U.S. District Judge William Alsup, Northern District of California Federal District Court, issued a ruling in the ongoing Mortgage Elimination Cases last week.

The cases, which were filed on behalf of various trusts holding title to properties (trustees were Scott Heineman and Kurt Johnson) in the Northern District of California, alleged various predatory lending and RICO causes of action against lenders. The judge dismissed previously dismissed one of the actions without leave to amend and sanctioned the attorney for the trust. The remaining cases were voluntarily dismissed and the lenders sought orders for attorney fees in defending the lawsuits.

According to the ruling, plaintiffs Scott Heineman and Kurt Johnson, through companies known as the Dorean Group and CCR, used the Internet to target homeowners behind on mortgage payments. The order says that, for a $3,000 fee, the pair would offer to "eliminate" the homeowner's mortgage.

The pair would then execute a complicated series of transactions that actually would leave "the borrower in worse condition than when he or she first looked to the plaintiffs for debt relief," Alsup said.

Heineman and Johnson's counsel, Thomas Spielbauer brought frivolous lawsuits against banks involved in the loans in an attempt to win settlements. The suits claimed the banks could not collect the debts because the loans had been paid for with wire transfers, not cash.

"The court here has seen the scam at work," Alsup said. "Greater bad faith would be hard to imagine. Plaintiffs and their counsel have employed a smokescreen to burden various lending institutions and impose upon them litigation costs in hopes of extracting settlements."

Spielbauer and his clients were ordered to pay about $77,000 to attorneys for the defendants.

Judge Alsup referred the matter to the U.S. attorney's office and the California State Bar without recommendation.