Former DocX CEO pleads guilty to conspiracy to commit wire, mail fraud

A Georgia woman who headed DocX pleaded guilty to one count of conspiracy to commit wire and mail fraud Tuesday afternoon in a case that ties back to the robo-signing scandal and the mishandling of thousands of mortgage documents.

The case ends at least one part of the massive foreclosure document-handling crisis that surfaced in Florida in the wake of the housing crisis.

U.S. prosecutors say Lorraine Brown agreed to plead guilty in a scheme that involved the hiring of dozens of workers to sign and fraudulently notarize thousands of mortgage-related documents even though employees signing the forms were not authorized to do so.

The allegations in court records suggest Brown was hired by mortgage servicers to handle loan documents. When servicers used Brown's services, she allegedly promised the availability of authorized signers to handle and authorize documents for mailings and public filings.

Prosecutors claim Brown reneged on those promises and began allowing in 2005 the forging and falsification of signatures on official documents tied to mortgages and foreclosure filings.  

A court filing by prosecutors says, "Unbeknownst to DocX clients, the authorized signers were instructed by Brown and other DocX employees to allow other, unauthorized DocX employees to sign, and to have the document notarized as if the actual authorized signer had executed the document."

Brown pleaded guilty to one federal charge of conspiracy to commit wire and mail fraud in the U.S. District Court for the Middle District in Florida Tuesday. The offense comes with a possible 5-year prison sentence and up to $250,000 in fines.

Lorraine Brown's path to federal court began during the massive demand for the moving of thousands of loan documents during the national foreclosure crisis. But Brown's firm had been around in some formation for nearly two decades.

Brown is a Georgia resident who founded DocX in the 1990s in Ohio, court records say. The firm was eventually acquired by Fidelity National Financial ($26.18 0.43%). Brown, at all times, remained the leader of the DocX subsidiary, even as the firm eventually fell under the leadership of Fidelity National Information Services and later became a division of Lender Processing Services ($32.99 0.11%). That development occurred when FNIS spun off a series of its business lines into LPS, prompting DocX to operate as LPS Document Services. The charge filed this morning also alleges Brown conspired to keep LPS in the dark about her activities.

LPS noted in its own statement about the charges against Brown that it was unaware of the alleged activities.

"As stated in the information filed by the U.S. attorney, Ms. Brown actively concealed from LPS the surrogate signing practices that she implemented at DocX," LPS noted in a statement. "When LPS discovered these practices in November 2009, it immediately discontinued the practices, terminated Ms. Brown and shut down the operations of DocX. LPS also remediated documents executed under the surrogate signing process and has fully cooperated with all government investigations into these matters."

The company added, "LPS is committed to ensuring that all employees operate with integrity and compliance in everything they do on behalf of the company."

Brown appeared before the U.S. District Court in the Middle District of Florida Tuesday morning to enter her guilty plea.

kpanchuk@housingwire.com