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CitiMortgage Employee Sues Her Employer – and Wins Big

Sherry Hunt, a 55-year old Missouri woman who joined CitiMortgage in 2004 as a vice-president in order to oversee its acquisition of loans underwritten by other banks, has struck gold for making honesty her first priority.

Hunt’s job was to audit the outside loans for fraud or other irregularities. In the mid-2000s, the hottest commodity was securitized mortgages and CitiMortgage, which was the sixth biggest lender at the time, was buying loans at breakneck speed. Before selling the mortgages to investors or vouching that they were eligible for government mortgage insurance, the loans had to be reviewed for complete signatures and documentation, the latter of which had to be verified. Citi’s guarantee to its investors was serious: it promised to pay on loans if the borrowers defaulted.

In March 2011, Hunt and another employee were ordered by Citi executive Jeffery Polkinghorne to lower the amount of loans they were classifying as defective – or else (bank fraud).  Hunt refused and sued Citigroup in Manhattan federal court under the federal Whistleblower’s Act. Her lawsuit, which accused the lender of violating U.S. home mortgage regulations, attracted the attention of the U.S. Justice Department, which joined the suit because Citigroup had accepted $45 billion in bailout (TARP) money from both the U.S. government and the Federal Reserve. Citigroup not only did not challenge her allegations, it did not defend itself in court and agreed to pay $158.3 million to settle the case. Of that amount, Sherry Hunt will receive $31 million.

Read the original article in Businessweek.

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