About the Author

author photo

The Implode-o-Meter staff account: our in-house commentary and compilation of news.

See All Posts by This Author

In Bizarre Ruling, Maryland Court Denies ML-Implode.com Anti-SLAPP Motion Against Downpayment Launderer

In what is sure to go down in free speech history as a gross error, if not a blatant miscarriage of justice, ML-Implode.com has been denied its motion for anti-SLAPP dismissal in the Maryland lawsuit, Russell vs. Krowne (et al.) (a-k-a Global Direct Sales and The Penobscot Indian Tribe vs. Implode-Explode Heavy Industries, Inc./ML-Implode.com).

The lawsuit concerns blog criticism posted on the site by contributor Krista Railey (“The Mortgage Whistleblower”) regarding Russell’s Grant America Program (“GAP”), a collaboration of his Global Direct Sales, LLP, and the Penobscot Indian Tribe of Mass. The venture specialized in arranging seller-funded downpayment FHA loans (“SFDPAs”). Put in lay terms, GAP arranged to make it appear there was a downpayment on FHA loans where there was no downpayment (FHA loans require at least a 3% downpayment).

To achieve this, funds were channeled through the Indian tribe, allowing the resulting loans to pass muster by having an apparently “government-sourced” downpayment (Indian tribes count as “governments” for federal purposes).

The company (like other similar outfits) went to great lengths to appear to borrowers to be a charity, and even claimed they were “FHA-approved” (even though there is no approval process or “approved” status for downpayment contributors). The IRS cracked down on such schemes that had elected 501(c)(3) tax-exempt “charity” status in 2006, which prompted Russell to launch the Indian tribe variant in response.

In its denial of the anti-SLAPP motion, the court gave two main points of rationale, the first being:

There are genuine issues of material fact as to whether this lawsuit is a SLAPP suit because the parties dispute whether the suit was brought in bad faith and whether the allegedly defamatory article was regarding any matter within the authority of a government body.

The court gave this justification despite the fact that the SFDPA was specifically outlawed in the July 2008 Housing and Economic Recovery Act (which the plaintiffs themselves acknowledge by having ceased their business in response). Thus, the suit obviously concerns a matter within the authority of a government body — before even considering that the loans in concern are all FHA, that is, federally-insured, and that the Indian tribe is considered a government, which is why the plaintiffs state that they were using them (these are all points all parties in the suit agree to).

Further, the very same court (and judge) ruled overwhelmingly against plaintiff’s “prior restraint” attempt to censor the web site with an injunction at the beginning of the suit, ruling that it met NONE of the federal court requirements to award a preliminary injunction. In fact, Judge Chasanow went further and stated (transcript):

… any injunction in this regard would chill the First Amendment rights of people like the defendants, never mind just the defendants, and would stifle rather than foster appropriate debate at this precise time when it is so important.

Most casual observers might thus legitimately wonder how a suit kicked-off with such a motion — meeting no court standards other than being filed in an official-looking document, with the clear intent to chill the target’s First Amendment rights — could not be in “bad faith”. It was also noted to the court in the anti-SLAPP motion that Russell sent at least one threatening message prior to filing the suit, spelling out his intent to punish the site. This is the only intent clearly discernible in the entire affair (see Turner declaration/exhibits, exhibit `F’).

The second reason the court gave for denying the anti-SLAPP motion was:

Additionally, there is a genuine issue of material fact as to Defendants’ civil liability because the parties dispute whether Defendants maliciously published the article. Therefore, Defendants’ motion will be denied.

This was a puzzling statement as well, because ML-Implode included in the anti-SLAPP motion proof — public web and internal email statements against SFDPA and taking any advertising money from SFDPA companies — released long before any interaction with Grant America persons (see Krowne anti-SLAPP declaration+exhibits, and Medecke declaration+exhibits . The plaintiffs, on the other hand, included no proof whatsoever (or even anything suggestive) that the critical article was published with malicious intent, instead relying on the flimsy happenstance that ML-Implode’s ad sales contractor had had independent contact with Grant America persons at some point prior to the article’s publication.

Worse for the court’s rulling, the plaintiffs conspicuously have not even claimed (let alone provided evidence) that ML-Implode then made any demands of advertising money in exchange for not publishing criticism. That is, of course, because no such evidence could exist, because ML-Implode was hostile to SFDPA long before Russell’s company came along, and thus wanted nothing to do with such companies (as it stated in the public record, and reproduced in the court record — see Krowne and Medecke declarations and exhibits above). As a result, the court is shamefully countenancing a fabricated extortion claim from the plaintiffs that lacks half of the founding of extortion. In other words, it’s nonsense, manufactured from whole cloth, which anyone can glean from reading the plaintiff’s filings.

ML-Implode founder Aaron Krowne stated in response to the ruling “This is a sad day for free speech. By allowing this SLAPP suit to drag on, the court is effectively enabling the continued proliferation of large-scale government loan con artists by allowing them to use their ill-gotten millions to sue into submission critics who attempt to speak out, as well as to lobby for abeyance of enforcement from the government.”

Krowne further states that IEHI, Inc. (ML-Implode’s parent company) will likely have to file bankruptcy in response to the expected continuing litigation costs.

Since the GAP/ML-Implode suit was filed, HUD has announced $11 billion in losses from seller-funded downpayment loans, which racked up a nearly 15% default rate (as of Fall 2009.) That means FHA holds in excess of a staggering $70 billion in fraudulent SFDPA loans, and continues to this day to pay out loss claims to the lenders who originated them.

In 2008 Forbes Magazine wrote an article about Russell’s activities which reported that he and his business partner Ryan Hill took home a combined $14 million in compensation from their earlier SFDPA project, Ameridream, a nominal “nonprofit.” That is proving to be a nice kitty with which to sue unruly websites that might prove a threat for “business”.

There Are 17 Responses So Far. »

  1. [...] • Mortgage-Implode to Face Bankruptcy due to SLAPP Lawsuit (ML-Implode) [...]

  2. [...] • Mortgage-Implode to Face Bankruptcy due to SLAPP Lawsuit (ML-Implode) [...]

  3. Housing is a risky thing to get into. I’ve sworn off buying a house again because of all the fraud and goofy programs. The power of this industry is out of control and we need to sever ties between govt and industry special interests. They never seem to have enough money to do things right but they always have money for lobbying and suing. They have taken out the economy and paint themselves as victims when their own actions eventually caused loss of their ill-gotten gains. Industry solution? Sue, lobby, lobby and sue some more.

  4. [...] In Bizarre Ruling, Maryland Court Denies ML-Implode.com Anti-SLAPP Motion Against Downpayment Launde… I am left to conclude that the courts don’t really read these proceedings with anything resembling the completeness necessary to make a fair decision, and that the result would probably have been very different with a couple high-profile amici (as on our New Hampshire anti-SLAPP suit). [...]

  5. [...] In Bizarre Ruling, Maryland Court Denies ML-Implode.com Anti-SLAPP Motion Against Downpayment Launde… I am left to conclude that the courts don’t really read… [...]

  6. [...] In Bizarre Ruling, Maryland Court Denies ML-Implode.com Anti-SLAPP Motion Against Downpayment Launde… I am left to conclude that the courts don’t really read these proceedings with anything resembling the completeness necessary to make a fair decision, and that the result would probably have been very different with a couple high-profile amici (as on our New Hampshire anti-SLAPP suit). [...]

  7. Absolute total bullcrap. THIS is the new methodology to silence dissent and to protect corruption within the financial system while insuring the political elites walk away unscathed. The death of ML-Implode will eave a great void in the blogosphere.

    Godspeed ML-Implode.

  8. How can you ask how the great State of Maryland, home to Governor’s Agnew and Mandel could come up with such a decision?

  9. I followed the Implode-o-meter from its ealier days and I’m sad to see this happen to you. That said, someone on The Big Picture Blog posted this in the comments section:

    In a footnote to the ruling, the judge said this:

    The court notes that Defendants waited over a year after this lawsuit was filed to bring this anti-SLAPP dismissal motion. Other courts have indicated that anti-SLAPP motions should be filed promptly and not in the middle of litigation.

    Any comment?

  10. [...] A Strike Against Bloggers And Free Speech- Implode-O-Meter Likely To Declare Bankruptcy By twist You can't expect good investigative journalism from the MSM, and sadly, it might be too dangerous for bloggers as well: [...]

  11. [...] In Bizarre Ruling, Maryland Court Denies ML-Implode.com Anti-SLAPP … This entry was posted in News. Bookmark the permalink. ← 10 Most Bizarre Body Modifications | Urban Titan [...]

  12. [...] In Bizarre Ruling, Maryland Court Denies ML-Implode.com Anti-SLAPP Motion Against Downpayment Launde… [...]

  13. there is no law, aaron. it’s all about the size of your wallet. sounds like the judge is a real c———.

  14. [...] the judge rejected an anti-SLAPP claim. The guy who couldn’t get the anti-SLAPP to work is blaming the judge, but as Levy points out, the real problem is with the Maryland anti-SLAPP statute, which can be [...]

  15. [...] the judge rejected an anti-SLAPP claim. The guy who couldn’t get the anti-SLAPP to work is blaming the judge, but as Levy points out, the real problem is with the Maryland anti-SLAPP statute, which can be [...]

  16. [...] where the judge rejected an anti-SLAPP claim. The guy who couldn't get the anti-SLAPP to work is blaming the judge, but as Levy points out, the real problem is with the Maryland anti-SLAPP statute, which can be [...]

  17. [...] publisher of the “Mortgage Lender Implode-o-Meter” blog. [Consumer Law & Policy, more, earlier here and here, h/t [...]

Post a Response