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ML-Implode Defeats Perpetrators of Outlawed FHA Downpayment Scheme, After 5 Year Libel “SLAPP” Suit

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In July 2008, with the Housing and Economic Recovery Act (HERA), Congress explicitly outlawed the practice of channeling downpayment funds through third party organizations to conceal the source, which might allow buyers to qualify for government-backed FHA loans with no buyer money down (FHA normally requires at least 3% down). Various schemes to achieve this “crypto-100% financing” had been proliferating since the mid-90s — with notorious operators being Nehemiah Corp. (of Sacramento) and Ameridream (of Gaithersburg, MD).

The HERA law went into effect on October 1, 2008, effectively shuttering all of these outfits.

An ML-Implode blogger had been investigating one such seller-funded downpayment assistance ‘program’ (SFDAP)-scheme described above, called the Grant America Program (GAP), and decided to blog about it and its ‘colorful’ founder, Christopher Russell. The interesting (some might say shocking) thing about GAP was that it achieved the SFDAP downpayment-channeling (some might say ‘laundering’) by using an Indian tribe — the Penobscot Indian Nation (of Maine) — as the conduit for funds (this was necessary as the IRS had just cracked down on the use of 501(c)3 nonprofits when used for the identical purpose). ML-Implode’s blogger sought to expose the gory details of this questionable scheme (some might argue, illegal even before the 2008 HERA law), as well as other questionable business dealings of Russell — who also happened to be the founder of Ameridream (Russell left Ameridream by 2004 under something of a cloud, which included acrimonious litigation over an ‘F— Ameridream’ web site, and a tax “excess benefit investigation” by the organization’s board. Russell insists to this day the departure was completely copacetic).

After interviewing Russell and poring over existing articles and government reports, the article was published, in mid-September of 2008. While excellent, it added little genuinely new information — instead, mostly pulling together already-public (though disparate and voluminous) items. And given that this sort of scheme was conclusively outlawed by the 2008 HERA law (effective October 1, mere weeks later) — you might think that this was the end of the story. But sadly it was not.

Russell, a litigious fellow, discovered the first version of the article posted to the blog on ML-Implode, and threatened to sue. After slightly softening some of the language (in hopes of appeasing the would-be plaintiff, rather than to correct any actual mistakes), the author re-posted the story a few days later with all of the same information. Russell, whose demand to withdraw the article was totally unqualified (and didn’t contain any actual correction matter), immediately proceed to sue.

The lawsuit was filed in Maryland federal court, and the rest is history.

You can read here about how Russell & friends attempted to get a “prior restraint” injunction on ML-Implode from publishing the article — even before the merits of the case were heard (the worst sort of tactic against free speech). They lost devastatingly (read the opinion denying the injunction).

You can read here how Maryland’s flawed “Anti-SLAPP” law, meant to allow rapid dismissal of frivolous libel suits (importantly, with costs awarded) failed to come to the aid of ML-Implode, as the law is written in such a way that it demands “proof” by the defendants that the suit is motivated by bad faith (the exact opposite burden that would make sense for this sort of law — in contradistinction to California’s Anti-SLAPP provision).

(Later, concrete evidence surfaced that Russell, and implicitly, his counsel, knew the lawsuit was frivolous).

In 2011, the costs of the lawsuit (over $100,000) were taking their toll, and IEHI (ML-Implode’s corporate owner & operator) ran out of funds to continue to pay counsel to defend itself, and thus defaulted. Things looked grim for ML-Implode and the cause of online free speech at that point.

However, in an amazing 11th-hour save (and after three years of searching), IEHI was able to locate a talented attorney willing to continue the case pro bono, Charles Borrero. Borrero led the effort to vacate IEHI’s default (effectively reversing it), which was granted on January 3, 2013.

You can read the motion to vacate memo here and the court’s rationale in granting it here.

At that point, the case was back on, and headed for trial again.

However, IEHI and its counsel wanted to try one last attempt to dispose of the case before any additional time and resources were wasted (including the federal court’s own resources… and your tax dollars), so a motion for summary judgment was put together. IEHI’s motion argued a number of grounds, including the immunity of ML-Implode as a publisher (as opposed to author) of the content (per U.S.C. 47 § 230); the lack of actual malice by ML-Implode or the author in producing and posting the article; journalistic privilege, and the fact that Russell (as someone profiting from government-backed loans) was at least a “limited purpose public figure,” thus deserving of less strict libel protection than a genuine private citizen.

You can read IEHI’s summary judgment memo here.

On September 18, 2013, IEHI’s summary judgment motion was granted, ending the case. You can read the court’s opinion here.

In the opinion, the court agreed powerfully with the USC 47 § 230 argument — that IEHI/ML-Implode had immunity, as a mere publisher-editor of the content, rather than its originator. The court reinforced recent precedents which held that serving (essentially traditional) functions of an editor does not confer liability to any meaningful extent for the purposes of S. 230 immunity.

The opinion is an unqualified victory for free speech, as it even-further eliminates any doubt as to whether independent, online publishing is “real” publishing, deserving of the protection long assumed for major newspapers and magazines, or of the immunity of internet service providers with respect to the user content they carry.


Despite the above much-appreciated (and we think, hard-fought) victory (which vests not only for us, but anyone who would make use of free speech online), IEHI would like to caution that “the system” is still far from safe for small, independent authors and publishers of online content — from a casual Facebook comment-poster all the way up to a small, independent online magazine. In the digital age, such persons can be dragged into court in any of the 50 states by someone (particularly rich and entrenched interests) who is merely “offended” by what the poster/author has said (or perhaps has something to hide), and who then retaliates by launching a nuisance libel lawsuit (a “SLAPP” suit) precisely because they know it will bankrupt the target, or force them to back down and self-censor. While such suits are, by their nature, meritless, that is besides the point — they always succeed tactically, as even the Penobscot/Russell suit here did, by destroying the target financially.

For these reasons, IEHI still recommends that anything of importance (i.e., that might upset the “powers that be”) online be published outside of the US, and anonymously.

To bring meaningful free speech back to the US, a patchwork of inconsistently-formulated and applied state “Anti-SLAPP” laws is not enough. In the current world, where increasingly public discourse takes place not in the context of major brick-and-mortar media companies (with their own legal departments), but outside of them, a federal “Anti-SLAPP” law (with teeth) is needed to make the American internet safe for much-needed critical public commentary once again.


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