The fatal flaw behind the justification of “ta-da” endorsements–effectively no one has “personal knowledge” of them
IMPORTANT NOTE/DISCLAIMER: The following article is not legal advice and was not written by an attorney. It is merely a collection of common-sense, rational observations written by a sane, rational layperson with common sense. It is recommended that you consult with an attorney for any and all legal advice and/or action.
A good magician never reveals how the trick is done. But what if the magician’s assistant has to testify under oath?
Bank of America/Countrywide’s Michele Sjolander has done just that a number of times, and in deposition testimony in the case of Kirby v. Bank of America (Southern District of Mississippi, 2012) Sjolander (pronounced “show-lander”) revealed the magic wand used by Bank of America to produce the so-called “ta-da” endorsements–that is, endorsements that magically turn up on promissory notes after a lawsuit has been going for some time with banks relying on notes that have no endorsements. Note: For more on why endorsements of promissory notes are so important, see this. And this.
But in the case of Bank of America’s (and Countrywide’s before it) “ta-da” endorsements–like all good magic acts performed using “magic” wands–there is never an actual overturning of the laws of nature or science, there is only prestidigitation, suspension of disbelief, and diversion of the attention of the observer.
The great thing about this story is that the “magic wand” used by Bank of America/Countrywide is an actual wand. Not a wand like Harry Potter’s of course–it’s a scanning wand, similar to the familiar wand used by security guards to check for the presence of metal on people who are entering federal buildings, boarding planes, etc. The main difference is that the Bank of America/Countrywide wand scans barcodes placed on collateral instruments. And according to Sjolander, this scanning wand generates a computer record of when and where these barcodes were scanned. And it is this computer record–and only this computer record–that allows a judge to grant a foreclosure in favor of Bank of America/Countrywide if a “ta-da” endorsement is presented.
Read this part if nothing else!
This computer record is all-important in completing the magic trick of the “ta-da” endorsement because without it, there is nothing to definitively establish when, where, or even if an endorsement was actually on a given note when it should have been there.
This is because, even though Sjolander herself is the named endorser on a large number of these notes, she admitted four crucial things that demonstrate that she has no personal knowledge of any given endorsement:
a) she never performs the endorsements,
b) she does not know the names of the people who performed the endorsements,
c) she is generally not present when the endorsements are supposedly done, and
d) she cannot say with any certainty when the endorsements were placed on the notes.
One can see then, that although Sjolander has been deposed a number of times regarding her role in the endorsements, she actually has no role in the endorsements other than the fact that her signature is affixed to the rubber stamps with which the notes are supposedly endorsed. In legal terms, then, she has no “personal knowledge” of whether a given note in a given lawsuit was endorsed at the proper time or not. That’s why the computer record generated by the magic scanning wand is so important to Bank of America/Countrywide’s sleight of hand.
The fatal flaw
However, the fatal flaw of the magic scanning wand is essentially twofold:
1) just as with the stamping of endorsements, Sjolander has no personal knowledge of this scanning/wanding either, as she does not perform the scanning/wanding of the collateral instruments, is not present during the scanning/wanding, and so forth; and
2) the scanning/wanding and the computer record generated thereby does not prove that the note was endorsed, it only proves that the note/collateral file was wanded. And that’s assuming that the computer record is not itself fabricated for litigation purposes, i.e., a “ta-da” business record.
This is an important distinction– perhaps the most important distinction–so it bears repeating: the computer record supposedly generated by the scanning/wanding does not prove that notes/collateral files were endorsed before entering the vault, it only proves that the notes/collateral files were wanded.
After all, one can easily imagine the minimum wage/temp types–who likely were the ones doing this purported scanning/wanding–cutting corners (because they’re bored, or upset, or hungry, or angry at working such a menial job, etc.) and say, not properly checking for endorsements before scanning/wanding but still waving the wand anyway.
So the only person who has personal knowledge of the scanning/wanding is not Sjolander or any of her fellow nominal endorsers–the only person who can testify that the note was endorsed at the time of scanning/wanding would be the person who actually did the scanning/wanding, and it is extremely unlikely that such a person could ever be brought forth as a witness. Admittedly, Sjolander is silent on the identity of those wielding the magic scanning wands, but presumably neither Sjolander nor Bank of America/Countrywide itself knows with any certainty which minimum-wage/temp worker scanned/wanded which note on which day, just as Sjolander testified that she could not name the person who supposedly endorsed the note in the Kirby case. So it seems that effectively, there is no one at Bank of America/Countrywide who can testify from personal knowledge that they know when or if any given note was endorsed or not.
That last point is so important, it too bears repeating: effectively, as shown above, it appears that there is effectively no one at Bank of America/Countrywide who can testify from personal knowlege (i.e, the legal standard) that they know when or if any particular note was endorsed or not. That such a situation could exist seems utterly unbelievable, but it seems a more than reasonable conclusion to reach given Sjolander’s testimony in Kirby v. Bank of America.
Notes likely not endorsed at all
Despite Sjolander’s testimony, the most likely possibility is that the notes weren’t ever endorsed at all and no attempt was ever made to endorse them, except when endorsements were needed for litigation purposes. Consider the following:
a) DeMartini Testimony Transcript
In the case of Kemp v. Countrywide (BK case from New Jersey, 2010) a Bank of America/Countrywide employee named Linda DeMartini testified to two important points: 1) she had “never seen an actual note that has an endorsement on the bottom,” and 2) to her knowledge, the only time endorsements were prepared was when they were needed for litigation purposes (this was fleshed out under questioning from the judge). By the time of her testimony in Kemp, DeMartini had worked for Bank of America/Countrywide for 10 years and at the time of her testimony, she worked in the litigation department at Bank of America as an operational team leader (according to her testimony, she had been in that position for approximately a year). So DeMartini was clearly competent to testify to the matters to which she testified, and even Bank of America must have thought so as they flew her from California to New Jersey to testify in the Kemp case.
b) Abigail Field Investigation into Countrywide Endorsements
Abigail Field wrote an article for Fortune magazine (“At Bank of America, more incomplete mortgage docs raise more questions”, June 3, 2011) which corroborated the testimony of Linda DeMartini. Field investigated foreclosure cases in two New York counties, looking for Countrywide endorsements. Her findings:
“There were 130 cases where the Bank of New York (BK) was foreclosing on behalf of a Countrywide mortgage-backed security. In 104 of those cases, the loan was originally made by Countrywide; the other 26 were made by other banks and sold to Countrywide for securitization.
None of the 104 Countrywide loans were endorsed by Countrywide – they included only the original borrower’s signature. Two-thirds of the loans made by other banks also lacked bank endorsements. The other third were endorsed either directly on the note or on an allonge, or a rider, accompanying the note.”
c) Testimony of Document Expert Frank Norwitch in HSBC v. Rose
In the Florida case of HSBC v. Ivor Rose: 2012_06_19 D Motion & Memorandum Fraud 80371 (11th Circuit, Miami-Dade), document expert Frank Norwitch found that the purported endorsements of Bank of America/Countrywide’s Michele Sjolander on a number of promissory notes in that case “are not original ink signatures” because the endorsements “microscopically do not display straie, reverse-side embossing, three-dimensionality, nor a ‘wetting’ of the paper fiber” (found on p. 55 of the pdf linked above). Exactly how the endorsements got on these supposedly original notes is unknown, but the fact that Norwitch opined that they are not “original ink signatures” certainly lends a lot of support to the suspicion of many that the endorsements were placed there long after they legally should have been in order to make the notes seems legitimate for litigation purposes. This practice of preparing endorsements for litigation purposes only was, as noted above, testified to under oath by Linda DeMartini in the Kemp case. And Norwitch obviously has a lot of experience with document examination as he was a senior document examiner for the Miami-Dade Police Department for approximately 17 years (1982-1999) and has commendations for his work from both the IRS and the FBI.
d) Findings of the OCC in April 2011 Consent Order with Bank of America
More evidence that notes weren’t endorsed was found by the Office of the Comptroller of the Currency (OCC), when the OCC said the following in the April 2011 Consent Order between Bank of America and the OCC: that Bank of America “litigated foreclosure proceedings and initiated non-judicial foreclosure proceedings without always ensuring that either the promissory note or the mortgage document were properly endorsed or assigned and, if necessary, in the possession of the appropriate party at the appropriate time.”
This single statement completely supports the testimony of Linda DeMartini in Kemp v. Countrywide, which, as noted above, stated that notes were not endorsed on the bottom and additionally that notes were not physically transferred to the proper parties as required by the UCC for negotiation to have occurred (in the case of Kemp, the note should have been transferred to Bank of New York, but it wasn’t so transferred).
e) “Ta-Da Endorsements” Common
There have been a number of cases of so-called “ta-da endorsements” in lawsuits. That is, the bank first offers as evidence and relies on a promissory note without endorsements, yet claims that money due under the note is payable to an entity other than the payee named on the note. Of course, this is impossible under the law (UCC), and if and when this impossibility is brought up during the course of a given lawsuit, often the banks will magically get their hands on an endorsed note and present it to the court–“Ta-da!” Courts will often then completely disregard the unendorsed note and focus only on the newly-presented (and almost certainly newly-manufactured) one. The link below documents a number of these “ta-da” endorsements in Florida cases.
Only one thing is left to say–“Ta-da!” The magic trick of securitization and the “ta-da” endorsements–pulled out like rabbits from hats–revealed as mere chicanery and smoke and mirrors.
IMPORTANT NOTE/DISCLAIMER: The above article is not legal advice and was not written by an attorney. It is merely a collection of common-sense, rational observations written by a sane, rational layperson with common sense. It is recommended that you consult with an attorney for any and all legal advice and/or action.