Editor’s note: Federal investigators are looking into so-called mortgage elimination programs that claim to wipe out home mortgages or other forms of debt for consumers. In this three-part series, we provide a case study of one mortgage-elimination process. Part 1 explores the methods the group’s proponents use to try to convince title companies and lenders that it has successfully eliminated mortgages. Part 2 follows the group’s beliefs and why they think mortgage elimination is possible. Part 3 takes an in-depth look at the group’s business model.
An e-mail was sent to consumers in early December about an “important broadcast” on the Internet featuring Kurt Johnson, one of the principal members of The Dorean Group — a group at the center of a controversial process that promoters claim can quickly erase mortgage debt for homeowners.
Some regulators have issued warnings about mortgage-elimination companies, and there are active federal investigations targeting some of these schemes.
The Dorean-related e-mail encourages people to awake “to the kinds of subtle programming, mind manipulation and lies you’ve been exposed to your entire life … in this debt laden society that we live in today,” and the e-mail includes a lengthy document describing charges brought by a congressman against The Federal Reserve Bank in the 1930s.
Mortgage elimination programs typically promote anti-bank philosophies that question the motives and validity of the mortgage process and the overall U.S. financial system. Some Web sites that promote mortgage-elimination programs also include intricately detailed conspiracy theories about the dark and sinister intentions of the Federal Reserve, the military industrial complex and the vastly powerful New World Order.
References in the e-mail message refer to a small group, “the controllers,” who are “at the core” of society’s financial woes. “What went wrong with the wealth and finances of the people in America?” the e-mail questions, and “Who are these people?”
Web sites and materials associated with The Dorean Group often question motives behind the nation’s financial system.
The Dorean Group, which uses a mailing address in Union City, Calif., is described in the e-mails as a “legal firm,” though the State Bar of California has no membership information for Johnson and D. Scott Heineman, another principal for the group.
The December 3 Internet audio broadcast was carried on a Web site called Mysteries of the Mind, hosted by Alex Merklinger. The Web site describes Merklinger’s Internet-based talk show as a gateway to exploring “many of life’s enigmas,” including UFOs, spiritual cosmology, crop circles, personal agendas, and “the arcane secrets of many cultures.”
Merklinger is also the contact person for another Web site, http://www.freedomandtrust.com/, that is affiliated with The Dorean Group, according to Farrel LeCompte, a broker for The Dorean Group process. Merklinger could not be reached for comment about The Dorean Group.
An e-mail response noted, “Alex will be away from the computer and telephone while recuperating from a sudden illness,” and a notice on the Web site states that “financial support for the escalating medical bills are very much appreciated.”
The Freedom and Trust site, like many of the Web sites associated with The Dorean Group, includes allegations about the far-reaching powers of the Federal Reserve Board and widespread corruption within the U.S. financial system. There are links to readings about “The Military Industrial Complex,” “An ‘Economic 9/11’ in the Works,” Native American prophecy relating to the New World Order conspiracy, “Our Dishonest Monetary System,” and to “The Creature from Jekyll Island” — this last one focuses on the Federal Reserve and is referenced by many Dorean-affiliated Web sites.
The Freedom and Trust site offers a window into how The Dorean Group and its affiliates attract consumers –and their money — to their program. The group’s affiliates promote philosophies that question the motives and validity of the U.S. financial system, and they encourage consumers to distrust and challenge this system.
“We are focusing on the topic of challenging spurious lending as well as fiduciary practices and the resulting erroneous mortgage debt with good reason,” the Freedom and Trust Web site states. The site asks consumers to challenge the mortgage process — “This is but one way that we are saying that we are not going to sit idle and take it, we are declaring that we want our money, our property, our country, our lives, our God given rights and pursuit of happiness back.”
Another site which LeCompte said is Dorean-affiliated, www.freemyloan.com, includes a video purporting to show “the occult pagan rituals of the global elite” and other information that claims to be “irrefutable evidence that there is a giant conspiracy of deception being perpetrated upon ‘U.S. Citizens.’ “
Still another site affiliated with The Dorean Group, www.ccrsolution.com, questions the foundations of the lending process: “Where was the loan? There wasn’t one. But you really do have to admit, it’s brilliant. Listen, we’re not the first people to ‘discover’ this was going on. But we have figured out some things that no one else has!”
And other Web sites similarly promote The Dorean Group’s process while questioning the integrity of the nation’s financial system.
Dorean promoters have admitted there are some flaws in the process. Heineman acknowledges that some clients may have ended up in a foreclosure process, and he said his group would continue to pursue litigation on their behalf.
“The foreclosure, if any, happens as a result of the bank ignoring on our presentment and moving forward, which is further evidence of a broken banking system. Any properties that have been foreclosed upon will be litigated later.” Asked whether The Dorean Group has successfully fought any foreclosure cases in court, Heineman said, “We’re still working.” One Web site, puredebt.com, has promoted the Dorean-affiliated program as a foreclosure alternative.
Heineman said that “mortgage elimination” is really a misnomer because The Dorean Group questions the very existence of a mortgage loan. “We challenge the mortgage validity. We’re not eliminating the mortgage — we don’t believe there was a valid contract to begin with.” He added, “Essentially, what we have is a broken system and we’d like to see them fix it with some honesty.” Even so, Web sites affiliated with The Dorean Group promote a mortgage-elimination process, and one affiliated Web site even carries the address: http://www.mortgageelimination.org/.
Meanwhile, real estate industry experts say they have yet to see a successful mortgage-elimination process that can hold up in court.
Dwight Bickel, a lawyer for LandAmerica Financial Group, said he is familiar with the Capital Creation Resource Web site, which is affiliated with The Dorean Group.
“I have researched many similar companies who suggest reasons why a mortgage can be eliminated without payment,” he said. “I have found no companies that have any type of procedure or forms that are considered by the courts, lawyers, banks and title insurance companies to be effective to eliminate the lien of the mortgage without payment in full.”
He added, “Most, if not all national title insurance underwriters have distributed educational bulletins alerting that the mortgage-elimination companies are recording (mortgage-discharge) documents, and concluding that the (documents) are deemed to be invalid since not signed by the lender in connection with a payoff.”
In many cases these documents are associated with such terms as “reconveyance” or “discharge” or “release,” he said.
John T. Reed, who maintains a Web site that rates real estate investment gurus, said The Dorean Group process “sounds like the guys who say income tax is unconstitutional. It’s ridiculous, but our laws are so complex that ignorant laymen figure maybe it’s true. Also, ‘the law is a ass’ sometimes, which enables people to believe maybe this works.”
He added, “I do not share the amazement of some that people fall for (mortgage-elimination programs) because I have become a reluctant expert in get-rich-quick scams. The basic principle is that people will believe an obvious lie if it is attractive enough.”
A lawyer representing Heineman, Johnson and several family trusts challenged the validity of the lending process with several lawsuits that were filed in late 2004 in U.S. District Court in Sacramento, Calif. One lawsuit, reviewed by Judge William Alsup, contends that there is no enforceable debt “when a lender funds a loan through wire transfers instead of cash,” though the judge dismissed the complaint. The lawyer who filed the complaint was fined for bringing a suit that was found to violate a court rule that requires complaints to be “simple, concise and direct.”
The complaint alleged that “no loan of money occurred” between a homeowner and lender because “a loan of legal tender did not occur” and while “the bank has the legal right to create money out of thin air, it does not have the right to conceal this and misrepresent to the ‘borrower’ that it is lending legal tender.” The complaint also argues that the homeowner “did not owe” a debt because the lender “did not make a loan of lawful United States money.”
Alsup ruled that the complaint was “largely unintelligible” and contains allegations that “are disjointed, vague and incomprehensible.”
Barry Hovis, a lawyer who represented World Savings Bank in lawsuits filed by Heineman and Johnson, said the lawsuits seemed “really just painfully ridiculous.” He added, “Clearly they’re doing a disservice not only to the financial institutions but to the borrowers that they solicited.”
Heineman said he blamed the complaint’s failure on Thomas Spielbauer, his lawyer in the case. Spielbauer did not return phone calls and e-mails seeking comment.
Sharon Horstkamp, corporate counsel for Mortgage Electronic Registration Systems, a technology company established by the mortgage banking industry, said the California litigation is not an isolated occurrence. She has identified additional litigation involving Heineman and Johnson as trustees for homes that have been set up in a family trust, and most of these homes were involved in a foreclosure process.
In November, Horstkamp started to notice a pattern in the lawsuits, which questioned the validity of the lending process. “A rash of lawsuits were being filed. I realized this might become a bigger issue,” she said.
Similar lawsuits have appeared in Washington, North Carolina, South Carolina and Georgia, according to Horstkamp, and there may be others.
LaRae Quy, a special agent with the FBI’s San Francisco office, said mortgage-elimination schemes that ask for up-front money and make big promises can be categorized the same as Nigerian scams, which use mass e-mail campaigns to convince consumers to spend money in exchange for a share of far larger rewards. Quy said consumers should contact the Better Business Bureau or their local police department or other trusted sources before entering into a program that seems too good to be true.
Monday: Secrecy surrounds mortgage-elimination programs.
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