LAS VEGAS (AP) — A Nevada judge has gutted a marquee criminal complaint filed in 2011 against two mortgage lending company employees, ruling that state prosecutors improperly presented information to a grand jury to obtain an indictment in what they called a massive mortgage fraud "robosigning" scheme.
A lawyer for defendant Gary Randall Trafford on Tuesday hailed Clark County District Judge Carolyn Ellsworth's ruling as "extraordinary" and accused Nevada Attorney General Catherine Cortez Masto and her deputies of prosecutorial misconduct.
The prosecutor heading the case was facing a foreclosure himself at the time, and a key witness in the case committed suicide in 2011, said John Hueston, attorney for Trafford.
"This case was announced as a groundbreaking robosigning case," Hueston said. "The judge found there was no robosigning whatsoever."
"It was prosecutorial misconduct," Hueston alleged, "and the judge found it was so pervasive that she was not sure that the grand jury would otherwise have indicted" Trafford or co-defendant Geraldine Ann Sheppard.
Attorney Ken Julian, representing Sheppard, said he was "grateful for the court's ruling."
Masto issued a statement characterizing Ellsworth's decision as a pretrial setback in an ongoing case and denied any intent to mislead the grand jury. She said she was considering whether to ask another grand jury to refile criminal charges.
"The judge made an evidentiary ruling yesterday that we presented additional evidence which demonstrated to the grand jury the consequences of the defendants actions on homeowners," Masto said through spokeswoman Jennifer Lopez. "There was no intent to mislead the grand jury. We think the judge recognized this."
The judge dismissed all of the 204 felony and 102 misdemeanor charges against Trafford and Sheppard. The charges consisted of notarization of a signature of a person not in the presence of a notary public, which is a gross misdemeanor, and two different felonies: offering false instruments for filing or recording, and false certification of an instrument.
Trafford, 50, of Irvine, Calif., and Sheppard, 63, of Santa Ana, Calif., had pleaded not guilty in the case.
The two worked for Lender Processing Services Inc., the nation's largest loan processing company. They were accused of directing a scheme to "robosign" tens of thousands of fraudulent foreclosure documents in the Las Vegas area during the hectic months before the Great Recession without verifying the information they contained.
Robosigning became an issue in Las Vegas and other areas with large numbers of foreclosures, and banks had to backtrack and review foreclosures across the country to make sure paperwork was in order.
At the same time Masto announced the criminal case against Trafford and Sheppard, Masto filed a civil lawsuit that seeks to collect hundreds of millions of dollars from Lender Processing Services Inc., also known under the names DOCX LLC and LPS Default Solutions Inc.
She said "former employees and industry players" described LPS as "an assembly-line sweatshop, churning out documents and foreclosures as fast as new requests came in and punishing network attorneys who failed to keep up the pace."
John Lovallo, a spokesman for Lender Processing Services, said company officials declined to comment.
The company, based in Jacksonville, Fla., said in December 2011 that it disputed Masto's allegations and would fight.
The civil case is active in Nevada state court.