1 2 3 4 5 6 7 8 9 UNIFUND CCR PARTNERS, 10 Plaintiffs, 11 vs. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ROBERTA KELLY aka ROBERTA KELLY-WILSON Defendant. ) ) No.

080710614 ) ) ) ANSWER with AFFIRMATIVE ) DEFENSES ) ) ) ) IN THE CIRCUIT COURT OF THE STATE OF OREGON FOR MULTNOMAH COUNTY

COMES NOW DEFENDANT, through her attorney ROBERT M. GREGG, and for her response to plaintiffs complaint, admits, denies and alleges as follows: 1. Defendant is without sufficient information to respond to paragraph 1 of the complaint and so denies same. 2. Defendant admits paragraph 2 of the complaint except as regards the account number, of which defendant has insufficient information to respond so denies same. 3. Defendant denies paragraph 3 of the complaint except the allegation that US Bank provided defendant with a credit card which defendant admits. 4.
TH E L A W O FFIC E S O F R O B E R T M . G R E G G 800 N O R T H D EV IN E R O A D V AN C O U V E R , W A 98661 TE L: (360) 694-6505 FAX : (360) 694-7619 LR M G 2@ M S N .C O M

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Defendant denies paragraphs 4, 5 and 6 of the complaint. For her FIRST AFFIRMATIVE DEFENSE, defendant alleges CONSPIRACY as follows: 5. Plaintiff is US Banks successor in interest, became the owner of the alleged debt set forth in its complaint by way of assignment from US Bank and is subject to all the defenses, setoffs and counterclaims which defendants have or may have against plaintiffs assignor US Bank. 6. Beginning at a time unknown to plaintiffs, and continuing at present, plaintiff UNIFUND CCR PARTNERS, US Bank and others, named and unnamed herein, have conspired and are conspiring to evade legal regulation and to violate statutes prohibiting racketeering, fraud and profiteering, the Real Estate Sale Procedures Act (RESPA) and other controls in the granting of credit, credit cards and loans secured by residential real estate mortgages for the purposes alleged below. 7. It was part of this conspiracy that some of the conspirators, including US Bank, agreed to relax and/or ignore standards relating to the credit worthiness and loan worthiness of borrowers, knowing that the effect of that would be to unnaturally increase the availability of credit and residential real estate secured loans, which would drive up residential real estate prices beyond real property values for such real estate and would encourage the proliferation of the use of credit. 8. As part of this conspiracy, US Bank and other coconspirators deployed appraisers who would appraise residential real properties at inflated values, justifying US Bank in making loans secured by said properties in amounts exceeding the real values of said properties which increased the bubble effect, because, as the coconspirators knew, real estate prices are based on the fair market value of the parcel(s) in question - whatever the market will bear - and the market had been manipulated by the coconspirators to maximize the demand for residential real estate
TH E L A W O FFIC E S O F R O B E R T M . G R E G G 800 N O R T H D EV IN E R O A D V AN C O U V E R , W A 98661 TE L: (360) 694-6505 FAX : (360) 694-7619 LR M G 2@ M S N .C O M

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mortgages. 9. As part of this conspiracy, US Bank and other coconspirators encouraged borrowers, including defendant, to assume responsibility for insupportable indebtedness by misrepresentations about the nature of credit, the nature of money and the workings of the credit markets, both at the time(s) that the misrepresentations were made and into the foreseeable future. 10. As part of this conspiracy, defendant US Bank and others originated as many residential real estate mortgages as possible and issued as many credit cards as possible because the conspiracy profited from the selling of the mortgages and the debt alleged above as bundles to be securitized by other coconspirators and bought and sold as securities as more fully alleged below. 11. The coconspirators knew that there would inevitably come a time when demand would decrease, when real estate prices would then begin to fall, and that the real estate market would then deflate, causing real estate prices together with fair market property values and true, uninflated property values to plummet triggering a wave of defaults by borrowers. 12. The coconspirators knew and intended that, when the effect described in paragraph 10 occurred, the mortgage backed and credit-debt based securities which they had sold would be revealed to be worthless or worth only a fraction of the price for which they had been sold, and the effects on the economy as a whole would include a massive, nationwide degradation of wealth and/or loss of income, and a radical tightening of the credit markets making it impossible for great masses of the barely-qualified or under-qualified borrowers who had been created by the conspiracy alleged herein to meet their mortgage payment obligations and credit payment obligations and financially untenable for others to do so, who, on account of the actions of the
TH E L A W O FFIC E S O F R O B E R T M . G R E G G 800 N O R T H D EV IN E R O A D V AN C O U V E R , W A 98661 TE L: (360) 694-6505 FAX : (360) 694-7619 LR M G 2@ M S N .C O M

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coconspirators, owed far more on their mortgages and/or credit cards than their properties were worth, and radically decreasing credit available to small businesses, aggravating unemployment and multiplying the number of mortgage and credit card defaults. 13. As part of the conspiracy that is alleged herein, the coconspirators planned to undertake foreclosures and credit-based debt collection on a massive scale in order to unlawfully and corruptly accrue to themselves an ownership interest in a large portion of the nations residential real estate and wealth, and in furtherance of the conspiracy, and sometimes as part of the securitization process, some of the coconspirators established trusts and other entities the purpose of which was to generate and complete the planned foreclosures and debt collection. 14. Plaintiff herein is just such an entity, established and/or managed as part of the conspiracy alleged above and for the purpose of effectuating its ends. 15. The debt-based credit collection which plaintiffs pursue hereby against the defendant is part of the conspiracy alleged herein. For her SECOND AFFIRMATIVE DEFENSE, defendant alleges FRAUD AND RACKETEERING as follows: A. General Allegations 16. Defendant realleges paragraph 5. 17. In 1999, Congress repealed the Glass-Steagal Acts by means of Pub. L. No. 106-102, 113 Stat. 1338 (1999), known as the Gramm-Leach-Bliley Financial Services Modernization Act (GLB). The result was what has come to be known as the modern Financial Services, or Finance, Industry.
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18. A huge secondary market in mortgage backed (MBSs) and credit-debt backed securities sprang up and was fed by an ever-increasing number of less-and-less trustworthy home mortgages and extensions of credit, which mortgages and credit were sold to the American public using the artificial depression of interest rates by The Federal Reserve, a consortium of private banks to which US Bank belongs.

19. The resultant false, and ultimately insupportable, increase in real property values and cheap, available credit, together with the artificially depressed interest rates, stimulated a refinance boom of epic proportions, artificially driving apparent real property values up even more, and stimulated unprecedented assumption of credit-based debt. 20. In June, 2007 Bear Stearns, one of the earths largest investment banks, pledged to loan one of its embattled hedge funds $3.2B, collateralized with debt obligations, only to have Merrill Lynch, another global investment bank also selling wealth management, asset management, insurance, and other related products, seize $850M of the underlying collateral and auction it off, realizing only $100M. Thereafter, facts began to emerge about the securitization of mortgages and debt as more specifically alleged below. 21. In or around October, 2007, courts around the country began to determine, when the question was properly addressed, that entities, especially trustees and successor trustees acting on behalf of beneficiaries, could not if pressed demonstrate that they were indeed empowered to foreclose - that they owned the mortgage note. See, e.g., Exhibit 1 to Complaint. 22. From the year 2000 until the bottom dropped out in 2008, all the major real estate lenders,
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US Bank included, required of their brokers that loans be configured according to the specifications of the investors. See Exhibit 2, Affidavit of Roberta Kelly. 23. Defendant alleges on information and belief that the extensions of debt based credit were also configured to the specifications of the investors. 24. The securitization process creates entities and security obligations that are completely removed from the agreement between the original lender (known as the originator) and the original borrower. Mortgages and debts are pooled or bundled and then sold with or without recourse to an issuer - usually a large corporation or private fund - and converted into securities known as Special Investment Vehicles (SIV) or Special Purpose Companies (SPC) or Special Purpose Vehicles (SPV) which are exempt from the Securites Act of 1933 and the Securities and Exchange Act of 1934. Pub. L. 106-102, Nov. 12, 1999, 113 Stat. 1338 (See 12 U.S.C. 1811 note). 25. Various interests in the securities are created and sold to investors, whose bargained-for exchange is a share of the income stream from the monthly payments made on the promissory notes or the credit card payments. 26. The obligation to pay the investors is administered through a Pooling and Servicing Agreement between a Servicer, and the entity created by the process. This process is extremely complex, with slices of the risk, known as tranches being created and sold in secondary markets. At the apex of the pyramid, the fees and bonuses generated by these transactions and paid to the traders and entities involved in originating the mortgages and the debt and in creating and trading in these securities were astronomical. A Servicer collects the payments from the property owner and distributes the payments to the investors after extracting a
TH E L A W O FFIC E S O F R O B E R T M . G R E G G 800 N O R T H D EV IN E R O A D V AN C O U V E R , W A 98661 TE L: (360) 694-6505 FAX : (360) 694-7619 LR M G 2@ M S N .C O M

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fee. 27. In the case of credit-based debt, collectors such as plaintiff are recruited to buy the debt which is created by means of the conspiracy, racketeering and the fraud alleged herein, pretend ignorance of the illegitimate debt creation, and gather whatever assets the alleged debtor has managed somehow to keep. B. Securitization as Fraud 28. Where, in true sale, disguised loan and assignment securitizations, the originator (or sponsor) serves as the servicer, the unavoidable conflict of interest constitutes conversion and fraud, specifically as follows: A. Misrepresentation of material facts occurs when the sponsor/servicer selects the assets to be transferred to the SPV, and the terms of the offering prospectus misrepresents the level of objectivity and fairness of the servicer/sponsor, and in the event the sponsor/servicer selects collateral for substitution where there are problems and the past and present disclosure statements and ABS offering documents materially misrepresent the sponsor/servicers objectivity and fairness. B. The specific intent to deceive about the sponsor/servicers acts, truthfulness and objectivity/fairness is inherent in the dual role of sponsor/servicer which constitutes a conflict-of-interest and from sponsor/servicers significant economic, psychological and legal incentives to maximize its profits by: a) delaying substitution of collateral for as long as possible, b) delaying recognition of collateral impairment, and c) substituting impaired collateral with sub-standard collateral. C. Investors rely heavily, and have a right to rely, on the representations, the structure, the arrangements, the contracts and the disclosure statements in securitizations, which are relatively complex. D. Losses occur due to the sponsors/servicers misrepresentations of its obligations, fairness, objectivity and fiduciary duties because: a. Investors estimates of the values of ABS are inaccurate and too high due to the servicers/sponsors misrepresentations; b. Investors incur unnecessary trading costs to re-balance their portfolios as the ABS becomes riskier; c. Investors and the sponsor/servicer incurs additional monitoring costs whenever there is any report of impairment of collateral or substitution;
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d. In the ABS sales process, the underwriter makes certain representations concerning the effectiveness and predictability of the collection process, and investors relying on such representations may have a securities fraud claim if the servicer fails to perform (i.e., goes bankrupt). 29.

4 Most, if not all, securitized mortgages and debts are taken off the originator/sponsors 5 books. This has only been permissible if: (1) The SPV is truly independent of the sponsor and of 6 the directors, fiduciary administrative duties notwithstanding; and (2) the sponsors transfer of the 7 assets to the SPV are a true sale and the sponsor keeps no ongoing economic interest in the 8 assets, and (3) the form and substance are transparently identical, and the structure is not, nor does 9 it appear to be, illusory or deceptive. Where the sponsor services the loan, these criteria cannot be 10 met. 11 30. 12 Off-Balance-Sheet Treatment Of ABS in both True-Sale and assignment 13 transactions constitutes fraud, specifically as follows: 14 15 16 17 18 19 20 21 22 23 24 25 26 D. Loss occurs as a direct and proximate result of the above-alleged sponsor/servicers misrepresentations of its obligations because a) investors estimates of the values of the sponsors equity are inaccurate and too high due to the servicers/sponsors misrepresentations of the SPV debt, b) investors incur unnecessary trading costs to re-balance their portfolios as the sponsor is deemed more risky, c) the investor and the sponsor/servicer incurs additional monitoring costs whenever there is any report of
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A. A misrepresentation of material fact - that the sponsor has no interest in the assets occurs when the sponsor removes the assets from its books, whereas consolidation of the SPV in the Sponsors financial statements is warranted because the sponsor a) retains a residual economic interest in the SPV, b) functions as servicer of the SPV asset pool, which grants the sponsor significant control over the assets and the SPVs operations, and c) determines recognition of impairment of collateral, and selects and provides assets for substitution of collateral and d) typically misrepresents the level of objectivity and fairness of the servicer/sponsor in disclosure statements. B. The misrepresentation alleged above is specifically intentional, as evidenced by the elaborate arrangements and structure of the securitization transaction. C. The sponsors current and prospective shareholders and other investors have a right to rely, and do rely heavily on the sponsors representations about the structure and arrangements of securitizations, the associated disclosure statements and the assurances of off-balance sheet treatment of SPV debt in securitizations, which are relatively complex. These form the primary source of knowledge and valuation terms for the investor.

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impairment of collateral or substitution. 31. Also as a direct and proximate result of all the fraud alleged above, and because of the near universality of the fraudulent practices alleged above, together with the widespread and associated practices of illegally and unconstitutionally creating money out of thin air and artificial manipulation of interest rates, all real property owners are damaged due to the unjustified and insupportable increase in real property values nationwide followed by the inevitable, predictable (and predicted) collapse, and the loss of wealth, and everyone is damaged by the resultant degradation of the currency. See Exhibit 3. C. Securitization as Racketeering 32. True sale, disguised loan and assignment securitizations are transactions constitute predicate acts under18 USC 1961-1968 as follows: A. The requisite enterprise is composed of the originator, the sponsor/issuer, the trustees and the intermediary bank, all of whom work together closely to effect the securitization transaction; B. Predicate acts include using the mails for sending out materials among themselves and to investors, using wires to engage in fraud by communicating with investors, conversion where there isnt proper title to collateral, misrepresentation of issues and facts pertaining to the securitization transaction as set forth above, securities fraud inherent in the false disclosures and non-disclosures alleged above, deprivation of the opportunity to profit, false and misleading representations about the value of the collateral and undercutting the issuers ability to pay debt claims or judgment claims in where the originator is financially distressed and the cash proceeds of the transaction are significantly less than the value of the collateral. C. The requisite intent is evident in the knowledge (actual and by inference), acts, omissions, purpose (actual and by inference) and results of the process of securitization. 33.

23 Specific United States Code sections implicated are: 18 USC 1341 (prohibits mail fraud), 24 18 USC 1343 (prohibits wire fraud), 18 USC 1344 (prohibits financial institution fraud), 18 USC 25 1957 (prohibits engaging in monetary transactions in property derived from specified unlawful 26
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activity), 18 USC 1952 (prohibits interstate travel or transportation in aid of racketeering). D. Securitization as Monopolization 34. 44. Securitization Constitutes Violations Of United States antitrust laws, as follows: A. Market Concentration: The US ABS and MBS markets are dominated by ay few large entities such as FNMA, Freddie Mac, the top-five investment banks (all of which have conduit programs), the top-five credit card issuers (MBNA, AMEX, Citigroup, etc.).. Hence the top-five ABS/MBS issuers control more than 50% of the US ABS/MBS market. This constitutes illegal market concentration under US Antitrust laws. B. Market Integration: The ABS and MBS markets are national and international, involving geographically-diverse entities and individuals. Each ABS offering typically involves presentations to investors in various cities, the printing, mailing, traveling and administrative costs costs being borne by the underwriter(s) before its fees are paid by the sponsor. This has two main effects: It reduces competitive pressure on dominant investment banks and groups of investment banks and it raises market-entry barriers by making it more expensive to conduct presentations for new offerings. Hence, the market integration created by the business practices of securities underwriters is anti-competitive and violates 15 USC 1 et seq. (The Sherman Act), 15 USC 12 et seq (The Clayton Act) and FTC Antitrust statutes. C. Syndicate Collusion, Price Discrimination and Exclusive Contracts: The syndicates of investment banks used in distributing ABS/MBS collude to determine the price at which each ABS tranche is sold and which investors can purchase different tranches. D. Price Formation and Price Fixing: The price of ABS securities is often linked to the price/yields of US treasury bonds, distorting the true demand/supply balance for ABS/MBS, and erroneously incorporating the demand/supply relationships of the US Treasury Bond market, into the ABS/MBS markets. Each active investment bank typically underwrites many offerings simultaneously, and essentially controls the pricing of each new-issue ABS offering. E. Vertical Foreclosure: In the ABS/MBS markets some investment banks and commercial banks are active in almost all phases of the securitization process, and non-bank entities can use their own asset portfolios and in-house trading desks to participate in almost all aspects of securitization processes. F. Tying occurs when sponsors are required to purchase loans, letters of credit, custody services, etc. from the investment bank, in order to effect the securitization transaction, investors are sometimes required to simultaneously purchase two or more tranches of an ABS offering or to promise to buy the same or similar ABS/MBS securities in order to be allocated ABS in new offerings, an apparent violation of 15 USC 13(2), and/or the sponsor and or investment bank may formally or informally require investors to purchase minimum dollar volume of ABS in specific offerings in order to get allocations in future offerings. These acts constitute illegal tying. G. Predatory pricing occurs when investment banks under-price ABS offerings in order to obtain more investors.
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E. The Use of Void Contracts 35. The securitization process necessarily involves the use of void contracts, for reasons including but not limited to the following: A. Lack of consideration - many of the contracts used in the securitization process are unilateral, executory contracts for which there is no consideration, illusory promises respecting collateral that has not been acquired or performed and contracts devoid of mutuality, either between the sponsor and the investors or between the investors and the SPV. F. Tax Evasion 36. All True-Sale, Disguised Loan And Assignment Securitizations are illegal tax-evasion schemes, prohibited by 26 U.S.C. 7201. 26 USC Subtitle F, Chapter 75, inter alia. based on the fact that the sponsor determines the price at which the collateral is transferred to the SPV, and hence can lower/increase the price of the collateral to avoid capital gains taxes. 37. Where, in true sale, disguised loan and assignment securitizations, the SPV is or employs a trust, the declaration of the trust is void because the trust is created for an illegal purpose as set forth in this complaint. 38. Where the employment of void contracts is customary and/ or the purpose of the transactions is illegal, as outline above, the process itself is void as against public policy. G. ORICO 39. ORS 166.720 prohibits unlawful racketeering activity, including prohibiting any person who has knowingly received any proceeds derived, directly or indirectly, from a pattern of
TH E L A W O FFIC E S O F R O B E R T M . G R E G G 800 N O R T H D EV IN E R O A D V AN C O U V E R , W A 98661 TE L: (360) 694-6505 FAX : (360) 694-7619 LR M G 2@ M S N .C O M

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racketeering activity or through the collection of an unlawful debt to use or invest, whether directly or indirectly, any part of such proceeds, or the proceeds derived from the investment or use thereof, in the acquisition of any title to, or any right, interest or equity in, real property or in the establishment or operation of any enterprise. 40. ORS 166.720 prohibits any person, through a pattern of racketeering activity or through the collection of an unlawful debt, from acquiring or maintaining, directly or indirectly, any interest in or control of any real property or enterprise. 41. ORS 166.720 prohibits any person employed by, or associated with, any enterprise from conducting or participating, directly or indirectly, in such enterprise through a pattern of racketeering activity or the collection of an unlawful debt. 42. ORS 166.720 prohibits any person from conspiring or endeavoring to violate any of the above prohibitions. 43. ORS 166.715 defines racketeering activity to include any conduct defined as racketeering activity under 18 U.S.C. 1961 (1)(B), (C), (D) and (E) and 2). 44. ORS 166.715 defines Unlawful debt as any money or other thing of value constituting principal or interest of a debt that is legally unenforceable in the state in whole or in part because the debt was incurred or contracted in violation of ORS 82.010 to 82.170, relating to interest and usury or in gambling activity in violation of federal law or in the business of lending at a rate usurious under federal or state law. 45. The conspiracy alleged herein, including but not limited to the securitization of mortgages,
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constitutes a pattern of criminal racketeering activity as specifically alleged above. H. Relevant Specific Allegations 46. Beginning in 2000, defendant was a licensed mortgage broker in the State of Oregon, and beginning in 2003, she was a licensed mortgage broker in both Oregon and Washington. US Bank was the banker for her business and she brokered may loans to US Bank. The credit card that is the subject of the complaint herein was issued to her in furtherance of her patronization of US Bank. 47. In order to encourage defendant to broker loans to US Bank and to continue to patronize US Bank, US Bank misrepresented to defendant the economic realities alleged above and encouraged her, in furtherance of the conspiracy and the pattern of racketeering activity alleged above, to assume more and more credit-based debt on the basis that as long as real estate fair market values continued to climb, there was no plausible scenario according to which her income and wealth would not do the same. 48. On October 22, 2002, plaintiff Kelly purchased a commercial building located at 3151 NE Sandy Blvd., Portland, Multnomah County, Oregon, granting a beneficial interest to defendant US Bank to secure a purchase money loan. Defendant intended to repay the commercial loan alleged above partially from her own earnings and partially from the rents paid by tenants, principally another mortgage broker, facts well known to defendant US Bank. 49. Beginning in late 2005, the conspiracy alleged above had become apparent to defendant, and she refused to participate as was her legal duty to do. She began to inform her potential clients about the pending crash in the housing market which would inevitably result from the actions of the coconspirators, which caused a radical decrease in her income and the income of
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her principal tenant at a time when interest rates were increasing quickly. 50. By the middle of 2006, ripples appeared in the residential real estate market due to the conspiracy, fraud and pattern of racketeering alleged herein, foretelling the collapse alleged in paragraph 18, above, and making it fiscally impossible for defendant to support the debt that had been assumed based, at least in part, on US Banks misrepresentations. 51. Since interest for the commercial loan was based on the prime rate, payments on the loan virtually doubled within half a year. Defendants attempts to persuade US Bank to refinance the commercial mortgage failed, despite the fact that there had never been a default or late payment on the loan, either on account of the conspiracy, fraud and pattern of racketeering alleged herein or on account of gender-based discrimination as more fully alleged below. 52. Defendant was damaged in an amount equal to at least $100,000.00 by the actions of US Bank, plaintiffs predecessor in interest alleged above. For her THIRD AFFIRMATIVE DEFENSE, defendant alleges: Gender Based Discrimination 53. Defendant realleges paragraph 5. 54. Defendant Kelly was forced to sell the said commercial building and suffer a loss of equity, which loss was precipitated by the actions of the coconspirators alleged, all to defendants damage in an amount of at least $250,000.00. 55. The sale was closed on November 3, 2006.

TH E L A W O FFIC E S O F R O B E R T M . G R E G G 800 N O R T H D EV IN E R O A D V AN C O U V E R , W A 98661 TE L: (360) 694-6505 FAX : (360) 694-7619 LR M G 2@ M S N .C O M

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56. The loan worthiness of a commercial building for purchase money loan purposes turns almost entirely on the buildings capacity to produce income and not the creditworthiness of the purchaser. 57. Defendant US Bank granted defendants borrower a purchase money commercial loan to buy the building at 3151 NE Sandy Blvd. from defendant on exactly the same terms as those which defendant had proposed to US Bank in her attempt to renegotiate her purchase money loan on the said building. 58. Nothing about the said commercial building had changed between the time defendant US Bank had rejected plaintiff Kellys attempt to renegotiate her loan and defendant US Banks acceptance of plaintiff Kellys buyers application for a purchase money loan on that same building. 59. Plaintiff Kellys buyer, however, was a man, and plaintiff Kelly alleges on information and belief that defendant US Banks decision to reject her application and accept his was gender based, in violation of state and federal law. WHEREFORE, defendant prays for a judgment as follows: 1. Determining that plaintiff take nothing hereby; 2. Awarding defendant a setoff against any amount(s) awarded plaintiff in the amount to be proved at trial but not to exceed $250,000.00. 3. Awarding defendant her costs, disbursements and attorneys fees incurred herein.

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4. Awarding defendant such other and further relief as the court deems just and proper. DATED this ___ day of May, 2009

________________________ ROBERT M. GREGG OSB # 812488 Attorney for Defendant Trial Attorney: Robert M. Gregg OSB # 812488

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