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The three lawyers who run one of the largest Democratic organizations in America have more than one way to get rich.
There is Surrogate’s Court, where the estates of the unfortunate people who die without wills are processed. This remains the domain of Gerard Sweeney, the master strategist of the Queens County Democratic Party and a bosom friend of the man who dreams of becoming the next Speaker of the House, Representative Joe Crowley. Since 2006, Sweeney has made $30 million as the borough’s counsel to the public administrator, a post that only those in the Democratic machine get to hold.
As the official chairman of the Queens Democrats, Crowley hands off the day-to-day affairs of his aging political apparatus to Sweeney and his two law partners, Michael Reich and Frank Bolz. Reich is the executive secretary of the Queens Democratic Party and Bolz is its law chair, plum positions they’ve each held for more than two decades. Until 2015, the powerful attorneys had a fourth partner, David Gallo, who brought another type of business to the very lucrative and politically connected law firm: foreclosing on people’s homes.
Since at least 2005, the law firm has represented banks and mortgage servicers in thousands of foreclosure cases throughout New York State, including many in Queens, where it wields its political clout. Unlike its work in Surrogate’s Court, where its favorite attorneys can reap handsome fees as guardians to the incapacitated, the foreclosure practice is rarely discussed or reported on. Even Queens Democratic insiders know little about it.
In court records, the firm is listed under its old name, Sweeney, Gallo, Reich and Bolz. The circumstances of Gallo’s departure are unclear. Shortly after the separation, Sweeney, Reich and Bolz relocated from Queens to Nassau County to focus primarily on probate law. Gallo still specializes in foreclosures.
This does not mean, however, that the three men have stopped earning money from taking distressed homeowners to court. Dozens of cases are still active, with court dates set for this month, next month, and the latter half of 2017. Many of them were initiated more than a half-decade ago.
How much cash the firm has raked in is not known, since it is paid privately by financial giants like Citibank, Bank of America, and Fannie Mae. Unlike the percentage of wills Sweeney rakes in at Surrogate’s Court, the earnings from foreclosures are not made public. One knowledgeable Democrat said they handle certain banks’ “entire accounts.”
Some sense of the firm’s earnings can be found in the federal government–backed Fannie Mae’s rules for compensation. In New York State, an attorney or firm can make as much as $4,950 from a single Fannie Mae foreclosure. Sweeney, Gallo, Reich and Bolz has represented Fannie Mae more than a hundred times in court.
Reich, who acts as a spokesman for the Queens Democrats, did not return requests for comment. Neither did Gallo.
Crowley, the Queens congressman and county leader, has styled himself as an advocate for homeowners, praising former president Obama’s efforts to expand federal housing programs to make it easier to refinance mortgages at current interest rates, even if more is owed than the value on the home. “We need to find ways to both help people stay in their homes and save more of their income,” he said in 2012.
But Crowley’s words have not matched his actions. He empowers Sweeney’s law firm, maintaining close ties despite its work on behalf of banks. And his brother Sean Crowley is a lobbyist at one of New York’s most influential firms, Davidoff, Hutcher and Citron, where he has lobbied the state government on behalf of the New York Creditors Bar Association, the trade association representing creditors and attorneys engaged in debt collection.
Crowley, however, defended his record.
“Congressman Crowley has been a staunch supporter of middle-class families and will continue to support policies that help keep New Yorkers in their homes,” said Alex Florez, a spokesman for Crowley. “The work the lawyers do on behalf of their clients is independent from the work they put in as volunteers in our effort to help elect good Democrats in Queens.”
Sweeney’s firm was never known as one of the largest and most notorious players in the foreclosure business, according to attorneys who have gone up against it in court. “This firm is pretty much like other foreclosure firms we see doing foreclosures in Queens,” said Mark Weliky, the executive director of the Queens Volunteer Lawyers Project. “In fact, they are probably a little better than some of the firms we would call ‘foreclosure mills.’ ”
The so-called foreclosure mills sprang up across the country during the financial and housing crises, representing banks and financial services trying to foreclose on the millions who had defaulted on their loans. In New York, the worst actor was probably Steven Baum, known for bringing cases without verifying the bank he represented actually owned the mortgage. Facing public and legal pressure, Baum shut down his firm in 2011. Sweeney, Gallo, Reich and Bolz took on one of his cases afterward, a not-uncommon practice after thousands of banks and lenders lost a prominent advocate.
The law firm saw a major uptick in business as the subprime mortgage crisis of 2007 bled into the catastrophic crash of September 2008. In a matter of a year, it came close to doubling its caseload. In 2008, the firm handled 441 cases. A year later, that number was 863. In 2010, they handled 858 cases before seeing a significant drop-off to 293 in 2011. (Caseloads pushed north of 700 again in 2013 and 2014.)
“I remember seeing them in the collapse right around 2007, 2008,” said Donna Dougherty, the attorney-in-charge and director of JASA/Legal Services for the Elderly in Queens. “If you were in that business at the time, you were doing high volume.”
With its large swath of working-class homeowners, Queens was arguably New York City’s ground zero for the housing crisis. As recently as last year, Queens was the borough with the most foreclosures in the city, according to a PropertyShark report. There were 898 first-time foreclosures in Queens in 2016, compared to 410 in Brooklyn.
Southeast Queens, home to a large African American population, was hit particularly hard by predatory lenders, said Oda Friedheim, the supervising attorney for foreclosure prevention at the Legal Aid Society. In 2009, at the height of the crisis, the neighborhoods of Jamaica, Hollis, Springfield Gardens, and St. Albans had more than 2,000 foreclosures alone, according to the Furman Center for Real Estate and Urban Policy. (These neighborhoods also led all of Queens in foreclosures in the first quarter of 2017, albeit with only 27 first-time foreclosures in Jamaica, according to PropertyShark.)
“Queens has a very large area with small homes,” Friedheim said.
For a law firm, representing financial giants foreclosing on homeowners is not especially difficult. At larger firms, different attorneys will handle different aspects of a foreclosure case, which can drag on for many years. Friedheim described it as “factory work.”
Per diem attorneys — hired by a firm just for a day to make a court appearance — are common during the foreclosure process. Homeowners, often too terrified and distraught to file proper paperwork or seek legal representation, end up representing themselves in court. Attorneys who have gone up against Sweeney, Gallo, Reich and Bolz recall seeing Gallo in court sparingly. Like other firms, it’s known for its generous use of per diem attorneys.
In Queens, where the insular political and legal system often breeds obvious conflicts of interest, the law firm’s influence can be felt virtually everywhere. All civil court judges are elected, which means they run in uncompetitive Democratic primaries with the support of the county organization. Sweeney, Reich and Bolz, in consultation with loyal Democratic district leaders, determine the judicial candidates. Anyone who rises to become a State Supreme Court judge must make donations to a county organization housekeeping account overseen by Reich and his law partners.
The end result of this system is beleaguered Queens homeowners walking into court to face judges who owe their livelihoods to the three men. Friedheim recalled an otherwise pro-tenant Queens judge once paying particular deference to Gallo, knowing the firm he came from. She soon found out why.
“It’s totally machine-connected,” Friedheim said. “That’s how it is.”