Which was why Bruce was trying so hard to ingratiate himself with the crusty partner. Usually at a large firm a first-year associate took assignments from a senior associate, who in turn worked directly with a partner. Bruce hoped that he could win Puck’s confidence, and that Puck—wary of again facing the loss of clients to a senior associate—would by-pass the traditional structure and directly oversee Bruce.
As for winning Puck’s confidence, it came down to one thing—ensure that nothing interrupted Puck’s income stream from his client base. The unfortunate senior associate apparently threatened Puck’s firm hold on the institutional clients he inherited from his father. Such a threat was an inevitable result of the manner in which the firm serviced its clients—the associate or junior partner worked directly with the client on a daily basis, while the senior partner provided occasional oversight. This familiarity often resulted in the client contacting the junior partner directly when a new legal matter arose. Under the complicated formula used for calculating firm profit distributions, the senior partner would have to share profits from the new matter with the junior partner. Bruce, however, as a junior associate, was not entitled to any share of firm profits and therefore was not a financial threat to Puck.
Of course, Puck would also be concerned that his clients be well-serviced. This could be a problem for Bruce. Usually, a young associate would get legal guidance from the senior associate assigned to the matter. Or, in some cases, the associate could go directly to the partner. But it didn’t seem that Puck would be particularly receptive to Bruce asking frequent questions. And, because of the competitive atmosphere at the firm, Bruce doubted that any of the more experienced associates would be willing to waste valuable billing time holding the hand of a first-year associate. Bruce would have to be careful.
Puck finally spoke. Bruce looked at the clock—he had been waiting for six minutes. “I noticed that you have been working on the foreclosures for Yankee Bank. It seems that, since the real estate market has been so prosperous the past decade, none of the more senior associates have had any experience handling foreclosure cases.” Bruce smiled to himself; when a senior associate asked if any of the new associates wanted to work on the Yankee Bank foreclosure cases, Bruce had quickly volunteered. The other associates not only saw the work as boring and dry, they also dreaded the thought of actually having to stand out on a street corner in Lowell or Revere or Dorchester and auction off some piece of property like a pretzel vendor. But Bruce saw the cases as a perfect opportunity to obtain inside information on real estate opportunities.
Puck continued. “I have just received a request from Nickel Bank of New York that we handle their foreclosure work in Massachusetts. Apparently they made some rather, shall we say, ambitious mortgage loans over the past few years, and a number of the borrowers are delinquent. Nickel wants to move ahead quickly on the foreclosures, before it gets a reputation in the area for not being aggressive with its borrowers. That is why they have retained us rather than a smaller firm—they are looking for a show of strength.” Puck paused at this point to display his long yellowed teeth. “They have instructed me to take a hard line with all of the loans, and to move to foreclosure as quickly as possible. I have agreed to take the cases on a flat fee of $2,000 per foreclosure, plus costs.”
Bruce took notes as Puck spoke, but his mind quickly found the meaning behind Puck’s words. Puck wanted a young associate to whip through these cases as quickly as possible, the borrowers and their sad stories be damned.
Puck did not wait for Bruce to finish writing. “Nickel has given us 40 files to start with. Get a real estate paralegal to help you. Give me status reports twice a month. I expect that there will be more cases if these are handled appropriately.”
Puck dismissed Bruce, who went back to his office. He reflected on the amount of time he had been spending on the Yankee Bank foreclosures. With a trained paralegal, he could complete a case in far less time than even Puck expected. Based on the $2,000 fee Puck was charging the client, Bruce calculated that Puck expected him to spend about 400 hours on the 40 foreclosure cases. Bruce was sure he could complete them in less than half that time. In other words, Bruce should have approximately 200 free hours to himself. Enough time to do all sorts of fun things.
* * *
[November 8, 1989]
Bruce spent the next morning at the law library reviewing every reference material he could find that related to foreclosure law and practice. Unlike the Yankee Bank cases, he would not have the benefit of a senior associate guiding him on the legal formalities in the Nickel Bank cases. Which was fine with Bruce—no guidance meant no oversight.
As Puck indicated, little had been written about foreclosure practice over the past decade because the booming real estate market resulted in few foreclosures. Bruce copied what he could find, and walked over to the Land Court to see if any of the older court clerks could give him any guidance. A desk clerk directed him to Eddie Sullivan, a red-nosed, white-haired caricature of the Irish civil servant that still existed in many parts of Massachusetts. Eddie’s eyes were clear, and Bruce asked if he could buy him lunch. Eddie hesitated. Bruce suggested the Scotch and Sirloin restaurant. Eddie accepted.
The restaurant occupied the top floor of an old warehouse building, midway between Boston Garden and the edge of the financial district. Customers—often businessmen on their way to or from the Garden to watch the Bruins or Celtics play—loaded onto an old freight elevator and were hoisted up to enjoy thick, juicy steaks and warm, doughy bread. And perhaps a tumbler or two of Scotland’s nectar. Bruce had done well in Eddie’s eyes by suggesting it.
Over lunch, Eddie laid out for Bruce—from beginning to end—the process of foreclosing on property in Massachusetts. It was technical and cumbersome, and the slightest error could invalidate the entire procedure. Bruce took notes, paying special attention to the clerk’s statement that the entire process took place absent any judicial oversight.
“So, once the auctioneer says, ‘Sold,’ that’s it? No court reviews it?”
“That’s right.” Eddie spoke in short sentences, sipping from his Dewar’s between each one. “In most states, you have to get a court order before you can foreclose. Or the court has to approve the sale afterwards. But in Massachusetts, you just do it. Don’t need the court at all.”
“So there’s no oversight of the process? Nobody checks to make sure the bank did all it could to get the highest price?”
“That’s right.”
Bruce indulged in a rare sip or two of a mid-day beer himself, paid the check, and strolled contentedly across the cobblestoned expanse of City Hall Plaza toward his office, his mind drunk with possibilities. No court oversight. Amazing....
“Wow. Getting soft, huh?” Gus’ voice jolted him out of his sanguinity. Like a wasp at a picnic. “The old Bruce never would have let someone sneak up on him like that.”
Bruce turned to face Gus, then quickly scanned the plaza. Last week he thought he had seen a couple of cops hanging around outside his apartment building. Nobody seemed to be watching them now, but they were standing alone together in the middle of an acre of brick nothingness. Anybody with a telephoto lens could easily snap a shot of them. That’s all he needed—pictures of him and Gus together just before Gus tried to knock off the Gardner Museum.
He turned his back toward the windowed high rises. “Damn it, Gus, we’re like sitting ducks out here.”
Gus smiled at Bruce. Today he wore a baseball cap, turned backwards. At least he could have picked something with a wide brim to hide his face from any camera. “I know we are. But there’s nothing wrong with a law-abiding citizen talking to his lawyer, is there?”
“What are you talking about?”
“I want some legal advice from you. Help you work off your debt to me.”
Bruce sighed. The pictures, if any, had already been taken. “There’s no debt, Gus. Now what do you want?”
Gus smiled, the same infectious grin Bruce had seen a thousand
times. “Before I ask, I just need a clarification on something. If I tell my attorney about a crime I committed, can he report me?”
Bruce had no idea where Gus was going with this. “No. The conversation would fall under the attorney-client privilege. If he told, he would be disbarred. And even if he did tell, the conversation wouldn’t be admissible in court.”
“That’s what I thought.” Gus smiled again. “Well, then I need some advice from my lawyer.” Gus described all the crimes he had ever committed. “So that’s it. Seven art heists, plus some other petty stuff. Should I go confess my crimes?”
“Stop fucking around, Gus. Of course not.”
“Thanks for the legal advice, counselor.” Bruce suddenly realized what Gus was doing, but it was too late to stop him. Gus took a step back, pulled a small cassette player from his pocket and dangled it in front of Bruce. “It’s such good advice that I decided to keep it all on tape.” Gus turned and waved as he walked away. “Oh, and don’t forget to send me a bill!”
Bruce cursed. Gus had outsmarted him. The whole basis of their relationship was that their fates were intertwined—if one ratted the other out, the other would simply return the favor. Like two men holding guns to each other’s temples. But Gus had suddenly disarmed Bruce. Bruce could now longer hold the threat of ratting on Gus over his head, because anything Bruce knew about Gus’ past crimes was now covered by the attorney-client privilege. Bruce would be disbarred if he said anything, and the information would be of no use to the police even if he did.
All of a sudden, only one of them held the gun. And it wasn’t Bruce.
He cursed again. To be bested by Gus was bad enough, but to lose to him on a legal technicality was positively shameful. Gus must have seen some movie where the Mafia attorney couldn’t testify against his clients and figured he’d give it a shot in real life. And he hit pretty close to the bulls eye. Bruce could try to argue that his knowledge of Gus’ crimes pre-dated their attorney-client conversation, but to do so he would have to reveal his own duplicity in the crimes. Hardly a path out of this mess.
All right then. So much for divorcing himself from Gus. He would have to placate Gus for as long as he could, and hope that he could pull off a scam at his firm before the Gus bomb blew up in his face.
* * *
Two days later, still angry at himself for allowing Gus to best him, Bruce took an early lunch so he could attend a foreclosure auction. The auction advertisement in the Globe had been stuck between one for a liquidation of Persian rugs and another publicizing the sale of restaurant equipment from an out-of-business oceanfront restaurant. The rug ad itself was reflective of nothing, but Bruce had noticed an increasing number of restaurant closings, and wondered if the economic boom was going to be followed by an equally severe bust. It wouldn’t necessarily be a bad thing—chaos was a breeding ground for opportunity.
The foreclosure sale was held in the driveway of the mortgaged property, a single-family home on a cul-de-sac in Medford, a middle class suburb north of Boston. Bruce had driven by the house the day before and had seen a broker’s “For Sale” sign in front. The sign was down now, but Bruce had called the broker, who told him the house was on the market for $289,000. When pressed, the broker had estimated that a more realistic value for the house was $235,000.
Bruce had researched the title on the property prior to the sale, and knew that the homeowners—Mario and Colleen Allante—had paid $260,000 in 1987 for a home that had sold in 1983 for barely half that amount. They had a mortgage of $247,000—Bruce calculated that the monthly payment, including taxes and insurance, approached $3,000. A commercial van with bright red “Mario’s Carpet” lettering sat in the driveway. Mario probably raked it in installing carpet during the construction boom, then couldn’t afford $36,000 per year in housing costs once the boom ended. Bruce shook his head—who was more of an idiot, Mario for taking such a big mortgage or the bank for making such an aggressive loan?
From his title search, Bruce also knew that Mario owed another $15,000 to the IRS and $10,000 to a wholesale carpet supplier, each of whom had placed a lien on the property. No wonder Mario was asking $289,000—he needed that much just to pay the broker and clear the liens on the property.
Bruce approached the auctioneer, who was standing huddled under an umbrella with a man Bruce assumed to be the bank’s attorney.
“Hello, sir. Are you here for the auction?”
No, Bruce thought, I’m here to ask Mario for a loan. “Yes, I am.”
“Welcome, then. Do you have the ten thousand dollars?” A certified check—or cash—was a requirement for making a bid at the auction. Bruce wondered how many people actually showed up with an envelope full of cash.
“No, but I’d like to observe, if that’s okay.”
Bruce was not alone—there were seven or eight other people milling about in the driveway trying to stay warm in the November chill. Despite the crowd, Bruce could see that the auctioneer’s sheet of paper entitled “Qualified Bidders” remained blank. Bruce guessed that many of the onlookers were Mario’s neighbors, drawn by a kind of morbid fascination.
The auctioneer gave Bruce a copy of the Sale Agreement, which Bruce read through quickly. Bruce smiled. The bank’s attorney had drafted an agreement that was so one-sided in favor of the bank that it was virtually impossible for a third party to be comfortable enough to make a bid. For example, prospective bidders were not allowed to view—much less inspect—the inside of the house. Furthermore, it was the successful bidder’s responsibility to evict the current owner and his family from the house. And the successful bidder had to close within 21 days, far too soon for anyone hoping to get a mortgage. Finally, the bidder was given no assurances that the bank even had clear title to the property.
Bruce shook his head. The draconian agreement was a classic example of the legal tail wagging the business dog. The attorney, in the name of zealous representation of his client (which zealousness, of course, merited a sizable fee), protected the bank from even the most obscure risk and transferred that risk to the bidders. No matter that the bank could easily have assumed many of these risks—for example, the bank had title insurance to protect against title defects, so there was no reason to force a bidder to assume that risk. But avoiding risk was what lawyers did by nature. Usually there was an opposing attorney negotiating from the other side, and the tension of this negotiation resulted in the parties sharing the risks. But in the foreclosure context there was no opposing attorney, no tension. Just some lawyer with a wet dream-like opportunity to draft a completely one-sided agreement.
It probably never occurred to the attorney that the bidders would significantly discount their bids to cover these risks. The result was that the bank—which, of course, wanted to sell the property for the highest price possible—had the privilege of paying thousands of dollars in legal fees to an attorney who zealously ensured that the bank would suffer a sizable loss at the auction.
As ludicrous as the whole arrangement was in Bruce’s eyes, he also realized that he could turn it to his advantage. If the banks expected to be “protected” by their lawyers to such an extent, well, then, he would just have to protect them.
The auctioneer, speaking into an electronic bullhorn, declared the auction open. Bruce had conducted a few auctions himself, and attended a few more, but he was again struck by the informality of the process. Just standing there in the rain on the side of the road selling somebody’s home. Mario wasn't visible, but two small children were peering out from the living room window. One held a doll. Bruce looked away.
Though there were no qualified bidders, the auctioneer went through the formality of asking for bids. Bruce understood the need to abide by these legal formalities, but when the auctioneer peered out expectantly over the sparse crowd, bullhorn in hand, waiting for one of the non-bidders to make a bid, Bruce almost burst out laughing. Like a stage actor in an empty theater expecting applause. Finally, the bank attorney spoke up—he seemed a bit
less zealous now, standing in the rain next to an inane auctioneer while a little girl and her doll watched from the window. “The bank bids one hundred fifty-five thousand dollars.”
“We have $155,000. Any further bids?” The auctioneer again surveyed the crowd, eyes magnified to twice their normal size by thick glasses, scanning for the slightest sign of movement from any of the non-bidders. “Is there anyone who wishes to display the required deposit money and increase the bid?” Everyone was now looking at their feet. Bruce wished he really did have the $10,000—it would have been fun to fumble in his pockets and then, with a look of profound shock, proudly display the wad of cash to the auctioneer. As if it had magically appeared through the sheer force of the auctioneer’s will. “Going once, going twice, sold! To the bank.”
As the auctioneer rolled up his auction flag, Bruce approached the bank attorney and offered his hand. “I’m Bruce Arrujo. I work for Stoak, Puck & Beal. We’re looking for an attorney to help us with our foreclosure work. Are you interested? I was really impressed by the thoroughness of your Sales Agreement.”
“Nice to meet you. Frank Macklin. Sure I’m interested.”
“Great. Can I buy you lunch?”
Over lunch, Bruce listened as Frank described his foreclosure practice. “There’s a bankruptcy case that governs this whole process. In that case, the court basically said that the bank has to bid at least 70 percent of the appraised value of the property.” Frank was showing off his knowledge, and Bruce was happy to listen.
Bruce did the arithmetic in his head, working backward from the bank’s final bid of $155,000. “So the appraisal today was $220,000?”
“Yup.”
So, the property had gone from $260,000 two years ago to $220,000 today. “Would the bank have let it go at $155,000?”
“Sure. They don’t want to take this stuff back if they can help it.”
Bruce did more arithmetic—over $50,000 in potential profit if he had bought the property and then re-sold it for the $220,000 figure, even after paying expenses. “How many auctions do you do per month?”
[Boston Law 01.0] Unlawful Deeds Page 9
