In the first criminal case involving robo-signing of mortgage documents, Nevada's attorney General Catherine Cortez Masto filed charges Wednesday against two Lender Processing Services employees accused of filing tens of thousands of false documents.

The grand jury indictment filed with the Clark County Recorder's office accuses California residents Gary Trafford and Gerri Sheppard of overseeing teams of so-called "robo-signers" — people who allegedly churned out improper notices of default to initiate foreclosure proceedings. The defendants allegedly allowed their signatures to be forged and submitted to the county recorder.

In a statement on Thursday morning, Lender Processing Services conceded that some of its past document signing practices "were flawed," but said that it believed the resulting filings were legitimate and that no wrongful foreclosures had occurred.

More indictments are likely to be filed, according to John Kelleher, Nevada's chief deputy attorney general.

"Robo-signing is obviously going on en masse in Nevada," Kelleher said. "Most of the major banks seem to be clients" of the defendants' company.

The AG's office has not made allegations against banks themselves, he said. "We simply don't know if the major banks were aware of what these individuals were doing," according to Kelleher.

If banks sanctioned the alleged robo-signers' activities, Kelleher said, they could be the subject of future actions. "Our charge is to prosecute criminal activity by whomever may be committing it," he said. "There's no provision under the law for an industry to collectively decide to circumvent Nevada statutes."

In the case against Trafford and Sheppard, bail has been set at $500,000 each. The two defendants face more than 600 counts ranging from gross misdemeanors to felonies. An LPS spokeswoman said that the two had worked for LPS for "several years" and that the company had hired an attorney to defend them.

Whether the defendants worked for Lender Processing Services throughout the time period of the alleged violations is not clear. The Nevada Attorney General's office said that their company had changed names several times between 2005 and 2008.

The indictment represents a marked escalation in the fight over robo-signing and improper foreclosure documentation. Robo-signing practices are at the heart of what was a 50-state attorneys general investigation that recently has fractured over disagreements about liability waivers and the magnitude of possible bank punishments. Nevada's move appears to widen a rift between the coalition of state attorneys general pushing for a global settlement with banks and those taking more aggressive unilateral action.

In a statement on Thursday, LPS appeared to express surprise at the indictments.

"LPS recently learned of an inquiry from the Nevada Attorney General into its document execution practices and expressed its willingness to fully cooperate with the investigation," the company said. "Earlier this month, the Attorney General's office confirmed that the company was not a target of this inquiry."

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