A story appearing in Dow Jones Bankruptcy Review managed to hammer shares of industry tech provider Lender Processing Services, Inc. [stock LPS][/stock] on early Friday afternoon, suggesting the Jacksonville, Fla.-based firm was the subject of a formal investigation by the Department of Justice. Shares in the company tanked nearly 30% on the news, falling $9.61 to $23.57, before trading of the company’s stock was halted on the New York Stock Exchange. Shares resumed trading late Friday afternoon. The story, however, appears to be the latest example of bad reporting by the financial press when it comes to mortgage banking – because as far as LPS is aware, the DOJ is not (and has not) been conducting any investigation of the company, according to a statement released by the firm. Nor is the firm subject to any court sanctions, as the Dow Jones story also inexplicably suggests, citing a Pennsylvania bankruptcy case. In that Pennsylvania case, the mortgage industry tech and services giant had been subject to a request by the court to explain its technology as part of a dispute involving HSBC, the bank’s retained counsel, and two borrowers in a Ch. 13 plan that were arguing over $180 dollars in unpaid flood insurance premiums. (Yes, $180.) Apparently, the lender’s counsel in the case, New Jersey-based Udren Law Offices, P.C., had been instructed by Judge Diane Weiss Sigmund to produce a loan payment history to resolve the dispute over the amount owed; when the law firm failed to produce the history, the attorney representing HSBC explained the failure by telling the court he had made a request on LPS’ NewTrack case workflow management platform but had not yet received a response. That led Sigmund to ask some questions about LPS and NewTrak. In a June 9 order, she threatened sanctions against everyone involved — including LPS, although the technology provider was not a party to the case — for a possible violation of a bankruptcy rule, called Rule 9011, that requires “every pleading, petition, written motion and other paper” to be signed by at least one attorney. In her order, she railed against the use of technology, writing that such a “mechanical approach” to managing bankruptcy “offends the integrity of our American bankruptcy system.” Cue the Dow Jones “news scoop,” which is based entirely on the contents of that June 9 order, and the subsequent comments of consumer bankruptcy attorney Max Gardner, who alleges in the Dow Jones story that LPS’ system “represents a complete outsourcing of the foreclosure and bankruptcy process.” (Never mind that Gardner has a vested personal interest in pushing his view of the world, so if he says it, it must be true, right?) If the sleuths at Dow Jones had actually reviewed all the case files, as they claim to have done, they’d surely have noticed an April 15 opinion from Judge Sigmund that absolves LPS of liability altogether, after the firm voluntarily cooperated with the court and regional U.S. Trustees Offices in explaining its system to them. “When this matter began, I was unaware of NewTrak and how it was routinely utlized in bankruptcy cases,” she wrote in the opinion. “By this Opinion, I have sought to share my education with participants in the bankruptcy system who may be similarly unfamiliar with the extent that a third party intermediary drives the Chapter 13 process.” Not exactly damning material. But wait, it gets better. “Based on this record, I find that sanctions against LPS are not warranted,” Sigmund writes in the April 15 opinion. “By misusing the resources made available to them, the Udren firm, not LPS, was responsible for the Rule 9011 deficiencies in this bankruptcy case.” “LPS was not a party to this case,” the company said in a press statement Friday, referring to the Pennsylvania bankrupcty. “LPS, however, voluntarily demonstrated the use of its system for Judge Sigmund and provided all information requested by the U.S. Trustees Offices in connection with this case. In Judge Sigmund’s opinion issued at the conclusion of the proceeding, Judge Sigmund stated that LPS was not responsible for any errors in the conduct of the case.” All of which means that facts can’t apparently get in the way of a good ole’ witch hunt at Dow Jones these days. I’m sure that comes as little consolation to shareholders of LPS; shares in the company had rebounded somewhat in afternoon trading, to $29.69 — still down 10.5 percent — when this story was published. Write to Paul Jackson at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.