A Washington attorney accused of being complicit in sending inflated foreclosure costs to government agencies, lenders and the public responded this week that the allegations are a “disingenuous attack” wholly lacking in merit.

The response was filed Wednesday with the Oregon State Bar on behalf of David E. Fennell, who co-owns two affiliated firms, Northwest Trustee Services Inc. and Foreclosure Expeditors/Initiators LLC, more commonly called FEI.

Fennell was replying to an ethics complaint filed against him with the bar in January. His attorney, Bradley F. Tellam of the Portland firm Stoel Rives, says in the document that Fennell knew nothing about and had no hand in FEI’s billing arrangements. Tellam also says the amounts FEI has charged for its foreclosure services are reasonable by industry standards.

The cost in question in the bar complaint is for legal foreclosure notices in newspaper classified ads, one step in the complex foreclosure process set out in state law. The complaint says that FEI sent bills for legal notices that were about 18 percent higher — roughly $180 per foreclosure — than the actual cost of service. FEI sent those bills to Northwest Trustee, which then asked consumers, government agencies and lenders for reimbursement.

The increased cost was passed on in at least one instance to a homeowner who paid to get out of foreclosure. Oregon law says trustee services are allowed to bill property owners only for expenses that are actually incurred.

Bend attorney Michael Dillard, who works for Karnopp Petersen and represents Bulletin parent company Western Communications, filed the complaint. Dillard says in the complaint that FEI has been a significant advertiser for the company, particularly for The Redmond Spokesman.

Attempts to contact Tellam on Thursday were unsuccessful. In his response to the bar, however, he says Dillard’s complaint is an attempt by Western Communications to “solidify a monopoly on high-priced legal advertising.”

Dillard could not be reached for comment.

Fennell’s filing responded to specific questions posed by an Oregon State Bar attorney assigned to investigate the complaint. The bar attorney will decide whether to dismiss the complaint or present it to the state Professional Responsibility Board, which functions like a grand jury and would decide whether to proceed with charges.

Before making the decision, the bar attorney can choose to ask for additional information from Dillard and Tellam.

Allegations unfounded, response says

Trustee services are often hired by lenders to handle the steps required by state law in a foreclosure. Northwest Trustee Services is one of several operating in the region.

Fennell’s response calls FEI a foreclosure support service provider. In addition to handling the publications, FEI ensures the property owner receives notice of the foreclosure and arranges the property auctions.

FEI and Northwest Trustee are part of a family of companies under a law firm, Routh Crabtree Olsen, all based in Bellevue, Wash. While they are related, the response says that FEI functions as an independent business doing work for Northwest Trustee and other unconnected clients.

Part of the work done by these businesses is to ensure notices of foreclosures are published in a qualified local newspaper. In Oregon, the law requires that a notice be published on four consecutive weeks.

The notices are one of the most expensive aspects of the foreclosure process. Four publications for one foreclosure in The Redmond Spokesman typically cost about $1,000.

In return, lenders pay trustee services a fee for the work and reimburse them for the expenses they rack up.

The crux of Dillard’s complaint is that FEI passed on a higher bill than what the newspaper charged it for the notices.

The complaint says FEI had previously asked a Western Communications clerk to fill out an email form every month showing the prices for all the ads that the company published. Then in July 2009, it asked the clerk to fill out a form showing the price with a commission tacked on. But Western Communications continued to bill at — and was paid by FEI at — the lower rate.

Documents from lenders and a state agency attached to the complaint show FEI requested payment for the higher amount.

The complaint targets Fennell under his ethical responsibilities as an attorney licensed to practice in Oregon.

The response focuses on several points, including Fennell’s level of involvement in the businesses and the nature of billing for publication notices in the industry.

Fennell had no knowledge of FEI’s billing arrangements, the response says. He also didn’t know one of the key FEI employees named in the complaint.

It also says one bill to a bank with the entry “Payee Code: Fennell” might be a product of the bank’s billing practices, and that neither FEI nor Northwest Trustee offered that as the appropriate code.

The response says that while FEI didn’t make money on newspaper notices in most Oregon counties, it isn’t wrong for the company to bill for more than what the newspapers charged for them. It cites an unnamed company that also does business in Deschutes County, saying it invoices more than the actual cost of the notices and at times hundreds of dollars more than FEI.

“FEI was never seeking to increase its commissions at the expense of its trustee customers, or in turn, their lender clients or borrowers,” the response says.

Tellam also disputes Dillard’s description of how the invoicing between Western Communications and FEI worked, and describes in several pages what value and services FEI provides.

Since the complaint

Since the filing of the complaint, Northwest Trustee has suspended publication orders to FEI, the response says.

“Although this suspension undoubtedly will increase costs to (Northwest Trustee Services),” it says, “it has been determined that it is prudent to do so until the issues raised in the complaint have been investigated and resolved.”

Since January, references to Fennell have been removed from the Northwest Trustee and Routh Crabtree Olsen websites. The response says Fennell was an unpaid counsel at the firm and as of January is no longer affiliated with it.