Saturday, June 8, 2013

OCC Misses Another Conflict of Interest: Foreclosure Review Outreach/Payment Processor Rust Consulting Owned By Residential Real Estate Player Apollo, Being Sold to VC Arm of Citigroup « naked capitalism

Yet another gathering of crows is emerging in the role of Rust Consulting in the foreclosure review process and history of it and its related companies.  The plot thickens and the conflicts of interest continue to become increasingly nefarious. Below are excerpts relative to this activity and the history of Rust Consulting and its ties to Apollo Global Management, SourceHov, CVCI, Citigroup and firms such as Coldwell Banker, Century 21, and Sotheby's Real Estate.

The crows feed at Ugland House in the Grand Caymans.  Even JPMorgan Chase's tendrils are linked to this tax haven of the rich and powerful.  See this link:

OCC Misses Another Conflict of Interest: Foreclosure Review Outreach/Payment Processor Rust Consulting Owned By Residential Real Estate Player Apollo, Being Sold to VC Arm of Citigroup « naked capitalism

 Now why might Rust be motivated not to be as diligent as it could be? Rust “joined” SOURCECORP, now SourceHOV, in 1999. SourceHOV is majority owned is Apollo Global Management, one of the fund managed by private equity giant Apollo. Apollo struck a deal to sell SourceHOV (and therefore Rust) to CVCI, a venture capital fund operated by Citigroup, in mid-March (I believe the sale has not yet closed).
Now let’s look briefly at some of Apollo’s involvement in residential real estate, a conflict that appears to have escaped the OCC’s attention. Apollo owns Realogy, which is the biggest residential brokerage service in the US, through its brands Coldwell Banker, Century 21, and Sotheby’s Real Estate. Residential brokerage firms have reason to play nicely with servicers; investors have claimed they’ll do broker price opinions for nothing but submit a bogus charge to the servicer (required periodically when a borrower in a securitized mortgage is delinquent) if they get the more lucrative sale of the property out of bank real estate owned. Apollo also manages Apollo Residential Mortgage, a REIT that invests in and manages RMBS, residential mortgage loans, and other US residential mortgages assets. Who are sources for loans? The big banks as originators and the servicers for seasoned loans. And in general, of all the big PE funds, Apollo has the deepest and most extensive dealings in commercial and residential real estate, giving it deep ties to the real estate units of all the major banks and servicers.

So it looks to be a stunning lapse for the OCC and Fed not to have caught this not-inconsiderable conflict of interest. Rust is also an approved Federal contractor, as reader LN, who provided us with this lead, also pointed out. Did Rust fail to make adequate disclosure of its ownership in its applications to become a government contractor?
 The only upside out of this lapse is that it reflects sufficiently badly on the OCC and Fed that it might force them to be more zealous about getting Rust to do its job than they might otherwise. Assuming, of course, that NC readers turn the heat up by alerting their Congressmen of this latest IFR-related fiasco.
See  Rust Consulting Inc GSA 520 Contract


Rust Consulting has a 35-year history founded in the combination of technology and consulting services to the legal industry.

Rust was founded by Ronald A. Rust, Esq., as The Rust Consulting Group, Inc. in 1976. Since inception, Rust has been a leader in applying computer technology to the practice of law. Using the most advanced computers and technology available, Rust coded millions of documents and built databases for more than 500 cases.

In 1988, Rust began a new business segment – claims administration for class action settlements and bankruptcy cases. As the claims administration segment grew, it became a business of its own.

In 1995, Rust Consulting, Inc. became a separate operating entity focused on claims administration.

In 1999, Rust Consulting joined SOURCECORP, Inc., a predecessor company to SourceHOV.  Rust remains a wholly owned subsidiary of SourceHOV.

In 2006, Rust acquired two complementary firms: a class action settlement administration firm, Complete Claim Solutions, LLC, and an advertising and media placement firm with which Rust had often worked before and which was already a fellow SourceHOV company, Kinsella Media, LLC. While often working separately, when jointly engaged, Rust and Kinsella Media seamlessly provide the nation’s best class action settlement administration and notice program design and implementation.

In 2009, Complete Claim Solutions was integrated into the Rust brand.

Also in 2009, Rust introduced a new focus in the business sector, dedicated to assisting clients with critical communication needs such as responses to data breachesproduct recalls, and other time-sensitive or complex projects.

In 2010, Rust leveraged its previous experience through expanding and formalizing two additional practices: a mass tort practice within our legal sector, andpublic sector. In the public sector, Rust was awarded two General Services Administration "GSA") contracts: Schedule 520 - Financial and Business Services ("FABS") and Schedule 70 - Information Technology ("I.T.").

Rust has provided services for more than 3,500 projects and distributed billions of dollars in settlement assets.
In 2013 Apollo struck a deal to sell SourceHOV (and therefore Rust) to CVCI, a venture capital fund operated by Citigroup, in mid-March (I believe the sale has not yet closed).



Citi Venture Capital International (CVCI Private Equity) / History.

Citi Venture Capital International - Citi Capital Advisors

Citi Venture Capital International is a leader in global Emerging Markets private equity and invests in companies with compelling growth prospects across India, ...

 Citi Venture Capital International is part of the Citi Capital Advisors platform.

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That shady offshore tax haven known as Ugland House in the Cayman Islands strikes again. After consuming a chunk of Jack Lew’s Senate confirmation hearing, with Senators grilling Lew on why he owned an investment housed in this offshore tax dodge while working for the Obama administration, the Cayman Islands’ address has surfaced once again in the foreclosure settlement scandal.

Note:     Ugland House is a building located in George Town, Cayman Islands Located on South Church Street, the building is the registered office address for 18,857 entities and has for years been linked to tax avoidance strategies. During his first presidential campaign, U.S. President Barack Obama referred to Ugland House as "either the biggest building in the world or the biggest tax scam in the world." President Obama subsequently nominated Jack Lew to Treasury Secretary in 2013, despite objections that Mr. Lew had invested heavily in funds in Ugland House while he worked as an investment banker at Citigroup during the 2008 financial meltdown, with President Obama stating that he was not concerned about Mr. Lew's past financial transactions. The building is occupied by the law firm Maples and Calder

  • Ugland House Explained a website by the law firm that maintains Ugland House
      • Maples and Calder the law firm that resides at Ugland  House                                                                                                                                                                                      
  •  BUSINESS ADDRESS: UGLAND HOUSE, P.O. BOX 309, GRAND CAYMAN STATE: E9 ZIP: KY1-1104           BUSINESS PHONE: 44 (0) 20 7529 5202

On April 30 of this year, just 18 days after the first wave of checks from the Federal government’s settlement of the so-called Independent Foreclosure Review began arriving in the mail – and bouncing – Citigroup Venture Capital International (CVCI), Lew’s former Ugland House investment, bought a large stake in the company that was mailing the checks, SourceHOV, parent of Rust Consulting. As reported by Naked Capitalism, the ownership stake was made despite Citigroup being one of the banks in the foreclosure settlement ...

When Jack Lew left his executive position at Citigroup at the end of 2008 and joined Hillary Clinton’s State Department as Deputy Secretary of State, he retained his investment in CVCI, a $7 billion private equity fund. According to his January 11, 2009 financial disclosure report, his CVCI account at that point had a value of between $100,000 and $250,000. As indicated on the document below, released as part of Lew’s Senate confirmation hearing, he still owned $19,470 of this foreign hedge fund investment in calendar year 2010 while working in a high level, highly sensitive State Department post. In Lew’s confirmation hearing in February, he said he had since sold the position at a loss. . . .

Rust Consulting, the firm serially mismanaging the payments to foreclosure victims, has its own Political Action Committee which is somewhat comically called the Rust Consulting “Administrative Excellence” PAC. Curiously, Rust Consulting is paying the claims for both the National Mortgage Settlement and the Independent Foreclosure Review settlement.

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