Two stories in today’s news provide court-side glimpses of two forms of market abuse that led us skipping down the garden path to the cratered economy. In this one from the Oregonian you can learn all about the alleged scams by various Oregon flimflam men who saw that the trough was unguarded. They apparently goosed up the value of properties, got inflated appraisals, and borrowed way out of proportion to the collateral, pocketing the overage.

They could act with impunity because the banks were turning their paper to Wall Street and didn’t have any reason to scrutinize loan applications.

And of course the liar loans promoted by banks were being bought by Bear Stearns. Here’s an update on criminal proceedings against former Bear Stearns managers facing indictments. Apparently, they knew that the loans they were buying were bunk.  Going to be fun to hear them explain why they kept hyping their hedge funds while secretly selling their own shares before it all crashed down.

All of this highlights the dark underbelly of deregulation.  Want a chuckle? Remember the movie, Wall Street? “Greed is good,” we were told by pop culture, by politicians and by professors.

So this is what they meant by “Good.”

David Sugerman

ps to regular readers-I’m out of here for a couple of weeks for vacation. While David Paul may pick up the slack, the blog may well go dark while I’m away. I’ll be back to it after the 4th of July weekend.

Here’s a nice summary of an important trial result in Portland.  Lois Whitmore, a healthy and active 78-year old Wal-Mart shopper suffered life-changing injuries when a Wal-Mart fixture fell and broke her foot.  Before the injuries, Ms. Whitmore walked several miles a day, and after each step caused her pain.

Kudos to my friend and colleague, Greg Kafoury, for leading the way. Apparently the unanimous jury assessed her harms and losses to the dime requested by her attorneys, as they reportedly granted her every dollar that she sought.

Kafoury has a special way with cases against retailers. He’s had some marvelous results against Fred Meyer stores in the past.

The rule that Wal-Mart violated is a simple one. Retail businesses go to great lengths to get shoppers in the door. The rules require that retailers provide for the safety of shoppers. It’s a simple and sensible rule. If they’re going to invite you in to spend your money, they have to be responsible for the condition of the store.

Wal-Mart apparently violated the simple rule of retail. But according to the news report, they went one step further. Wal-Mart employees apparently testified under oath that Ms. Whitmore was sitting on an electric scooter shortly after they learned she was injured. They claimed that she had bumped over the display and caused her own injury.

But here’s the problem. Not a word of that appeared in their incident report, and instead that report–which would have been written at or near the time of the injury–reportedly said that she was sitting on a bench near the display, not on a scooter.

Seems like this is one of those trials that could have been avoided had Wal-Mart simply taken responsibility for their customer’s harms and losses. Guess they needed to hear it from the jury.

David Sugerman

This report from The Oregonian on the Berkman trial. According to news reports, Mr. Berkman testified yesterday that he always intended to repay the investor money that he took, and thus they were loans.  I imagine this one is going to be hard one to pull off.

The news reports also highlight Mr. Fortino (one of the investors’ lawyers) cross examination, reporting that Paul Fortino got Mr. Berkman to concede that “loans” are customarily transactions in which the borrowers atcually know that they were lending money. Apparently, these were “loans” that weren’t actually disclosed to the borrowers.

It’s not in the news report, and I don’t have a transcript or first-hand knowledge, so the rest of the cross examination is something I can only imagine. But I suspect that Mr. Fortino went through a litany about a lack of documentation including promissory notes, contracts, loan documents, and the like. He probably had a lot of fun asking about the particulars of these “loans” like the amount of principal, the interest rate, and the repayment date.

I suppose all of this should be written and read with a shred of skepticism, or what in law talk we call, a caveat. News reports sometimes get trials wrong…really wrong. Sometimes that’s innocent when a hard working and honest journalist simply misses something. Sometimes–rarely, I hope–it’s because the reporter has an agenda. And sometimes it’s as simple as an editor nixed part of the report for good or bad reason. So it’s possible that the news report gives a misleading impression of the trial. And all of us owe the system and the parties the grace of waiting for the jury to tell us how it turns out.

Still, it’s impossible not to react to the news report. While I haven’t watched a lick of this trial, it strikes me that Mr. Berkman is coming across like a youngster who hasn’t mastered the fine art of lying. There are several common attributes of good liars, including telling a story that is plausible enough for the listener to suspend his or her critical thinking. And if you’re going to be a good liar, never spin a yarn that is completely at odds with how the world works. Because who could possibly believe that this was a loan?

David Sugerman

Double dose of irony in this report in today’s Oregonian. It seems that a lobbyist for the Oregon Coalition of Mortgage Originators, Shane Jackson, filed suit in Multnomah County Circuit Court to collect his unpaid fees of $20,000. According to the news report, he sued both the Oregon Coalition of Mortgage Originators and its president, William Ridge.

Back story: Jackson and the Oregon Coalition of Mortgage Originators worked to stop reforms aimed at tightening the rules on mortgage lending. Alert readers might immediately connect this effort to the whole lack of regulation that got us into the mortgage lending crisis.

More detail: The Oregon Coalition of Mortgage Originators took great glee in killing SB 965 in the 2007 session. The bill,  Senate Bill 965, would have required plain language disclosures and use of underwriting standards.  It would also have allowed consumers harmed by mortgage lenders misconduct to directly sue.

According to the news report, the real estate market downturn put Mr. Ridge in a position of being unable to meet the payments on his new South Waterfront Condo.  Ridge apparently defaulted. That’s apparently part of the reason why Mr. Jackson has not been paid.

So here’s the first level of irony. These cowboys were so busy protecting their “rights” (read: positions at the trough) that they wouldn’t acknowledge the obvious. Lack of regulation and market oversight caused the mortgage lending meltdown.  And that is the main culprit in the real estate slide that bit Mr. Ridge in the backside.  While no one knows whether prompt action would have boosted consumers’ confidence in the market, it’s easy to see how Mr. Ridge, the Oregon Coalition of Mortgage Originators, and their lobbyist have all gotten swept up by the under-regulated markets.

And as for the second level of irony, my vague recollection is that the Oregon Coalition of Mortgage Originators opposed reforms in part because they allowed consumers harmed by misconduct to…gasp…file a lawsuit if the lender’s misconduct injured the consumer.  I guess Mr. Jackson didn’t lose any sleep over filing a lawsuit when he got stiffed for his rightfully owed $20,000. Maybe he now has a different take on the need to be able to pursue claims in court?

The whole thing would be little more than a belly laugh if so many others weren’t otherwise harmed by the collapse.  Can’t help but wonder what my friends at Our Oregon think of all this. They fought valiantly for consumers on SB 965. Angela Martin from Our Oregon was demonized for taking the lead. A number of good people–my friend Phil Goldsmith, for example–spent countless hours working on behalf of consumers on these issues.

I wonder now if Mr. Ridge and Mr. Jackson have had second thoughts about their work opposing lending  reform or about Our Oregon’s work on SB 965?

David Sugerman

I’m totally transfixed by news reports on the Craig Berkman trial. According to this report, Mr. Berkman admitted that he falsified his personal financial statement. It wasn’t one of those tiny little white lies, either. Apparently, he circulated financial statements showing his net worth to be $25 million when he was actually $5 million in debt.

Short version backstory: Craig Berkman is a former Oregon guberntorial candidate who lived the good life as a way wealth investment hotshot. Apparently, that living came either from self-lending made without investors’ knowledge or from outright theft. (Or maybe it’s somewhere in between?)

There are a number of other misstatements set forth in the article, too. But let’s not rush to judgment. Mr. Berkman apparently still denies that he stole money, claiming, instead, that the borrowed it and paid it back with interest.

One of the striking things about the news report is that it shows that it took a lawsuit to get to the bottom of his dealings. Until lawyers at Bullivant Houser filed a lawsuit, the investors couldn’t get the records that sheds the light that forced Mr. Berkman’s admissions.  I wonder what the story would be today if the lawyers for the investors hadn’t dug deep to get the records?

Can’t wait to see how this one turns out, but if I had to bet money–and I don’t–I wouldn’t be betting on Mr. Berkman here. At least not from what I read in the press.

David Sugerman

Interesting write up today in The Oregonian about the civil trial in a case brought by former investors against formerly high flying financier, party activist, Republican gubernatorial candidate, Craig Berkman. This is another one of those cases where I just want to grab a big tub of popcorn, plop down in an easy chair and enjoy the show.

At the front end, Mr. Berkman apparently admits that he secretly took $3.8 million in investors’ money. Apparently, his lawyer plans to claim that the investors losses of $20 million came from market conditions, not the secret taking of cash.

I’m taken with several parts to this.  Most notably is the repeat of the realization from the Adidas verdict that no one rants about businesses suing businesses for large sums of money.  Same is true about investors, I guess. And I don’t really have a beef with that, but I have to wonder why a double standard applies when a profoundly injured person dares to sue for damages.

The Big O article closes with a specific description of Jordan Schnitzer’s experience. All of Portland knows the Schnitzer family–they are successful, high profile civic leaders who have given large sums of money to many Portland institutions. I assume that Mr. Schnitzer’s net worth is such that his million dollar loss has relatively little impact on his overall wealth. I don’t mean to sound petty–it’s more that you need a sense of perspective about these things. But of course, it’s an interesting part of the story.  And regardless of his wealth and status, Mr. Schnitzer has every right to press his proper claims forward.

The other interesting piece is that Bullivant Houser’s Steve English leads the team representing the investors. He’s an accomplished trial lawyer from a law firm that focuses mostly on business and defense of claims.  It’s a large law firm by Portland standards.

While I suppose it’s easy to write it all off as a big-firm lawyer representing some pissed off rich people against a wrongdoing rich guy, the lesson underneath is that we all need a civil justice system. We all need access to the courts. We all need to be able to hold wrondoers accountable. That should be true whether the case involves multi-millionaires fighting over who owes what to whom or whether the case involves a working person who suffered profound injury caused by a dangerous product.

David Sugerman

The news report appeared during the week. My friend and colleague, Ed Johnson, did a helluva job representing a homeless woman in her excessive force claims against members of the Gresham police force.  Here’s what seems to be a less-than-accurate account of what happened.

I rarely go out of my way to call into question news reports of trials, but the story left me with the impression that the police were the victims.  We know from the result that the story is wrong, as there are two independent checks the injured person must clear to win against the police.

In federal court, juries deciding civil lawsuits must be unanimous. The jury unanimously found in favor of Mary MacQuire, the woman tasered and beaten, and even found that her harms and losses required more money than she had requested.

But there is another check as well.  The federal judge who tried the case, Judge Michael Mosman, is not inexperienced in police cases. Before his appointment to the bench, Judge Mosman served as the U.S. Attorney, the person in charge of federal criminal prosecutions in Oregon.  So he came to the bench with a lot of experience with the police. As the judge presiding over the case, Judge Mosman only submits a case to the jury if there is sufficient evidence of wrongdoing. He listened to the evidence and submitted the case to the jury.

I had a chance to talk to Ed Johnson both before and after the trial. He’s a great guy who works for the Oregon Law Center, representing people of modest means. The case he described to me wasn’t the same one I read about in the paper. But regardless of the reporting problem, police cases are hard. Juries typically give police a lot of leeway because they recognize the difficulties of their jobs. In my experience, most Oregon juries believe the police. Of course, Oregonians tend to be pretty level headed, such that when they hear credible evidence of a problem they do what is right to assess fault and address harms and losses.

When I spoke to him before the trial, Ed was clear-eyed about the difficulties a homeless woman faces in claiming that the police used excessive force. He was quietly committed to his case. After the trial, he was spent, as most of us are after a hard-fought case. He was also pleased with the result.

Ed Johnson and Ms. MacQuire deserve our gratitude and praise. By taking the case to trial, Ed Johnson and Ms. MacQuire demonstrated that justice can be found in Oregon. The jury and judge deserve our praises as well, because a verdict in a case like this sends a message to those who fail to heed the rules that no one is above the law. Not even the police.

David Sugerman

Hate to admit it, but my car radio presets include Portland’s KINK FM. And from this I learned that the somewhat annoying morning guy, Les Sarnoff, was “on vacation” this week. I don’t mean to sound overly snarky, but alert readers of The Oregonian learned today that this wasn’t exactly a vacation, unless you call sitting in trial as a criminal defendant a “vacation.”

Seems that Mr. Sarnoff was in fact in trial in Clackamas County Circuit Court on charges of driving under the influence of an intoxicant.  According to news reports, he had taken ambien–a sleep aid–before leaving the for home so that he would fall asleep when he got home.

I’m something of an insomniac, so I suppose I can sympathize with the sleep problems. But taking Ambien before getting in your car isn’t much different from a tavern stop for three or four doubles on your way home.  Bad idea.

Witness accounts reported say that Mr. Sarnoff was off the road and nearly hit a building as he weaved his way toward home. Thankfully, no one was injured, so we don’t have to use the civil justice system to seek payment to cover someone’s harms and losses.

But the whole thing provides another caution and teachable moment.  Driving under the influence is a recipe for disaster or, in the smiley spin world of morning radio, “vacation.”

David Sugerman

This could be any of us. At the Portland Airport, you’re a passenger being dropping off curbside. You say your good-byes and go to grab the bags from the trunk. Most days, you walk off into the terminal.

Tragically, Dr. Joel Hopkin suffered life-threatening crush injuries when a wayward car set of a chain reaction, ending with a car crushing Dr. Hopkin against his car, as he unloaded his bags.

According to reports, Mr. and Mrs. Kerr started the chain reaction when Mrs. Kerr left their vehicle to look for an arriving air passenger. When she left their car to look for the passenger, Mr. Kerr climbed across into the driver’s seat. When he climbed over the middle, he apparently knocked the car into gear. Mr. Kerr may have panicked and hit the accelerator. The Kerr vehicle struck a vehicle in front of it, propelling that vehicle into Dr. Hopkin.

David Sugerman

Friends:

The headlines the last two days contained two seemingly unconnected stories. Today’s front page (Oregonian) was saturated with insights about Mr. Obama and his speech last night seeking to unify our country on issues of race relations. There was tremendous support for the message, and the messenger as well.

Seemingly unconnected, the paper also reported on “bike boxes” link to help with traffic flow on Portland’s streets where bicycles and motorists meet. The two seem related. We have two communities, black and white, motorhead and bicyclists. Why can’t we just get along?

There is deep seated distrust in the two (four?) camps. Mr. Obama’s premise and the premise of the bike boxes is simple and similar. We just need to get along. There is no need to conflict or hassle. What matters is mutual respect and tolerance. Why don’t we just give that a try for a while and see if we can get along?

I have represented dozens of cyclists injured in traffic accidents in the local area, including Multnomah, Washington and Clackamas counties. I understand the insurance issues and the social issues involved in these cases. There may be some rights that surprise you. Contact me for a no-cost initial consultation. I would like to help.

And….. let’s just try to get along. At work, at school and on the way home tonight as well!

Sincerely,

David Paul

PAUL & SUGERMAN, PC.

503.224.6602