Libel trial begins over mortgage scam charges

Mike Stuckey Senior news editor • Profile • E-mail

On the surface, the trial scheduled to begin Monday morning in the Dallas courtroom of U.S. District Judge Jane J. Boyle is your basic libel suit. Orix Capital Markets, a $1 billion financial services company, says its reputation is being seriously damaged by allegations posted on a Web site that mocks its very name.

Indeed, the Web site’s shocking claims of massive fraud and deceit by a prominent member of the mortgage-servicing industry have captured the attention of high-powered attorneys and others immersed in the current foreclosure crisis.

But lurking beneath the case at hand is a Texas-sized struggle that has snaked through state and federal courts for years, churning out a forest in documents, consuming a fortune in attorneys’ fees and spawning claims on both sides that could be put to good use by John Grisham, the best-selling author of fictional legal thrillers.

Charges of everything from conspiracy and fraud to spying and destruction of evidence spew  forth from the plaintiffs and defendants in courtroom filings and comments.

“This case and these fights are completely out of control and have been since the beginning,” Judge Boyle told attorneys for both sides at the outset of a pre-trial evidentiary hearing.

Key defendant only 20
Cyrus Rafizadeh, a defendant in the libel case, says the lawsuit is the work of an evil corporate giant determined to silence him, a 20-year-old law student, “computer nerd” and self-taught expert on mortgage securitization and trusts.

Rafizadeh says he is using his Web site, Predatorix.com, to expose a vast scam by Dallas-based Orix, information that is directly related to the current U.S. mortgage meltdown and is of vital interest to investors, regulators and taxpayers.

In one posting on his Web site, he bemoans the nation's likely loss of its position as "the undisputed banking and investment center of a worldwide capitalist system" because of misdeeds throughout the asset-backed securities markets, including mortgage trusts. Discovering and revealing the big picture and Orix's part in it, he told msnbc.com, is his “fate,” “destiny” and “calling.”

“I’d like to somehow hold these companies accountable and make them fix all this damage they’ve done to all these investors, homeowners and taxpayers,” Rafizadeh said. That damage even includes the deaths of a distraught investor and two brothers who drowned in a pool at a building seized by Orix, according to posts on his Web site.

Led by senior counsel Greg May, Orix attorneys say Cyrus Rafizadeh is merely the point man in a family conspiracy led by Rafizadeh’s father, Schumann Rafizadeh, a multimillionaire software developer, business owner and real estate investor from Houston.

They say the family is seeking revenge against Orix for foreclosing in 2001 on a family-owned apartment complex in Louisiana and eventually winning a nearly $11 million judgment against Cyrus’ mother, Mondona Rafizadeh. Orix says the Web site is just one of many outrages in the Rafizadehs’ “long and sordid” dealings with the company.

'They cannot do that'
“It’s one thing to express an opinion,” May told msnbc.com. “It’s another thing to accuse us of killing people and breaking the law. They cannot do that. That’s libel and we intend to prove it.”

The libel suit was filed as a counterclaim to a 2006 suit against Orix by a company called Super Future Equities, in which Cyrus Rafizadeh was a corporate officer. SFE owned shares in the securitized mortgage trust that held the loan on his family’s foreclosed apartment complex.

Rafizadeh said much of the material in SFE’s lawsuit, which was dismissed by Judge Boyle in December 2007, was the fruit of his thousands of hours of research into Orix, the mortgage-servicing industry, real estate trusts and the securitization process.

Rafizadeh, who said he graduated from high school at 16 and received his bachelor’s degree in business from the University of Houston last year before starting law school in Australia, told msnbc.com that he became interested in the topics after Orix foreclosed on the family’s Louisiana property. Orix, “engineered the default because they figured out you make more money in foreclosure and default than if the borrower makes all the principal and interest payments,” which his family was doing, he said.

Because his company was an investor in the securitized mortgage trust in which the Louisiana loan was held, Rafizadeh’s research was aided by access to information only available to participants. He says that helped him to assemble the breathtaking string of allegations against Orix and its executives that were encapsulated in SFE’s 95-page lawsuit and repeated on his Web site.

The suit alleged a scheme in which Orix “targeted” certain trusts, “covertly” seized control of them and used this power to force undeserving borrowers into foreclosure to reap millions in ill-gotten gain at the expense of the borrowers and investors. Orix was paid four times as much to service loans in default as loans that were performing in the trust at issue, the suit said.

Suit dismissed
The suit was dismissed when Judge Boyle ruled that SFE, Rafizadeh’s company, had not shown that it suffered any damages because of its investments in the trust.

But the Web site stayed online for all the world to see, including lawyers who are at the forefront of the nation’s current foreclosure crisis and journalists who are covering it. Rafizadeh said logs from the site also indicate it has been widely visited by computer users at large banks, the U.S. Department of Justice, the Securities and Exchange Commission and other federal agencies.

And the libel suit stayed online in the court system, pressing Orix’s claims that Predatorix.com and SFE’s legal maneuvering were the Rafizadeh family’s vicious proxy attacks on its good name.

MORE FROM CRIME & COURTS

Crime & courts Section Front

Trucker program attracts drug smugglers FBI runs out of leads in civil rights killings   Insanity defense in Fort Hood shooting case? Hate crimes up against gays, religion  Man with alleged child porn shrine charged   Ex-Marine arraigned in ‘Cathouse’ star’s killing Was doctor slaying justified to stop abortion? Former ACORN official gets probation Pastor robbed after knock on church door New charges in Somali terror case Crime & courts Section Front   Add Crime & courts headlines to your news reader: