In re Altisource Portfolio Solutions S.A. SecuritiesLitigation

Court: United States District Court, Southern District of Florida
Case Number: 14-81156-WPD
Judge: Hon. William P. Dimitrouleas
Case Contacts: Hannah Ross, Lauren McMillen Ormsbee, David Kaplan, Jesse Jensen

This is a securities class action on behalf of a class of all persons and entities who purchased or otherwise acquired the common stock of Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”) during the period from April 25, 2013 through December 21, 2014 inclusive (the “Class Period”). 

On December 5, 2014, the Honorable William P. Dimitrouleas, U.S. District Judge for the Southern District of Florida, entered an Order appointing the International Union of Painters and Allied Trades District Council 35 Pension and Annuity Funds as Lead Plaintiff, and appointing BLB&G as Lead Counsel for the investor class.

On January 30, 2015, Lead Plaintiff filed the Amended Class Action Complaint (“Amended Complaint”).  The Amended Complaint asserts claims for violations of the federal securities laws by Altisource, a provider of support and technology services for mortgage loan servicing, and by Ocwen Financial Corporation (“Ocwen”), the largest nonbank mortgage servicer in the country and Altisource’s former parent.  In addition, the action asserts claims against William C. Erbey, the founder, majority shareholder, and former Chairman of both Altisource and Ocwen, William B. Shepro, Altisource’s current CEO, and Michelle D. Esterman, Altisource’s current CFO (collectively, “Defendants”).    

Specifically, the Amended Complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by misrepresenting the true nature of the companies’ relationship and business dealings, loan servicing capabilities and legal compliance.  Throughout the Class Period, Defendants emphasized to the market that Altisource’s revenues from its related party transactions with Ocwen – Altisource’s lifeblood – were sustainable, free of self-dealing or other conflicts, and subject to strict internal controls.  These assurances extended to related party transactions and potential conflicts of interests involving Defendant Erbey, the founder, majority shareholder, and Chairman of both companies until government regulators recently forced him to resign.  In addition, the action alleges that Defendants touted the superior quality and regulatory compliance of Altisource’s mortgage servicing technologies. Defendants repeatedly emphasized that Altisource’s REALServicing platform, the technology backbone of Ocwen’s loan servicing business, was highly scalable and fully capable of servicing loans in an efficient, effective, and legally compliant manner.

Defendants’ assurances were false.  In a series of partial disclosures stemming from a two year-long investigation by the New York Department of Financial Services (“NY DFS”), the truth was exposed about Altisource’s conflicted relationship with Ocwen, Erbey’s failure to recuse himself from related party transactions, and serious deficiencies with the REALServicing platform.  These partial corrective disclosures gradually removed the artificial inflation from the Company’s stock price resulting from Defendants’ misstatements and omissions, causing Class members to suffer significant losses. 

In particular, a series of letters and actions by the NY DFS between February 2014 and October 21, 2014, gradually revealed to the market:  (i) that the NY DFS had uncovered a number of potential conflicts of interest between Ocwen and Altisource that “cast serious doubts on recent public statements . . . that Ocwen has a ‘strictly arms-length business relationship” with Altisource; (ii) additional “significant concerns” that Altisource and Ocwen were engaged in self-dealing through Altisource’s over-charging of Ocwen customers; (iiI) further concerns regarding a “troubling transaction” between Ocwen and Altisource and approved by Defendant Erbey, which was designed to funnel as much as $65 million in fees annually from already-distressed homeowners to Altisource for minimal work; and (iv) serious issues with Ocwen’s systems and processes for mortgage loan servicing, including Ocwen’s practice of “backdating [] potentially hundreds of thousands of letters to borrowers, likely causing them significant harm.”   In response to each of these revelations, price of Altisource’s stock price suffered significant declines.

Ultimately, on December 22, 2014, Ocwen was forced to enter into a Consent Order with the NY DFS (the “2014 Consent Order”) in which it admitted to many of the details of the Defendants’ fraudulent conduct.  As detailed in the Amended Complaint and set forth in the 2014 Consent Order, the NY DFS found, and Ocwen “agreed,” that Ocwen’s business dealings with Altisource constituted “numerous and significant violations” of New York State laws and regulations.  The admissions and revelations contained in the 2014 Consent Order caused Altisource’s shares to plummet by over 33% in a single trading day.

All told, in response to the NY DFS letters, the 2014 Consent Order, and other corrective disclosures detailed in the operative complaint, Altisource’s stock price crashed from a Class Period high of $170 per share, to close at just $31 per share on December 22, 2014, a staggering decline of 76%. 

The deadline for Defendants to answer, move to dismiss, or otherwise respond to the Amended Complaint was March 23, 2015, and the deadline for Lead Plaintiffs to file their opposition to any such motion to dismiss is May 14, 2015.  Replies are due on June 8, 2015.