United States District Court, D. Maryland
CONSUMER FINANCIAL PROTECTION BUREAU, et al. Plaintiffs,
GARY KLOPP, et al. Defendants.
RICHARD D. BENNETT, UNITED STATES DISTRICT JUDGE
the Consumer Financial Protection Bureau and the Consumer
Protection Division of the Maryland Attorney General's
Office (together, “Plaintiffs” or
“Regulators”), filed this action against Mr.
Klopp and other individuals and entities to address the
Defendants' alleged participation in a kickback scheme in
violation of federal and state consumer protection laws. (ECF
No. 1.) On November 13, 2015, Plaintiffs and Defendants Gary
Klopp, All County Settlements, LLC, and Carroll Abstracts,
Inc., submitted a Stipulated Final Judgment and Order (ECF
No. 51), which this Court approved and entered on November
16, 2015. (ECF No. 53.) On August 16, 2017, this Court
conducted a hearing and held Mr. Klopp in civil contempt for
violating the Stipulated Final Judgment and Order.
(See ECF No. 59.)
now are Plaintiffs' Motion for Sanctions (ECF No. 67) and
Defendant Klopp's Motion in Limine to Preclude
Use of Deposition of Stacey Kearney (ECF No. 69). On May 16,
2018, this Court conducted a hearing, and for the reasons set
forth on the record and for the reasons set forth below,
Defendant Klopp's Motion in Limine (ECF No. 69)
is GRANTED, 
and Plaintiffs' Motion for Sanctions (ECF No. 67) is
GRANTED IN PART and DENIED IN PART. More specifically:
Klopp SHALL PAY $526, 796.36 to the Plaintiffs.
a. Any supersedeas bond to stay the enforcement of this
monetary judgment must amount to $632, 655.63 and be posted
within 14 days of any notice of appeal.
Klopp is completely BARRED from the mortgage industry for a
period of TWO YEARS, starting TEN DAYS after the entry of
a. He may collect his base salary through the date of the
sanctions hearing, May 16, 2018, but may not receive any
compensation from Peoples Bank for work after that date.
b. This Order does not prohibit payments or reimbursements
related to the requisite transfer of any assets or other
interests in Peoples Bank.
Klopp SHALL POST this Sanctions Order to the Nationwide
Mortgage Licensing System and Registry website within 60 days
of this Order.
April 29, 2015, Plaintiffs filed a Complaint against Mr.
Klopp and other individuals and entities alleging violations
of the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2607(a), the Consumer
Financial Protection Act of 2010, 12 U.S.C. §
5536(a)(1)(A), and the Maryland Consumer Protection Act, Md.
Code Ann., Com. Law §§ 13-101 through 13-501 (2013
Repl. Vol.). (ECF No. 1.) On November 13, 2015, Plaintiffs
and Defendants Gary Klopp, All County Settlements, LLC, and
Carroll Abstracts, Inc., submitted a Stipulated Final
Judgment and Order (ECF No. 51), which this Court approved
and entered on November 16, 2015. (ECF No. 53, hereinafter
“Final Judgment Order.”)
these three Defendants neither admit nor deny the allegations
(id. at ¶ 3), the Final Judgment Order, in
relevant part, has imposed the following conduct
8. Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are
limited from participation in the Mortgage Industry for two
years from the Effective Date as follows:
a. Defendants are prohibited from contacting, soliciting, or
otherwise dealing with consumer borrowers or loan applicants
in any capacity with regard to any mortgage business; and
b. Defendants are prohibited from contacting, soliciting, or
otherwise dealing with any third party businesses engaged in
offering any settlement service.
c. These limitations shall not prohibit Defendant Klopp from
acting solely as a personnel or human-resources manager for a
mortgage business operated by an FDIC insured banking
institution, including providing personnel or
human-resources-related management and administrative
functions with regard to National Mortgage Licensing
System-registered loan originators, as that term is defined
in Md. Fin. Inst. Code Ann. §11-601.
9. Within 60 days of the Effective Date, Defendant Klopp must
disclose this action and Order to NMLSR and, in accordance
with NMLSR procedure, upload an electronic copy of this
(ECF No. 53 at 5-6.) The Final Judgment Order also includes
various reporting requirements related to personal contact
information and business activities. (Id. at
7, 2017, the Plaintiffs filed an Application for an Order to
Show Cause Why Gary Klopp Should Not Be Held in Contempt.
(ECF No. 54.) This Court issued the requested Show Cause
Order on July 18, 2017. (ECF No. 55.) On August 16, 2017, the
parties offered testimony and documentary evidence regarding
Mr. Klopp's compliance - or lack thereof - with the
reporting requirements and the conduct prohibitions. Mr.
Klopp testified that he has been working for Peoples Bank
& Trust Company (“Peoples Bank”) and that his
management contract and compensation plan have not changed
since the entry of the Final Judgment Order. He receives a
for his duties as an HR manager plus additional compensation
based on the profitability of his branches. At the August 16,
2017 hearing, Stacey Kearney, an employee at the Peoples Bank
branch in Owings Mills, Maryland, testified that Mr. Klopp
had ultimate control of that branch, which employed over 100
people. The evidence at the hearing also established that Mr.
Klopp has owned and operated a Peoples Bank branch in
California. Both branches focus entirely on brokering
conclusion of the contempt hearing on August 16, 2017, this
Court held Mr. Klopp in civil contempt, for the reasons
stated on the record, for violating numerous provisions of
the Final Judgment and Order. (ECF No. 59.) Specifically, it
held that Mr. Klopp violated Paragraph 8 of the Final
Judgment and Order by continuing to own and operate Peoples
Bank branches in Owings Mills, Maryland and in California and
by engaging in all aspects of running his mortgage
businesses. In this regard, this Court specifically stated,
“It is undisputed that Mr. Klopp has continued to own
and operate a mortgage business; in my opinion, in a clear
violation of this Court's [O]rder.” This Court also
held that Klopp violated Paragraph 9 by failing to upload a
copy of the Final Judgment and Order to the Nationwide
Mortgage Licensing System and Registry (“NMLSR”),
and that he violated the reporting requirements (see
ECF No. 53 at ¶¶15-17) by failing to inform the
Plaintiffs of his address in California and his ownership and
control of a Peoples Bank branch in California.
Court then held sub curia the issue of sanctions.
After jointly seeking an extension of time (ECF Nos. 63-64),
the parties submitted their sanctions briefs (ECF Nos.
67-71). The Regulators seek (1) disgorgement of all
of Klopp's income from People Bank from the date of
Judgment until the date of compliance, whenever that appears
to be; and (2) a lifetime ban from the industry, without an
exception for human resources (“HR”) work. Mr.
Klopp argues that these proposed sanctions are
initial briefs, however, did not fully address the
Court's concerns, so this Court requested brief status
reports on Mr. Klopp's efforts to comply with this