Ocwen’s West Palm Beach office. Photo by Gary Coronado/The Palm Beach Post.
Ocwen shares have plunged in the past year as a result of an “anything goes” business culture and rampant conflicts of interest, a shareholder alleges in a suit filed this week.
The civil suit, filed Tuesday in U.S. District Court for the Southern District of Florida, names as defendants Ocwen Chairman William Erbey, Chief Executive Ron Faris, major shareholder Barry Wish and three other Ocwen executives. Plaintiff William A. Sokolowski of New Jersey alleges breach of fiduciary duty and unjust enrichment.
The New York Department of Financial Services on Monday ordered Erbey out of his company and imposed a $150 million penalty. That settlement could be just the start, said Sokolowski’s suit, filed by attorney Richard Greenfield.
“It is likely that Ocwen will be subjected to massive future fines and penalties beyond the most recent $150 million fine, and be required to make material changes to its business practices and, as well, will be forced to pay substantial amounts to defend and ultimately resolve the litigation brought against Ocwen by defrauded investors and borrowers,” the suit said.
Sokolowski’s suit alleges Erbey created conflicts of interest through his stakes in Ocwen and four spin-off companies. According to SEC filings, Erbey owns 20.7 million shares of Ocwen (NYSE: OCN), 6.8 million of Altisource Portfolio Solutions (Nasdaq: ASPS), 862,33 shares of Home Loan Servicing Solutions (Nasdaq: HLSS), 2.3 million shares of Altisource Residential Corp. (Nasdaq: RESI) and 696,141 shares of Altisource Asset Management Corp. (Nasdaq: AAMC)
“Because of the overlapping ownership, control and management of Ocwen and the other four entities, Defendants Erbey and Wish, were siphoning off revenues from Ocwen to the four related spin-off companies for services that were illicitly raising costs for the mortgagees whose loans Ocwen was supposedly servicing, thereby exposing Ocwen and its shareholders to billions of dollars in regulatory and civil liability,” the suit said.