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On Thanksgiving Day, attorney Joseph Becher got a call on his cell phone from a former client, panicking about a foreclosure notice that came the day before.

Becher, who helped the client with a loan modification request, didn't know what to say. He hasn't represented the client since he quit working for Dan Dargon in May - troubled, he said, by how Dargon was running his law firm.

But Becher said the client hasn't known whom to call since Dargon closed the doors to his Concord office several months ago.

Now, with a foreclosure sale scheduled, the client "is understandably concerned," Becher said yesterday, testifying before the Banking Department during a hearing to decide whether Dargon violated a new state law that requires anyone doing mortgage modification work to be licensed by the state.

How Dargon unraveled his firm isn't the basis of the Banking Department's case against him. The department says Dargon's firm violated federal and state laws governing mortgage modification work on 108 occasions by collecting advance fees, entering into "best efforts" contracts and performing unlicensed loan originations - all violations that carry fines of up to $25,000.

Dargon says the Banking Department doesn't have the authority to regulate lawyers performing mortgage modifications, an argument he's making in a court case against the Banking Department and a legal question that wasn't the subject of yesterday's hearing.

But the question of what Dargon promised his clients when they paid him upfront for his firm's representation - and what they got in return - played into much of yesterday's testimony, as former employees described what they saw at the firm.

At first, the firm's focus was on helping people avoid foreclosure, said Becher, who was the only attorney working for Dargon when the firm began taking on loan modification clients in the summer of 2009.

But in the coming months, as the firm grew to a staff of more than 30 employees, Becher said he saw the law firm "turn into a business where the primary objective was how to get clients in and out of the door as expeditiously as possible while still meeting our contractual obligations."

The firm may not have met certain client expectations, however, Becher and other employees said.

Attorney Joseph Russell said the firm's contracts offered clients the option to request a forensic audit, but he never conducted one.

Russell, who did foreclosure work for a firm in Connecticut before joining Dargon's firm in March, described that kind of audit as an intensive process that involves reviewing hundreds of pages of a client's financial documents.

At Dargon's firm, Russell said he was never told to conduct the audit, despite the language in the contracts.

"No one, as far as I could see, was doing those," he said yesterday.

Assistant Attorney General Karen Gorham, representing the Banking Department during yesterday's hearing, asked Russell what that meant for clients.

"That they believed they were paying for that service and receiving the benefit of that service," which can result in better loan terms for borrowers, Russell said. He said he had a conversation with Dargon about the lack of auditing and later overheard an instruction given to the firm's telemarketers to stop advertising the practice.

Attorney Jeffrey Merrill, who joined the firm last December, said he was concerned about the firm's telemarketing practices after he overheard the head telemarketer say he "wanted to get away from a consultative sell and more into an emotional sell."

Instead of focusing on whether a client would qualify for a loan modification, Merrill said, the telemarketer wanted to emphasize the "pain and anguish people feel when they get that foreclosure notice."

"That is completely unethical," Merrill said.

Merrill said he resigned in February, about two weeks after he overheard that conversation.

Dargon's clients were directed to the telemarketers by solicitation letters, Gorham said in her opening remarks during yesterday's hearing, which was held before a presiding officer appointed by the Banking Department.

Gorham said Dargon's firm began his loan modification practice after hearing a business pitch from a mortgage broker, quickly spending $100,000 on leads that gave him mortgage information for potential clients.

In the wake of the housing market crash that left homeowners in New Hampshire and across the country on the brink of foreclosure, third-party loan modification "was a huge business opportunity, and Dargon Law Firm took the bait," Gorham said. "They became a loan modification mill."

Dargon - who represented himself yesterday - responded to Gorham in his opening remarks by saying his business "wasn't a mill."

"It was a law firm that was dedicated to helping people save their homes," he said. "There's nothing wrong with how we solicited people whatsoever."

He said the telemarketers functioned as screeners, to make sure the firm only took appropriate candidates, and he said lawyers had discretion over which clients they represented.

In cross-examining his former employees, Dargon on several occasions asked whether they believed they had been involved in a scam.

"Did you ever get the sense that I was, like, out to take money from people and defraud them?" he asked Becher.

"I got the sense you were in it for the right reasons," Becher said.

The hearing continues today, and the presiding officer, lawyer Stephen Judge, is expected to issue a decision within 30 days on whether Dargon's firm will face penalties.


How many counts is "soliciting donations for a Titan and then running off with the money" worth?