER 6] IN SUPPORT OF PLAINTIFFS EX PARTE Plaintiff, APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO v. SHOW CAUSE RE: PRELIMINARY INJUCTION HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 1-50, inclusive, Defendants. DECLARATION OF [CONSUMER 6] I, [Consumer 6], declare under penalty under the laws of the State of California as follows: 1. I am 48 years old, married to [Consumer 7], and live with our son in Sacramento,

California. In October 1994, we purchased a home in Sacramento, which we owned until we sold it in December of 2003. As of Spring 2002, and during the time discussed in this declaration, we had a mortgage with Principal Residential Mortgage. 2. In late January 1999, my husband hurt himself at work, and later was involved in two

separate car accidents. All of this made it very hard for him to go back to work, and my husband was unemployed for almost two and a half years. As a result, my husband and I fell behind on our house payments, and our loan company sent us a Notice of Default saying that it was going to foreclose on our home. 3. In the middle of Spring 2002, I searched the Internet to try to locate a company that

might be able to help us avoid foreclosure. I found an Internet site at www.foreclosureassistancehotline.com, that offered free assistance to consumers facing

33

foreclosure. I was impressed by the site and the offer of free services, and filled out and submitted an on-line questionnaire help form located on the site. 4. On or about April 12, 2002, I received an e-mail from a person who identified himself

as Mr. Matt McKeon, and said he was a counselor from Housing Assistance Services. In his email, he said that I had filled out Housing Assistance Services on-line help form at www.foreclosureassistancehotline.com. A true and correct copy of the electronic mail I received from Mr. McKeon on April 12 is attached as Exhibit 1 and incorporated by reference. 5. On or about April 13, 2002, I received another e-mail from Mr. McKeon, again

encouraging me to contact him. A true and correct copy of the e-mail I received from Mr. McKeon on April 13, 2002, is attached as Exhibit 2 and incorporated by reference. 6. A few weeks later, in early May, 2002 I decided to call Housing Assistance Services,

at the phone number Mr. McKeon had listed in his e-mail to me. When I called the number, the man who answered said his name was Mr. Brian Balcom, and that he was with Housing Assistance Services. Mr. Balcom said he would fax me a contract and a list of information that Housing Assistance Services needed in order to be able to help me and my husband. Mr. Balcom also told me that I would be required to pay Housing Assistance Services a $750 fee. 7. During our phone conversation, Mr. Balcom also told me that Housing Assistance

Services had 30 days to take care of our mortgage problem. I told Mr. Balcom that I was already behind 11 months with our payments, and if possible, I did not want to file for bankruptcy. Mr. Balcom told me not to worry because Housing Assistance Services could help me and my husband. 8. Shortly after the call, I received a fax from Mr. Balcom including the contract, a list of

the information that Housing Assistance Services needed to help me and my husband, and a Reinstatement Services Acceptance Agreement. On the same day, I faxed the signed contract and Reinstatement Services Acceptance Agreement back to Housing Assistance Services, along with additional documents that Mr. Balcom said Housing Assistance Services would need in order to help us, including pay stubs, bank statements, and mortgage statements. True and

34

correct copies of the signed contract and Reinstatement Services Acceptance Agreement that I faxed to Housing Assistance Services are attached as Exhibits 3 and 4, respectively, and are incorporated by reference. 9. Neither Mr. Balcom nor anyone else from Housing Assistance Service ever sent me or

my husband a notice that we could cancel my contract with them, or ever gave me a form to fill out if we did decide to cancel the contract. 10. A few days later, I received a call from Ms. Chele Stone who identified herself as

from Housing Assistance Services. Ms. Stone asked for a credit card number, which Housing Assistance Services would use to charge its $750 fee. I gave her the account number for my American Express Gold Card. 11. A few weeks later, I received a phone call from a person who identified himself as Dylan Rowley and said he was an underwriter from Housing Assistance Services. Mr. Rowley told me that Housing Assistance could not work out a deal with my lender because I had bad credit, a lien on my property, and I was too far behind with my payments. 12. A few days after my call with Mr. Rowley I discovered that Housing Assistance Services had placed an additional $150 charge against my American Express card. I disputed this charge, and Housing Assistance Services subsequently refunded this $150. However, they have refused my request to refund the other $750 I paid to them. 13. I never met anyone from Housing Assistance Services in person; they handled everything by phone, fax, mail or e-mail. 14. I never hired anyone from Housing Assistance Services as my attorney or real estate broker, never signed a real estate broker or legal services contract with Housing Assistance Services, and never sought legal advice from anyone at Housing Assistance Services. 15. After Housing Assistance Services was unable to help us, my husband and I filed a Chapter 13 bankruptcy, to try to save our home. We hired a private attorney who we found in our local phone book to represent us in our bankruptcy. However, in December 2003, we

35

decided to sell our home; we could not keep up with our loan payments and felt that we had no other choice. I declare under penalty of perjury under the laws of the state of California that the facts set forth in this declaration are true and correct, that they are of my own personal knowledge, and if called and sworn as a witness, I could and would competently testify to the above facts, and that this declaration was signed on California. [CONSUMER 6] , 2004, at Sacramento,

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17.6 Amended Complaint

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff, v. HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 150, inclusive, Defendants. CASE NO. 04CC07958 FIRST AMENDED COMPLAINT FOR RESTITUTION, PERMANENT INJUNCTIVE RELIEF, AND OTHER EQUITABLE RELIEF

Plaintiff the People of the State of California (People or Plaintiff), by and through Bill Lockyer, Attorney General of the State of California, is informed and believes and thereupon alleges as follows: 1. This action is brought against Defendants, who in the course of their foreclosure

consultant business regularly violate Californias Mortgage Foreclosure Consultant Act, as codified at Sections 2945 et seq. of the Civil Code, while preying on consumers facing foreclosure and the loss of their homes. Defendants conduct all their business from California locations and include a choice of law clause in their contracts specifying that California law shall apply to their contracts. Californias laws regulating foreclosure consultants therefore apply to Defendants dealings with all consumers, regardless of where those consumers reside. 2. In the course of promising to assist consumers who are in foreclosure, Defendants

unlawfully collect payment prior to performing services, and do not include terms in their contracts required under California law, including notice to consumers of their right to cancel mortgage foreclosure consultant contracts. Additionally, Defendants falsely advertise that they

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have been in business for longer than they in fact have been and that they provide services at no charge when in fact they do not. PARTIES AND VENUE 3. Defendant Housing Assistance Services, Inc. (Housing Assistance Services or

H.A.S.) is a California corporation, that at all relevant times transacted business within the State of California, including in the County of Orange, as well as in other states. Defendant H.A.S. filed its articles of incorporation with the Office of the California Secretary of State in 2000. 4. At all relevant times defendant Marc Sheckler (Sheckler) was the president of

Housing Assistance Services. Defendant Sheckler is an attorney, but this action is not based on his representation of any of the other Defendants in this matter. 5. Plaintiff is not aware of the true names and capacities of the defendants sued as

Does 1 through 50, inclusive, and therefore sues these defendants by such fictitious names. Does 46 through 50, inclusive, are attorneys, but this action is not based on their representation of any of the other Defendants in this matter. Each of these fictitiously named Defendants is responsible in some manner for the activities alleged in this complaint. Plaintiff will amend this Complaint to add the true names of the fictitiously named Defendants once they are discovered. 6. Whenever reference is made in this Complaint to any act of Defendants, that

allegation shall mean that each Defendant acted individually and jointly with the other Defendants. 7. Any allegation about any acts of any corporate or other business Defendant means

that the corporation or other business did the acts alleged through its officers, directors, employees, agents and/or representatives while they were acting within the actual or ostensible scope of their authority. 8. At all relevant times, each Defendant committed the acts, caused others to commit

the acts, ratified the acts, or permitted others to commit the acts alleged in this Complaint.

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Additionally, some or all of the Defendants acted as the agent of the other Defendants, and all of the Defendants acted within the scope of their agency if acting as an agent of another. 9. At all relevant times, each Defendant knew or realized that the other Defendants

were engaging in or planned to engage in the violations of law alleged in this Complaint. Knowing or realizing that other Defendants were engaging in or planning to engage in unlawful conduct, each Defendant nevertheless facilitated the commission of those unlawful acts. Each Defendant intended to and did encourage, facilitate, or assist in the commission of the unlawful acts, and thereby aided and abetted the other Defendants in the unlawful conduct. 10. Defendants have engaged in a conspiracy, common enterprise, and common course of conduct, the purpose of which is and was to engage in the violations of law alleged in this Complaint. The conspiracy, common enterprise, and common course of conduct continues to the present. 11. The violations of law alleged in this Complaint occurred in Orange County and elsewhere. DEFENDANTS BUSINESS PRACTICES AND GOVERNING LAW 12. In pertinent part, California Civil Code section 2945.1, subdivision (a) defines a

foreclosure consultant as: [A]ny person who makes any solicitation, representation, or offer to any [home] owner to perform for compensation or who, for compensation, performs any service which the person in any manner represents will in any manner do any of the following: (1) Stop or postpone the foreclosure sale. (2) Obtain any forbearance from any beneficiary or mortgagee. (3) Assist the owner to exercise the right of reinstatement provided in [Civil Code] Section 2924c. (4) Obtain any extension of the period within which the owner may reinstate his or her obligation.

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(5) Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a deed of trust or mortgage on a residence in foreclosure or contained in any such deed of trust or mortgage. (6) Assist the owner to obtain a loan or advance of funds. (7) Avoid or ameliorate the impairment of the owner's credit resulting from the recording of a notice of default or the conduct of a foreclosure sale. (8) Save the owners residence from foreclosure. (brackets added.) 13. Defendants operate as foreclosure consultants as that term is defined in subdivision (a) of section 2945.1 of the California Civil Code. 14. Californias law defining and regulating foreclosure consultants includes exceptions for attorneys licensed to practice law in California who are rendering foreclosure consultant services in the course of providing legal services, and for persons registered as real estate brokers in California who are engaging in acts that require a brokers license, such as the negotiation of new loans, provided, among other things, that the broker is not paid until the completion of his or her services. While Defendant Sheckler is an attorney licensed to practice law in California and is also a licensed broker, neither of these exemptions apply here, nor do any of the other exceptions set forth in subdivision (b) of Section 2945.1 of the Civil Code. Persons may perform the services Defendants claim to provide, such as the negotiation of loan modifications or forbearance agreements, without being licensed as attorneys or brokers. Also, Defendants typically do not perform (or claim to perform) mortgage foreclosure consultant services for consumers while also providing those consumers with legal services or services that require a brokers license. Further, the exception granted to brokers does not apply, because Defendants collect payment from consumers prior to completing all services they contract to, or represent they will, provide. 15. Defendants send letters and postcards marketing their services to homeowners who are in foreclosure on their mortgage loan(s). In their solicitation letters, Defendants 40

represent that Housing Assistance Services offers a Fresh Start Program that will enable consumers to prevent the foreclosure sale of their home. 16. The marketing postcards sent by Defendants prominently feature a logo for a purported non-profit organization called the United States Homeowners Protection Agency. The purported logo for the United States Homeowners Protection Agency includes a seal, insignia, trade or brand name, that reasonably could be construed as implying a connection to a federal government agency, when in fact there is no such connection. Additionally, there is no non-profit organization called the United States Homeowners Protection Agency. 17. As of July, 2004, Defendants also maintained or advertised on an Internet website, http://www.hasus.com, which advertised that Defendants offer free phone counseling and have over 25 years of combined experience helping homeowners in trouble. The website was registered by Defendant Sheckler. A true and correct copy of the hasus.com site as of July 14, 2004, is attached as Exhibit 1 and incorporated by reference. As of July, 2004, the Internet website http://www.foreclosureassistancehotline.com also prominently displayed a logo of Defendant Housing Assistance Services on the top left corner of each page of the website. This website advertised that Defendants offer free services, are contracted by major lenders to enter homeowners into affordable payment plans, and have over 25 years of combined experience in getting homeowners out of foreclosure. The website displays a toll free number that consumers may call for assistance in handling their foreclosure. Consumers who call the phone number are connected to a representative of Defendant Housing Assistance Services. A true and correct copy of the foreclosureassistancehotline.com Internet site as of July 14, 2004, is attached as Exhibit 2 and incorporated by reference. Both websites urged consumers to call the same toll free number, 1-800-454-2903, and include an identical online questionnaire. 18. When a consumer calls or sends an e-mail to Housing Assistance Services about his or her foreclosure, an agent or employee of Defendants represents to the consumer that once he or she hires Housing Assistance Services, H.A.S. will contact the consumers lender, or the 41

lenders agent, and arrange a modification, forbearance agreement, or payment plan that will enable the consumer to bring his or her loan current and avoid foreclosure. 19. If the consumer agrees to contract with Housing Assistance Services, Defendants then send the consumer a contract with H.A.S. for the consumer to sign and return, and ask for information that Defendants will need to assist the consumer, such as mortgage statements. The form contracts often used by Defendants include a choice of law clause specifying that California law shall govern the contracts between H.A.S. and the consumers. 20. The form contracts typically used by Defendants state that Housing Assistance Services, Inc. provides homeownership counseling regarding options and alternatives that may be available to help you avoid foreclosure. A true and correct copy of a form contract sometimes used by Defendants is attached as Exhibit 3 and incorporated by reference. 21. Defendants charge consumers a base fee, typically between $750 and $1,250, as

well as a credit report fee and a separate reinstatement processing fee. Defendants often charge these fees regardless of whether Defendants are able to obtain a loan modification, forbearance agreement, or other agreement that enables a consumer to reinstate his or her loan and avoid foreclosure. Additionally, Defendants sometimes charge a docusave fee, and separate monthly fees for providing financial education materials and for purportedly monitoring a consumers compliance with any agreement negotiated with that consumers lender or loan servicer. DEFENDANTS VIOLATIONS OF CALIFORNIA LAWS REGULATING FORECLOSURE CONSULTANTS 22. Subdivision (a) of Section 2945.3 of the Civil Code provides that every foreclosure consultant contract shall fully disclose the exact nature of the foreclosure consultants services. In violation of this provision, Defendants sometimes use vague and ambiguous contracts that do not describe the exact nature of the services provided by Defendants. Instead, the form contracts sometimes used by Defendants, such as Exhibit 3, provide that HAS will package and arrange . . . information and communicate with Clients

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lender or lenders representative and [t]he actions Housing Assistance Services performs involved with packaging Clients information constitute performance, without explaining what those terms mean, how a clients information will be packaged and arranged, or the means or content of any communications or attempted communications with a clients lender or loan servicer. 23. In violation of Subdivision (b) of Section 2945.3 of the Civil Code, Defendants do not always include the following notice in their foreclosure consultant contracts: NOTICE REQUIRED BY CALIFORNIA LAW ------------------------------------ or anyone working (Name) for him or her CANNOT: (1) Take any money from you or ask you for money until -------------------------------- has (Name) completely finished doing everything he or she said he or she would do; and (2) Ask you to sign or have you sign any lien, deed of trust, or deed. 24. In violation of subdivision (c) of Section 2945.3 of the Civil Code, the form

contracts used by Defendants, such as Exhibit 3, do not always include in immediate proximity to the space reserved for the owner's signature a conspicuous statement in a size equal to at least 10-point bold type, notice to consumers of their three day right to cancel the foreclosure consultant contact. 25. The form contracts used by Defendants, such as Exhibit 3, also do not always specify the address where a consumer can give notice that he or she is canceling the foreclosure consultant contract, in violation of subdivision (d) of Section 2945.3 of the Civil Code.

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26. Defendants do not always provide consumers with the Notice of Cancellation form required pursuant to subdivisions (e) and (f) of Section 2945.3 of the Civil Code. 27. In violation of subdivision (a) of Section 2945.4 of the Civil Code, Defendants sometimes claim, demand, charge, collect and/or receive payment from consumers prior to providing all services that Defendants contract with consumers to provide, or represent to consumers that they will provide. 28. In violation of subdivision (g) of Section 2945.4 of the Civil Code, Defendants sometimes induce or attempt to induce consumers to enter into contracts that do not comply in all respects with Sections 2945.2 and 2945.3 of the Civil Code. 29. In violation of sections 2945.9 and 2945.10 of the Civil Code, the form contract sometimes used by Defendants purports to limit Defendants liability to the total amount of fees paid by a consumer. FIRST CAUSE OF ACTION AGAINST ALL DEFENDANTS VIOLATIONS OF BUSINESS AND PROFESSIONS CODE SECTION 17500 (UNTRUE OR MISLEADING REPRESENTATIONS) 30. The People reallege and incorporate by reference all paragraphs above, as though fully set forth at this place. 31. Since an exact date unknown to Plaintiff and continuing to the present time, Defendants have violated and continue to violate Business and Professions Code section 17500 by making or disseminating untrue or misleading statements, or causing untrue or misleading statements to be made or disseminated, to homeowners, with the intent to induce them to enter into contracts with Housing Assistance Services for the providing of foreclosure consultant services. These untrue or misleading statements include, but are not necessarily limited to: A. Representing that Housing Assistance Services will be able to save consumers homes from foreclosure by negotiating an agreement with a borrowers lender or loan servicer that will enable the borrower to avoid the foreclosure sale of his or her home. These statements are untrue or misleading because Defendants will not 44

necessarily be able to negotiate a plan that will allow a particular consumer to avoid foreclosure; B. Representing on their Internet website that Defendants have 25 years of combined experience in helping consumers avoid foreclosure. These statements are untrue or misleading because Defendant Housing Assistance Services has only been in business since 2000; C. Representing on their Internet website that Defendants provide free services. These statements are untrue or misleading because Defendants charge for the foreclosure consulting services they provide or purport to provide; D. Representing on Internet websites that Defendants are contracted by major lenders to enter homeowners into affordable payment plans. These statements are untrue or misleading because Defendants do not have contracts with major lenders for the purpose of negotiating repayment plans for consumers facing foreclosure; and E. Sending postcards to consumers that prominently feature the logo, insignia, or seal of, and represent that there is, a non-profit organization named the United States Homeowners Protection Agency. Defendants use of these postcard solicitations is false advertising because the use and placement of the purported logo for the United States Homeowners Proection Agency could reasonably be construed or interpreted as implying that a federal govermental agency is somehow connected with, approves, or endorses Defendants, when in fact that is not the case, and also because there is no such non-profit organization. 32. Defendants knew or by the exercise of reasonable care should have known that the statements set forth, above, were untrue or misleading at the time the statements were made. SECOND CAUSE OF ACTION AGAINST ALL DEFENDANTS VIOLATIONS OF BUSINESS AND PROFESSIONS CODE SECTION 17200 (UNFAIR COMPETITION) 45

33. The People reallege and incorporate by reference all paragraphs above, as though fully set forth at this place. 34. Since an exact date unknown to Plaintiff, and continuing to the present, Defendants have engaged in and continue to engage in unfair competition as defined in Business and Professions Code section 17200 by committing acts or practices which include, but are not necessarily limited to, the following: A. As set forth in the First Cause of Action, Defendants have violated Business and

Professions Code section 17500; B. Defendants have violated subdivision (a) of Section 2945.3 of the Civil Code by

not fully disclosing in writing the exact nature of the services they provide to consumers; C. Defendants have failed to include in their contracts the notice required by

subdivision (b) of Section 2945.3 of the Civil Code; D. Defendants have failed to include in their contracts the notice of right to cancel

required by subdivision (c) of Section 2945.3 of the Civil Code; E. Defendants have failed to include in their contracts the address where a consumer

may send notice that he or she is canceling a foreclosure consultant contract with Defendants, in violation of subdivision (d) of Section 2945.3 of the Civil Code; F. Defendants have failed to provide consumers with the separate notice of right to

cancel their foreclosure consultant contract, in violation of subdivisions (e) and (f) of Section 2945.3 of the Civil Code; G. Defendants have claimed, demanded, charged, collected, and/or received payment

from consumers prior to providing all services they contracted to or represented they would perform, in violation of subdivision (a) of Section 2945.4 of the Civil Code; H. In violation of subdivision (g) of Section 2945.4 of the Civil Code, Defendants

have induced or attempted to induce consumers to execute contracts that do not fully comply with Sections 2945.2 and 2945.3 of the Civil Code;

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I.

In violation of sections 2945.9 and 2945.10 of the Civil Code, Defendants have

induced consumers to sign contracts that purport to limit Defendants liability to the total amount of fees paid by that consumer; and J. Defendants unlawfully, unfairly and fraudulently charge a reinstatement

processing fee to consumers, regardless of whether Defendants are in fact able to negotiate a plan that allows a particular consumer to reinstate his or her loan and avoid foreclosure. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment as follows: 1. Pursuant to Business and Professions Code 17535, that all Defendants, their

successors, agents, representatives, employees, and all persons who act in concert with them be permanently enjoined from making any untrue or misleading statements in violation of Business and Professions Code 17500, including, but not limited to, the untrue or misleading statements alleged in the First Cause of Action; 2. Pursuant to Business and Professions Code 17203, that all Defendants, their

successors, agents, representatives, employees, and all persons who act in concert with them be permanently enjoined from committing any acts of unfair competition in violation of 17200, including, but not limited to, the violations alleged in the Second Cause of Action, including violating any provisions of California law regulating mortgage foreclosure consultants; 3. Pursuant to Business and Professions Code 17536, that the Court assess a civil

penalty of two thousand five hundred dollars ($2,500) against each Defendant for each violation of Business and Professions Code 17500, as proved at trial, but in an amount of at least $1,000,000; 4. Pursuant to Business and Professions Code 17206, that the Court assess a civil

penalty of two thousand five hundred dollars ($2,500) against each Defendant for each violation of Business and Professions Code 17200 alleged in the Complaint, as proved at trial, but in an amount of at least $1,000,000;

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5.

Pursuant to Business and Professions Code 17203 and 17535, that Defendants

be ordered to give full restitution to all consumers who contracted with Defendants; 6. For such other and further relief that the Court deems just and proper, including

(1) an order that each Defendant be permanently barred from operating as a foreclosure consultant in California and from having any involvement in or with any individual, business, corporation, or any other entity that operates as a foreclosure consultant; (2) an order that Defendants take down and permanently cease operating any Internet website which markets foreclosure consultant services, including but not limited to www.hasus.com and www.foreclosureassistancehotline.com; (3) an order imposing a constructive trust on (a) all money Defendants have received from consumers who responded to Defendants' unlawful solicitations; (b) all bank, savings, and checking accounts in which any Defendant deposited any of this money; (c) all profits derived from this money; and (d) any property purchased or maintained, in whole or in part, by any of this money; and, (4) an order that Defendants be enjoined from spending, transferring, disbursing, encumbering, or otherwise dissipating any funds held in the constructive trust imposed under the terms of this paragraph, subparagraph (3) above without first obtaining approval from this Court after a hearing of which Plaintiff is given at least 15 days written notice; and 7. That the People recover their costs of suit. Respectfully submitted, BILL LOCKYER Attorney General of the State of California ALBERT NORMAN SHELDEN Acting Senior Assistant Attorney General

Dated: September __, 2004

BENJAMIN G. DIEHL Deputy Attorney General Attorneys for Plaintiff

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17.7 Memorandum in Support of Preliminary Injunction

SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF ORANGE CASE NO. 04CC07958 THE PEOPLE OF THE STATE OF CALIFORNIA, PLAINTIFFS REPLY BRIEF IN SUPPORT OF APPLICATION FOR Plaintiff, PRELIMINARY INJUNCTION [FILED CONCURRENTLY WITH SUPPLEMENTAL DECLARATION OF [CONSUMER 1]]

v. HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 1-50, inclusive,

Hearing Date: Time: Dept.: Defendants. Judge:

I.

INTRODUCTION On July 28, 2004, the Court entered a temporary restraining order barring Defendant

Housing Assistance Services (H.A.S.) from violating Californias Mortgage Foreclosure Consultant Laws, as codified at Civil Code Sections 2945, et seq, and freezing Defendants assets, save for funds necessary to cover legitimate business expenses. In its opposition to the Peoples application for a Preliminary Injunction, Defendant claims to have ceased its unlawful conduct, citing a contract Defendant claims it has been using since February or March 2004. That contract, however, is rife with the same illegalities alleged in Plaintiffs complaint and already documented by Plaintiff in its moving papers. Additionally, Defendant continues to advertise that it offers free services when in fact it does not. Therefore, this Court should enter the preliminary injunction requested by the People, and maintain the freeze on Defendants assets. II. DEFENDANT ADMITS TO UNLAWFUL BUSINESS PRACTICES, AND SHOULD BE PRELIMINARILY ENJOINED FROM COMMITTING FURTHER

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VIOLATIONS OF THE FORECLOSURE CONSULTANT LAW AND OTHER UNFAIR BUSINESS PRACTICES. A. Defendants Own Evidence Conclusively Demonstrates Its Contracts Do Not Comply With Californias Mortgage Foreclosure Consultant Laws. In the Peoples Application for a Temporary Restraining Order and Order to Show Cause Re: Preliminary Injunction, Plaintiff documented Defendant H.A.S.s repeated, long-term use of contracts and business practices that violated Californias mortgage foreclosure consultant laws. (App. for TRO and Preliminary Injunction, pp. 3-6, 10-11; Declarations of [Consumer 4]; [Consumer 2], and [Consumer 6]; See also Plaintiffs Complaint, paras. 20-27.) In its opposition, Defendant now contends that it has rewritten its contracts to comply with the law, and relies on a copy of the form contract that it says has been in use ever since February or March, 2004. (See Defendants Opposition, p. 1, ln.26 - p.2, ln. 1; Declaration of Marc Sheckler, para. 3 and Exhibit A.) However, the contract Defendant relies on suffers from the same illegalities already documented by Plaintiff and alleged in the Peoples complaint.3 Specifically, at a minimum, Defendant violates Californias mortgage foreclosure consultant laws in the following ways: 1. The contract does not include any of the notices required by subdivisions (b)

through (d) of Civil Code section 2945.3. Specifically, the contract does not include any notice that Defendant may not collect or ask for any payment until completing all services they agree to perform, nor that foreclosure consultant contracts may be canceled. Rather, the contract specifies that no refund shall be due to a consumer in any case. The contract also does not specify the address where a consumer may deliver notice that he or she is canceling the contract. 2. The contract submitted by H.A.S. does not fully disclose the exact nature of the

foreclosure consultant services Defendant will provide, in violation of Civil Code Section
Also, Defendant H.A.S. is a California corporation, and the contract it relies on includes a choice of law clause specifying that its contracts shall be governed by and interpreted in accordance with the laws of the State of California. (Declaration of Marc Sheckler, para. 3, Exh. A.) Therefore, Californias mortgage foreclosure consultant laws apply to Defendants contracts with consumers nationwide, not just its contracts with California consumers.
3

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2945.3, subdivision (a). Rather, the contract simply states that the consumer is contracting with H.A.S. to analyz[e] and strategiz[e] a solution to consumers mortgage delinquency and that H.A.S. will package and arrange [a consumers] information and communicate with customers lender or lenders representative. The contract does not define these vague terms, and therefore does not disclose the exact nature of the tasks which H.A.S. must complete in order to be entitled to payment. 3. Neither Marc Shecklers declaration nor the contract submitted by Defendant

provides any indication that Defendant provides, in duplicate (or at all), a form notice of cancellation, as required by Civil Code section 2945.3, subdivision (e). Therefore, Plaintiffs evidence that Defendant does not do so is uncontradicted. 4. The contract does not include the notices required by Civil Code section 2945.3,

and Defendant has provided no evidence that it no longer collects payment prior to completing all services that it contracts to or represents it will provide. Plaintiffs evidence that Defendant violates subdivision (a) of Civil Code Section 2945.4 by collecting payment prior to completing such services is therefore uncontradicted. 5. By admitting that the current contract has been in use since February or March,

2004, (Declaration of Marc Sheckler, para. 3), Defendant admits that it continues to induce consumers to sign contracts that do not comply with Civil Code Section 2945.3. Accordingly, Defendant remains in violation of subdivision (g) of Civil Code Section 2945.4. 6. The contract expressly provides that the maximum liability for H.A.S. is limited

to the total amount of fees paid by customer. Therefore, Defendant remains in violation of Civil Code sections 2945.9 and 2945.10, which bar foreclosure consultant contracts from including provisions that purport to limit a mortgage foreclosure consultants liability.

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Thus, by the admission of its president and sole shareholder, the form contract used by Defendant since February or March of this year violates California law, and Plaintiff respectfully requests that this Court enter the Preliminary Injunction as applied for by the People. B. Defendant H.A.S. Continues To Engage in False Advertising.

On the About Us section of its internet website, www.hasus.com, Defendant continues to claim falsely that consumers who call H.A.S.s toll free number will receive free phone counseling. (Supplemental Declaration of [Consumer 1], para. 2, Exh. 1.) However, consumers who call Defendant are in fact solicited to contract with H.A.S., and as their contract makes clear, Defendant charges expensive fees, depriving consumers of funds they could instead use in their effort to save their homes from foreclosure. Job listings posted by H.A.S. at internet sites such as www.monster.com confirm that Defendants phone counselors take inbound calls from consumers facing foreclosure who have seen H.A.S.s solicitations, with a goal of closing 10 clients per week, though top producers will close 15 clients per week. (Supplemental Declaration of [Consumer 1], para. 3, Exh. 2.) H.A.S.s job advertisement even boasts that its so-called counselors will be spending all of [their] time selling. (Ibid.) In short, rather than free counseling, a consumer facing foreclosure who calls H.A.S. will instead receive a sales pitch. Accordingly, H.A.S. continues to commit false advertising by claiming that it offers free services when in fact it does not. Additionally, Defendant has advertised on www.hasus.com that its team has over 25 years of combined experience helping homeowners in trouble. (See Exh. 1 to Declaration of [Consumer 1] submitted in support of Plaintiffs Application for Preliminary Injunction.) Because H.A.S. did not incorporate until 2000, this statement was deceptive, as it suggested that Defendant had been in business for longer than it actually had. (App. for TRO at pp. 11-12.) Defendant contends that because it has now changed is website to specify that H.A.S. was incorporated in 2000, this statement is no longer deceptive. (Def.s Opp. at p. 5.) However, as discussed in Section C, below, Section 17203 of the Business and Professions Code clearly authorizes the Court to enter an injunction against Defendant based on its past acts of unlawful 52

competition, including past acts of false advertising. Therefore, despite Defendants efforts to modify its website to correct this particular misstatement, the Court should enter the injunction as requested by Plaintiff. C. Section 17203 of the Business and Professions Code Expressly Authorizes the Court To Enter the Injunction Requested By Plaintiff, Even Though Defendant Claims To Have Changed Its Practices.

As set forth in Plaintiffs Application for Temporary Restraining Order and Order to Show Cause Re: Entry of Preliminary Injunction, the People have established a reasonable probability that Plaintiff will prevail on the merits at trial. (Plaintiffs App. for TRO at pp. 9-12.) Also, as discussed above, the evidence submitted by Defendant actually confirms H.A.S.s long-standing pattern and practice of requiring consumers to sign contracts that do not comply with Californias mortgage foreclosure consultant laws. Further, Defendant H.A.S. does not contend that it is exempt from the foreclosure consultant laws, or introduce any evidence that it would suffer any irreparable harm if the Court enters the injunction. Instead, despite the clearly unlawful provisions of the contract it relies on, H.A.S. bases its defense on the claim that it has ceased the unlawful conduct complained of by the People. (Opp. at pp. 1-2.) In addition to being contradicted by its own evidence, Defendant H.A.S.s claim is immaterial. Section 17203 of the Business and Professions Code expressly authorizes this Court to enter an injunction against any party who engages, has engaged, or proposes to engage in unfair competition. (Bus. & Prof. Code 17203 (emph. added).) Thus, even if a party subject to an injunction claims a challenged practice has ceased, in an unfair competition case such as this one, a trial court may issue an injunction where a person has committed a past unlawful practice. (Brockey v. Moore (2003) 107 Cal.App.4th 86, 103 (citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 570) (emph. added).) Defendants reliance on Brockey v. Moore, supra, is clearly misplaced since the court there expressly held that a court may issue an injunction based on past unlawful practices. (Id., at p.

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103.) Defendants citation to Scripps Health v. Marin (1999) 72 Cal.App.4th 324 is also inapplicable, as that case did not involve an unfair competition claim. The plaintiff there sought an injunction pursuant to Code of Civil Procedure section 527.8, not under Section 17203. As set forth above, Section 17203 expressly authorizes courts to issue an injunction against any party who has engaged in unfair competition. Defendant also cites Trader Joes Co. v. Progressive Campaigns, Inc. (1999) 73 Cal.App.4th 425, to claim that Plaintiff must not only show a reasonable probability of success on the merits, but also that the harm to the People resulting from a denial of the injunction outweighs the harm to Defendant from granting it. (Opp at. p.4) However, Trader Joes Co. is inapplicable, because it concerned a claim brought by a private party, not a prosecutorial action brought by a governmental entity. California law is clear that Once a governmental entity establishes that it will probably succeed at trial, a presumption should arise that public harm will result if an injunction does not issue. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 72; App for TRO at pp. 9-10). Thus, because Plaintiff has shown it is reasonably probable that the People will prevail on the merits, the burden is on Defendant to show it would suffer irreparable harm. Ibid. Defendant has made no such showing, and therefore this Court should enter the Preliminary Injunction. Morever, because Plaintiff does not seek to force Defendant to cease business, or to do anything other than follow the law, the Preliminary Injunction sought by the People is in no way punitive. Rather, the injunction is simply a mechanism to ensure H.A.S.s compliance with state law, as made necessary by Defendants past unlawful conduct. III. THE ASSET FREEZE ORDERED BY THE COURT SHOULD REMAIN IN PLACE. The asset freeze imposed by the Court at the time it entered the TRO should remain in place. Defendant does not even address the asset freeze in its opposition, but, by its own admission, has engaged in and continues to engage in unlawful business practices. Because Defendants revenue appears to come exclusively from contracts that expressly violate the terms 54

of the mortgage foreclosure consultant laws, this Court can order Defendant to restore to consumers all money they have paid to H.A.S., and Defendants assets should remain frozen in order to effectuate this relief. (See Bus. & Prof. Code, 17203, 17535 [court authorized to employ various means to restore to any person in interest any money . . . which may have been acquired through unfair competition or false advertising].)4 Even if the frozen funds were to exceed the amount of restitution ordered by the Court, additional funds must still be protected from dissipation in order to pay any civil penalties the Court imposes. As stated in SEC v. Cherif (7th Cir. 1991) 933 F.2d 403, a civil fraud prosecution by the SEC, [t]he dollar figure of the assets frozen can include the amount of proceeds reasonably subject to disgorgement plus the amount which the SEC can recover as a civil penalty. (Id. at p. 416, n. 15, citation omitted.) The same is true here. Business and Professions Code sections 17206 and 17535 provide for -- and the People intend to seek -- a civil penalty of up to $2,500 for each violation of Sections 17200 and 17500. Where the trial court finds a violation of Section 17200, Section 17206 requires the imposition of civil penalties. While the amount of the penalty is within the discretion of the court, the imposition of penalties is not. (Bus. & Prof. Code 17206, subd. (b) [The court shall impose a civil penalty for each violation of this chapter.].) In the unlikely event that there is enough money to make restitution to all of Defendants victims, the remaining funds should continue to be safeguarded so that they are available to pay any penalties the Court imposes. Therefore, all funds frozen by the Court under the terms of the TRO should remain protected from dissipation by Defendant.

CONCLUSION Plaintiff respectfully requests that the Court issue the Preliminary Injunction requested by Plaintiff, to be in effect while this action is pending, and for the freeze of Defendants assets to remain in place until such time as this Court orders otherwise.
Moreover, all consumers who contracted with H.A.S. and did not receive all required notices and disclosures have an extended right to rescind their contracts. (Civil Code 2945.3, subd. (g).)
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Dated: September __, 2004

Respectfully submitted, BILL LOCKYER Attorney General of the State of California ALBERT NORMAN SHELDEN Acting Senior Assistant Attorney General

BENJAMIN G. DIEHL Deputy Attorney General Attorneys for Plaintiff

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17.8 Permanent Injunction and Final Judgment

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE

PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff, v. HOUSING ASSISTANCE SERVICES, INC., a California corporation; MARC SHECKLER, an individual; and DOES 150, inclusive, Defendants.

CASE NO. 04CC07958 PERMANENT INJUNCTION AND FINAL JUDGMENT IN FAVOR OF PLAINTIFF AND AGAINST DEFENDANT HOUSING ASSISTANCE SERVICES AND PERMANENT INJUNCTION AGAINST MARC SHECKLER

Plaintiff, the People of the State of California (People or Plaintiff), through its attorney, Attorney General Bill Lockyer, by Deputy Attorney General Benjamin G. Diehl and Defendant Housing Assistance Services, Inc., a California corporation (HAS) and Marc Sheckler (collectively, Defendants), appearing personally and through their respective counsel, Karin Easter Gurwell and Pick & Boydston, LLP, by Erik Syverson, having stipulated that this Permanent Injunction and Final Judgment (hereafter Judgment) may be entered without the taking of evidence, without trial or adjudication of any issue of fact or law, and good cause appearing therefor, IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT: 1. 2. This Court has jurisdiction of the subject matter hereof and the parties hereto. Pursuant to Business and Professions Code Sections 17203 and 17535,

Defendants, and their respective representatives, employees, and agents, and all persons, corporations, and other entities acting in concert with or at the direction of any of said

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Defendants, are hereby permanently enjoined and restrained from engaging in or performing, directly or indirectly, any or all of the following: (A) Failing to include in contracts they provide to prospective customers for the provision of mortgage foreclosure consultant services, all provisions required by law to be included in such contracts, including but not limited to all provisions required under each subdivision of section 2945.3 of the California Civil Code; (B) Failing, in violation of subdivisions (e) and (f) of Section 2945.3 of the California Civil Code, to provide customers who enter into a mortgage foreclosure consultant contract with a separate notice, in duplicate, of their right to cancel their foreclosure consultant contract; (C) Engaging in any conduct barred by section 2945.4 of the California Civil Code; (D) Including terms in mortgage foreclosure consultant contracts that purport to limit Defendants liability; (E) Representing that Defendants provide mortgage foreclosure counseling services at no cost; (F) Representing the Defendants have been in business for longer than they in fact have; (G) Including any reference to the United States Homeowners Protection Agency, or any non-profit organization not registered with the Office of the California Attorney General, in any advertisements or solicitations promoting any foreclosure consulting services offered by Defendants; (H) Including any materials in any advertisements or solicitations promoting any foreclosure consulting services offered by Defendants that could reasonably be construed or interpreted as implying that any governmental agency is somehow connected with, approves, or endorses Defendants; (I) Violating any California laws regulating mortgage foreclosure consultants, as codified at Section 2945 et seq. of the California Civil Code.

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3.

Pursuant to Business and Professions Code sections 17203 and 17536, Defendant

Housing Assistance Services: A. Shall offer refunds to all California purchasers (i.e., customers who lived in California at the time of purchase) of any foreclosure consulting services sold by HAS, or by anyone acting on behalf of or in connection with HAS, as follows: i. Defendant HAS shall provide full refunds of money paid by each

California customer who purchased foreclosure consulting services from HAS, but either did not receive a repayment plan, or did not accept any plan obtained or purportedly obtained by or through HAS. ii. Defendant HAS shall refund 10% of the price paid by each California

customer who purchased foreclosure consulting services from HAS who received and accepted a repayment plan obtained by or through HAS, provided that HAS is able to document that the customer accepted the plan. Customers for whom HAS is not able to provide such documentation shall receive full restitution. The People shall have the authority to contact customers that HAS states received and accepted the plans, to verify that the customers accepted plans obtained by or through HAS. iii. If any California customers contacted by the People pursuant to subparagraph ii, above, claim that they did not receive and accept a payment plan obtained by or through HAS, then Plaintiff and HAS shall, in good faith, attempt to reach agreement on the amount each such customer is entitled to receive as a refund under this Judgment. If they are unable to so agree, they may apply to this Court for a resolution of such dispute. iv. California customers who have already received refunds from, and released claims they may have had as to, HAS shall not be entitled to any further restitution from HAS by virtue of the Court entering this Judgment.

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v.

For agreements signed by more than one customer, receipt of restitution

by one customer shall be deemed to be receipt of restitution by all customers who were party to that agreement. B. Shall notify all California customers referenced in paragraph A(i), above, of

their right to receive a full refund by mailing at HASs expense to each such customer at his or her last known address the Notice attached hereto as Exhibit 1, and shall notify all California customers referenced in paragraph A(ii), above, of their right to receive a 10% refund by mailing at HASs expense to each such customer at his or her last known address the Notice attached hereto as Exhibit 2. The notices shall be mailed no later than 14 days after the date this Judgment is entered, and HAS shall include a postage paid pre-addressed return envelope with all Notices sent to customers pursuant to the terms of this Judgment. No later than 30 days after the date this Judgment is entered, HAS shall serve the office of the Attorney General with notice that the letters have been mailed. Such notice of mailing shall be in the form of a declaration submitted under penalty of perjury, signed by an officer of HAS who has the authority to act on its behalf, and shall state, at a minimum, the date(s) of the mailing(s), the number of letters mailed on each mailing date and the total number of letters mailed to customers referenced in paragraph A(i) above and the total number of letters mailed to customers referenced in paragraph A(ii) above. C. Shall notify Plaintiff of all customers whose notices are returned undelivered

to HAS for any reason. Such notice shall be sent to Plaintiff within sixty days after the date this Judgment is entered and shall be in the form of a declaration or declarations submitted under penalty of perjury, signed by an officer of HAS who has the authority to act on its behalf, and shall state, at a minimum, the name of each customer and the address to which the letter, that was returned to HAS, was mailed. Plaintiff shall attempt to identify new addresses for all such customers. At HASs expense, and no later than 14 days after Plaintiff provides to HAS a list of all customers for whom it has been able to identify new addresses, HAS shall remail the appropriate notice to all such customers, except that the 60

deadline to respond to the re-mailed Notice may be reduced from the 60 days set forth in Exhibits 1 and 2 attached hereto to 30 days. Defendant shall provide Plaintiff with a supplemental notice of mailing, under the terms specified under subparagraph B, above. D. Shall post on its Internet website for 60 days after the date the Court enters

this Judgment notice of the restitution that all California customers who paid any funds to HAS may obtain under the terms of this Judgment, and a notice that such customers may request a copy of the Notices attached as Exhibits 1 and 2 by contacting HAS by phone or by mail. E. Shall allow customers to request the refund provided for under the terms of

this Judgment either by returning the signature page of their Notice to HAS, or otherwise making a written request to HAS, sent by mail to the address specified in the Notice. F. Shall no later than 120 days after the date the Court enters this Judgment,

notify Plaintiff of all California customers who have requested a refund, as provided for under the terms of this Judgment. Such notice shall be in the form of a declaration submitted under penalty of perjury, signed by an officer of Housing Assistance Services who has the authority to act on behalf of HAS, and shall state, at a minimum, the name, address and amounts claimed and actually to be paid to each such customer. If HAS disagrees with the refund amount claimed by any specific customer, the declaration shall also specify the disagreement. Plaintiff and HAS shall, in good faith, attempt to reach agreement on the amount each such customer is entitled to receive as a refund under this Judgment. If they are unable to, they may apply to this Court for a resolution of such dispute. G. Shall no later than 150 days after the date the Court enters this Judgment,

pay refunds to all California customers who have requested a refund, as provided for under the terms of the Judgment. H. Shall no later than 165 days after the date the Court enters this Judgment,

notify Plaintiff of all refund payments made to California customers pursuant to the terms of 61

this Judgment. Such notice shall be in the form of a declaration submitted under penalty of perjury, signed by an officer of Housing Assistance Services who has the authority to act on its behalf, which shall include as an exhibit documentation sufficient to confirm the amount of the refund payments made, and that HAS has sufficient funds to honor all refund checks. 4. Pursuant to Business and Professions Code Sections 17206 and 17536, Defendant

HAS is ordered to pay Plaintiff the sum of $65,000 as civil penalties. One-half of this amount ($32,500) will be due no later than 180 days after entry of this Permanent Injunction and Final Judgment, and the remaining $32,500 will be due no later than 210 days after entry of the Permanent Injunction and Final Judgment. 5. Defendant HAS is ordered to pay Plaintiff the sum of $20,000 to cover the

Plaintiffs attorneys fees and costs of the investigation and prosecution of this matter. Ten thousand dollars of this sum shall be paid upon entry of this Permanent Injunction and Final Judgment, with the remainder due thirty days after entry of this Permanent Injunction and Final Judgment. 6. Unless approved in advance by this Court, for 255 days after entry of this

judgment, Marc Sheckler shall not transfer, encumber, or consent to any transfer or encumbrance of, any interest in the real property owned and located in the County of Orange, State of California, commonly known as [Address of property], which is legally described as: Parcel 1: [Location of parcel 1], of Miscellaneous Maps, in the Office of the County Recorder of Said County. Parcel 2: [Location of parcel 2], Miscellaneous Maps, in the office of the County Recorder of Said County. EXCEPT therefrom all water and subsurface water rights, below a depth of 500 feet without the right of surface entry, as dedicated or reserved in instruments or record.

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(the Property). This Court shall sign a separate order barring such transfer or encumbrance, a true and correct copy of which as attached hereto as Exhibit 3, which shall be recorded at the Office of the Orange County Recorder. If HAS satisfies its financial obligations under this Judgment prior to 255 days after the date this Judgment is entered, the Court shall vacate the order barring the transfer or encumbrance of the Property. If Defendant Sheckler wishes to encumber or transfer any interest in the property while this order is pending, he shall first ask Plaintiff to stipulate to allow such transfer or encumbrance. If Plaintiff does not so stipulate, Sheckler may appear ex parte for an order seeking permission to effect the transfer or encumbrance, except that he must give counsel for Plaintiff 72 hours prior notice of such ex parte appearance. 7. Unless Plaintiff notifies Defendants otherwise, all notices to be served by any

Defendant pursuant to the terms of this Judgment shall be served by mail and by facsimile to: Deputy Attorney General Benjamin G. Diehl Office of the California Attorney General 300 S. Spring St. Los Angeles, CA 90013 Facsimile number: (213) 897-4951. 8. Unless Defendants notify Plaintiff otherwise, all notices to be served by Plaintiff

to any Defendant pursuant to the terms of this Judgment, including but not limited to notice of any default of any of the provisions of the Judgment, shall be served by mail and by facsimile to: Erik Syverson, Esq. Pick & Boydston, LLP 523 W. 6th St., Ste. 1134 Los Angeles, CA 90014 Facsimile number: (213) 624-9073 and to: Karin Easter Gurwell, Esq. 7755 Center Ave., Ste. 1100 Huntington Beach, CA 92647 Facsimile number: (714) 372-2276 63

9.

This Judgment does not constitute an admission by, or finding of fault or liability

against, Defendants. 10. This Judgment shall take effect immediately upon entry by the clerk, and the clerk is ordered to enter it forthwith. 11. The Complaint on file against Does 1-50 is ordered dismissed. 12. This Court shall retain jurisdiction over this matter for the purposes of enabling any party affected by this Judgment to apply to the Court at any time, and after serving notice to all other parties, for such further orders and directions as might be necessary or appropriate for the construction, carrying out, modification, enforcement, or punishment for any violation of this Judgment or for the modification of any of the injunctive provisions of this Judgment.

Date:

_________________________________ Hon. Thierry Patrick Colaw Judge, California Superior Court

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