Bloggers’ Right to Free Speech and Use Anonymous Sources Questioned in New Hampshire Supreme Court

The case of Mortgage Lender Implode-O-Meter vs. Mortgage Specialists Inc (MSI) has reached the New Hampshire Supreme Court. MSI has demanded Implode-O-Meter reveal the identity of one of its sources in a defamation case and Implode-O-Meter refuses.

Please consider New Hampshire Suit Challenges Mortgage Blogger’s Use of Anonymous Sources

The New Hampshire Supreme Court heard oral arguments Wednesday in a lawsuit that calls into question the legal protections available to independent Web sites that cover news.

The case involves mortgage lender Implode-Explode, a Las Vegas-based site launched in 2007 that publishes stories about the meltdown of the mortgage industry.

The dispute began in November 2008 when The Mortgage Specialists Inc (MSI) won a temporary injunction requesting that a confidential document, "2007 Loan Chart," be removed from Implode-Explode’s site, ml-implode.com. MSI also requested the identity of the source and of a commenter, "Brianbattersby," who they allege made defamatory comments about the company and its president.

Implode-Explode removed both the loan chart and the comments, but refused to either provide the identity of their anonymous sources or promise to refrain from posting the document again in the future. Unsatisfied, MSI pressed for a permanent injunction against the site and won the case in a New Hampshire Superior Court in March 2008.

Aside from those facts, nearly everything else about the case remains in dispute. During their extended 15-minute presentations before the court, the two lawyers called on precedents from Dendrite International v. Does and The New York Times v. United States to argue their claims of anonymous sources and confidential documents, and what constitutes a real journalist.

Jeremy Eggleton of the Orr & Reno, the firm representing Implode Explode, spoke first, calling the injunction a case of prior restraint and a violation of the "basic principals of the First Amendment," that, "tramples on the rights" of his client to speak freely.

Alexander Walker of Devine Millimet & Branch, speaking for MSI, dismissed the First Amendment concerns as a red herring in the case. "This is not the Pentagon Papers," he said. "They [Implode Explode] are not journalists."

According to Sam Bayard, a fellow at the Berkman Center for Internet & Society at Harvard, and assistant director of the Citizen Media Law Project, the potential impact of any decision is the shortage of case law dealing with these issues in an online context. "As we are moving online and our journalism is going online," he said, "this could have a big impact."

If the court rules against Implode, Bayard also cited the precedent-setting New York Times v. United States as an example of the concern. In today’s environment, The New York Times would post the Pentagon Papers Web-first. If MSI’s claim is upheld, he said, it would be as if "two days later the government came along and filed an injunction" and then the papers were removed as if they never existed.

Fraud Charges Against Mortgage Specialists

The origin of the dispute goes back to Summer of 2008 when Mortgage Specialists Faces Fraud Charges.

The New Hampshire Banking Department has received nine consumer complaints about The Mortgage Specialists in the last few years, but it was the department’s routine check of the business that led to fraud charges.

The Mortgage Specialists was issued a cease-and-desist order it must respond to within 30 days, according to department spokesman Rich Arcand. The company, which received the order last week, could face $200,000 in fines and revocation of its license.

Banking Department staff visited the main office in Plaistow a few weeks ago to perform an examination that is routinely administered every 18 months, Arcand said.

When the department asked for 20 files stored at a site within a 10-minute drive, it took more than four hours for employees to return with the folders, according to the cease-and-desist order. Documents were missing from all the files, but the department said it later found some of them in a bin waiting to be shredded.

The department found customers’ signatures had been photocopied and attached to new documents, the order said. Two broker fee agreements and an application for a federal mortgage loan were also altered.

The Mortgage Specialists couldn’t provide two requested files of canceled loans, and the Banking Department said it also found those files in the shred bin.

The Massachusetts Division of Banks was just finishing its own routine examination when it uncovered the use of unfair and deceptive practices, such as inflating borrower income, according to the cease-and-desist order the state issued yesterday.

"The division’s temporary cease-and-desist order requires The Mortgage Specialists to place all remaining loans with a qualified lender or broker with no loss to consumers and forbids the company from initiating any new mortgage loan transactions," spokeswoman Kimberly Haberline said.

The charges include 14 counts of fraud, 20 counts of incomplete records, 15 counts of dishonest and unethical practices, and three counts of destruction of records.

Scandal-tainted N.H. mortgage co. gets to keep Mass. license

Inquiring minds are reading Lenders cry foul over firm.

A scandal-tainted home-loan firm that’s using Red Sox knuckleballer Tim Wakefield as a pitchman should be thrown out of the mortgage game, some Bay State lenders say.

Home-loan executives are blasting regulators’ decision to let Plaistow, N.H.-based The Mortgage Specialists Inc. stay in business despite allegedly forging client signatures and dumping incriminating records.

Massachusetts and New Hampshire regulators OK’d a settlement under which Mortgage Specialists will keep licenses in both states but pay $725,000 in fines.

The firm – which admitted no wrongdoing – will also hire outside auditors to review records back to 2005, as well as going forward for up to three years.

The deal comes after state inspectors allegedly found Mortgage Specialists had cut-and-pasted customer signatures onto some documents instead of getting real sign-offs.

In one case, a client who applied for a 30-year mortgage allegedly wound up with a much-more-costly 40-year loan – apparently without the person’s knowledge.

Another loan application reputedly inflated a woman’s 2005 income to $99,000, even though she made just $17,700 as of 2007, according to court filings.

Inspectors allegedly found many suspect documents in a shredding bin after Mortgage Specialists took four hours to produce files stored just 10 minutes away.

Mortgage Specialists President Michael Gill has a controversial history.

Outside of the loan business, Gill is one of thoroughbred racing’s most successful horse owners, winning millions of dollars in purses. He’s even netted an Eclipse Award, the industry’s top honor for owners.

However, tracks in New York, Delaware and elsewhere have partly or fully banned Gill’s horses over the years amid speculation that his animals received performance-enhancing drugs.

Gill has denied such charges, but one of his horses did test positive for the substance benzylpiperazine at Boston’s Suffolk Downs in 2001.

Six years earlier, New Hampshire racing officials banned Gill for three years after a horse he trained came up positive for the drug clenbuterol.

I spoke with Aaron Krowne this morning via Email. Aaron writes:

Here are some additional statements I can give.

(1) Our belief is the "brianbattersby" forum comment now removed from the site was substantially true. We do not think we should have to censor it or disclose who the person is.

(2) We have received substantial, additional highly-detailed information from a person or person(s) who clearly was at the company or close to it while fraudulent activities were going on, and is attempting to leak them. However, we no longer can release this information thanks to the lower court’s ruling and the general air of "shoot the whistleblower" surrounding this case.

(3) The Loan Chart that MoSpec is claiming is "secret" is not only not secret according to the law (NH banking regulations state only that the Banking Commission can’t release the info), but our best information is that it was actually sent openly to MoSpec investors. So MoSpec themselves would be the "leaker". After all, it is merely their production volume, and theoretically, any company MoSpec sells or brokers loans to would have a copy of that chart.(4)

Point #2 above is in all likelihood the real reason for this "SLAPP" suit.

I believe the court ruled improperly in forcing the documents to be removed from Implode-O-Meter. Moreover, I believe Aaron should be able to post all of the relevant documentation he has on The Mortgage Specialists.

While some may consider a $725,000 fine substantial. I do not believe it was substantial enough. The sad irony in this case is that The Mortgage Specialists is fighting to shut down Implode-O-Meter, when it is The Mortgage Specialists who should be shut down.

This case has profound implications on the right of online journal and blogs to state their case. This is both a freedom of speech case and a journalist right to protect sources case.

Aaron Krowne and Implode-O-Meter deserve your support.

Mike "Mish" Shedlock