In the ongoing saga of Brookstone Law Group who the Federal Trade Commission took action against for harming consumers, recent court documents paint a conflicting point of view.
The smart attorney Michael Thurman, who is representing Jeremy Foti, says the FTC action against Foti should be dismissed. Court documents make the claim Foti is not liable for any violations by the Corporate Defendants, he did not participate directly in the alleged violations, had no control or authority over the Corporate Defendants, and didn’t know about the claimed violations of impact on consumers. – Source
The court document referenced seems to paint the picture that Jeremy Foti had nothing to do with Brookstone Law or the actions of the Corporate Defendants. It says, “At no time did Mr. Foti ever control the marketing and sales at Brookstone or Advantis (UF 14), and he never formulated, directed, controlled, had the authority to control, or participated in any of the acts or practices set forth in the Complaint.”
Instead the finger is pointed at Vito Torchia who was later disbarred. Foti says Torchia, “was the 100% owner, CEO, president and managing attorney of Brookstone, at least through May 2014 when he testified before the California State Bar. Mr. Torchia testified that “the buck stopped with [him]” under Brookstone’s business plan. In addition to Mr. Torchia, attorney John Mortimer also served as a CEO for Brookstone and attorneys Geoffrey Broderick and Jonathan Tarkowski were shareholders of the firm.”
Court documents also say Foti was not only involved with Brookstone but also believed in their mission so strongly they hired the firm to represent them in their mortgage issues. The court document says, “Finally, Mr. Foti’s retention of Brookstone to represent his and his wife’s properties demonstrate both that he was not aware of any wrongdoing or violations by Brookstone and that he believed in the value of the law firm’s services. In about April 2011, Mr. Foti and his wife joined other plaintiffs in suing JP Morgan Chase in Robert Potter v. JP Morgan Chase, which was initially filed in the Los Angeles Superior Court (UF 108). Despite the fact that the Potter action was dismissed in about July 2015, Mr. Foti and his wife paid $4,000 on July 28, 2015, and $16,000 on September 1, 2015, for the firm’s services (UF 109) in accordance with their agreement with the firm, presumably based on their hopes that the Brookstone attorneys would be able to raise a new claim on their behalf based on the Peterson ruling or an alternative theory. Mr. Foti’s lack of knowledge or belief that Brookstone was violating any laws is amply demonstrated by the fact that he personally paid $20,000 to Brookstone to become and remain a client of the firm.”
The Federal Trade Commission sees things a bit differently. On the same day the Foti document was filed with the court, so was the FTC Memorandum in Support of Summary Judgment Against Defendants Jeremy Foti and Charles Marshall.
The FTC says, “Although Jeremy Foti attempted to hide his involvement, he was discovered by the Receiver on June 2, 2016. Uncontroverted evidence confirms that he was a control person and that he also directly participated in the deceptive acts.” The FTC also says “By November 2014, Foti, along with [Damian] Kutzner, began recruiting Marshall to be the Advantis attorney, with responsibility for Brookstone matters. (including Ex. 30, which indicates Marshall was aware Brookstone clients were paying monthly fees) Throughout the negotiations, Marshall insisted that Foti be a part of a small group, usually including just Marshall, Kutzner, and Foti, on negotiations. Notably, Torchia was not involved in these negotiations, and Marshall testified that Foti was a negotiating principal.”
The FTC paints the picture Jeremy Foti was a knowledgeable debt relief industry insider. They say, “Foti’s history shows a pattern of illegal and unethical behavior and attempts to hide his involvement with companies. In the 2000s, Foti owned and operated a mortgage brokerage called Americor Lending Group Inc. (“Americor”). For acts that took place while Foti was an owner and operator, the State of Washington cited Americor for alleged bogus lending practices and the Federal Communications Commission cited Americor for illegal telemarketing. Following Americor, Foti moved behind the scenes to assist in debt settlement businesses, an industry rife with fraud. Foti provided consulting services, office space, and capital to Morgan Drexen, Inc. (“Morgan Drexen”). The Consumer Financial Protection Bureau sued Morgan Drexen in 2013 for charging illegal advance fees for its services. In 2015, the CFPB obtained a final judgment against Morgan Drexen as a discovery sanction after proving Morgan Drexen fabricated evidence in discovery. In the late 2000s, Foti also began operating Kirkland Green, another debt settlement company that has generated consumer complaints.”
“Foti attempted to hide his involvement. In addition to avoiding official titles, he has admitted using “shelf companies” with “nominee services,” which allow him to own companies while hiding his ownership from the public. Webstar Inc., a central company in the current fraudulent scheme, was just such a shelf company. Foti funneled more than $1.5 million to this company while hiding his ownership of Webstar from Brookstone’s purported owner, Vito Torchia. Following the TRO, Foti reached out to the FTC, claiming to be a consultant for an entity other than the Corporate Defendants. Tellingly, his agreements with the Corporate Defendants include confidentiality provisions that prevented the Corporate Defendants from disclosing his work for them.” – Source
The FTC also takes issue with the claim Foti was not a controlling person in the enterprise. The FTC says, “There is no material dispute that Foti was a key control person for the Corporate Defendants. As the documents show, Foti was a manager, with various titles such as VP of Marketing and CFO. His emails show his obvious control and authority, including his input on, and distribution of, sales and marketing materials while also determining bonuses for sales people. Similarly, the paper owner of Brookstone, Torchia, declared under penalty of perjury that Foti was a manager with broad authority regarding mailers and scripts, with oversight over sales. Foti was also paid like an owner. Starting in 2011, he, Torchia, and Kutzner all received the same compensation and he and Kutzner were listed as “executives” in the accountant’s chart. Without Torchia’s knowledge, Foti also received approximately $1.5 million in additional payments through Webstar, a company he told Torchia he did not own or control. When Torchia began facing bar troubles, Foti and Kutzner cut Torchia out of the business and arranged for two new attorneys, Broderick and Marshall, to come on board. Foti was integral in the negotiations with Marshall and Marshall testified that Foti was a principal. Although Foti has submitted declarations attempting to refute these allegations and denied them at his deposition, he provides no evidence to support these denials.”
Foti has a long record of activity in the debt relief space. He has lived to fight another day, many times. And Foti’s lawyer, Thurman, is a sharp guy. It’s up the the Court now to see if either of these competing arguments gets any traction. Only time will tell.