Inside Foreclosure King David Stern’s Downfall

A caricature of David J. Stern, portrayed as Superman, from a t-shirt he gave to investors.

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After years of high-flying success and millions of dollars in profits, the future suddenly looks grim for the Law Offices of David J. Stern. The firm, which was the subject of a long MoJo investigation published in August, used to be one of the nation’s most powerful “foreclosure mills,” those assembly line-like operations that handle hundreds of thousands of foreclosure cases for the nation’s largest mortgage companies. (In 2009 alone, the Stern firm handled 70,382 foreclosure cases.) But in the past few months, the corner-cutting and alleged fraud in the foreclosure business, as described in my August story, erupted into a national scandal. As a result, the Stern firm has seen its fortunes plummet, with major clients, like Fannie Mae, Freddie Mac, and Citigroup, cutting ties to Stern. Stern’s operation has also laid off hundreds of employees in recent weeks.

Until now, though, the full extent of the decline of Stern’s operation—which includes his law firm and publicly-traded real estate processing company, DJSP Enterprises—has been somewhat unclear. But according to a pair of letters obtained by Mother Jones, Stern says he plans to shed about 70 percent of his workforce. Last winter, his operation employed nearly 1,000 employees, which means 650 to 700 staffers in all could face termination. (An official with DJSP Enterprises didn’t immediately respond to a request for comment on Thursday.) Even more staggering is this statistic: In the last six months, Stern writes in one of the internal letters, his outfit has lost more than 90 percent of new business referrals. “While we are doing everything possible to guide the company successfully through these difficult times, these developments mandate that we take immediate action to align the business with current realities,” reads one of the letters, with Stern’s name listed as author. The letters, a source close to DJSP Enterprises says, were sent on Thursday to employees throughout the company; one is a termination letter, the other a letter informing recipients that they remained employed by DJSP.

Here are the two letters in their entirety:

DJS Termination Letter

 

DJS Still Employed Letter

 

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It’s risky, but also unavoidable: A full one-third of the dollars that we need to pay for the journalism you rely on has to get raised in December. A good December means our newsroom is fully staffed, well-resourced, and on the beat. A bad one portends budget trouble and hard choices.

The December 31 deadline is drawing nearer, and if we’re going to have any chance of making our goal, we need those of you who’ve never pitched in before to join the ranks of MoJo donors.

We simply can’t afford to come up short. There is no cushion in our razor-thin budget—no backup, no alternative sources of revenue to balance our books. Corporations and powerful people with deep pockets will never sustain the fierce journalism we do. That’s why we need you to show up for us right now.

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