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Archive for the 'False Claims Act' Category

Wells Fargo Pays Out Again, This Time For Fraudulent Anti-Veteran Lending Practices

August 18th, 2017 at 9:08am

Banking giant Wells Fargo must pay over $100 million to settle allegations of fraud that included overcharging military veterans using the VA Home Loan to refinance their mortgages. The victims were not only veterans but U.S. taxpayers.

Brokers Victor Bibby and Brian Donnelly were the two whistleblowers in the lawsuit who sought to recover the losses that the federal government suffered when the loans it guaranteed loans defaulted. The two men sued Wells Fargo and seven other lenders to recoup losses; notably the federal government declined to join the qui tam lawsuit, which was filed under the federal False Claims Act, aka Lincoln’s Law (31 USC §§ 3729-3733.

The other banks are Bank of America Corp (BAC.N), Citigroup Inc (C.N), First Tennessee, JPMorgan Chase & Co (JPM.N), PNC Financial Services Group Inc (PNC.N) and SunTrust Banks Inc (STI.N). The total pay-out is $161.7 million.

Depending on whether the federal government offers to assist, the private person can receive a portion of the recovered damages, from 10% to 30%. If the government intervenes, the person bringing the lawsuit, the “relator”, receives between 15%-25%. If the government does not, the relator receives between 25%-30%. If the government intervenes and most of the information is already public, the relator is only entitled to 10%.

Read the full article, including Wells Fargo’s boilerplate “apology,” in

Countrywide Whistleblower to Get $57 Million

December 22nd, 2014 at 1:32pm

There is no category of businessperson I admire more than the whistleblower. Without them, our country would be even more corrupted by the acts of large corporations and our citizens would be the victims of that corruption. So it gives me a great deal of satisfaction to post the following story, published in DSNews.

Edward O’Donnell, a former executive with  Countrywide Financial Corp., will be getting $57 million for the key role he played in the government recovering more than $15 billion against Bank of America.

O’Donnell filed two whistle-blower lawsuits under the False Claims Act: the first having to do with Countrywide’s sale of faulty mortgage-backed securities to Fannie Mae and Freddie Mac through a program known as the High Speed Swim Lane (HSSL, or “Hustle”) (see this report from Bloomberg News). That suit, filed in 2012, resulted in the government negotiating a settlement with Bank of America, which bought Countrywide, for $1.27 billion.

The second suit O’Donnell filed against Countrywide resulted in a record $16.65 billion settlement with Bank of America with the government in August 2014.

Bank of America bought Countrywide for $4 billion in 2008. It probably doesn’t look like such a good investment anymore.

JPMorgan Chase Whistleblower Gets $63.9 Million

March 19th, 2014 at 5:51pm

Keith Edwards, a former assistant vice president supervising a government insuring unit for JPMorgan, will be paid $63.9 million for providing the information that led to the banking giant’s agreement to pay the U.S. government $614 million. JPMorgan also promised (don’t hold your breath) to change the procedures and oversight that resulted in it being charged with defrauding the government into insuring toxic home loans.

The settlement was filed with the U.S. District Court in Manhattan and besides indicating the amount paid to Edwards, included an admission by JPMorganthat for over a decade it had submitted thousands of mortgages to be insured with the FHA and VA that did not qualify for guarantees by the government. The bank also admitted that when its own internal auditing turned up these problems, it did not inform the agencies.

Keith Edwards originally filed his lawsuit in January 2013 under the False Claims Act. His attorney, David Wasinger, also represented Edward O’Donnell, whose tips regarding defective mortgages by Countrywide led to a verdict against Bank of America in October 2013, for which the government is seeking $2.1 billion in penalties.

The case is U.S. ex rel. Edwards v. JPMorgan Chase Bank NA et al, U.S. District Court, Southern District of New York, No. 13-00220.

Read the original article in MSN Money.

Whistleblower Lawsuit Results in $614 Million Settlement by JPMorgan Chase

February 6th, 2014 at 7:53am

In yet another settlement with the federal government, JPMorgan Chase & Co has agreed to pay $614 million to the U.S. government. In a rare admission, the bank acknowledged it had defrauded the Federal Housing Administration and the Department of Veterans Affairs by underwriting sub-standard mortgage loans that were ineligible for insurance by those agencies. When losses from the sub-standard loans occurred, both agencies – meaning taxpayers – were required to cover them.

The case began when whistleblower, Keith Edwards sued JPMorgan in January 2013 under the False Claims Act, which allows individuals to sue government vendors for defrauding taxpayers. Edwards worked with Preet Bharara, the U.S. Attorney in Manhattan, whose office joined the lawsuit.

Similar allegations have already resulted in settlements with Bharara’s office with Citigroup Inc. and Deutsche Bank AG. The U.S. Attorney is still pursuing $2.1 billion in penalties from Bank of America after a jury decided it was liable for fraud with respect to the mortgages sold by its Countrywide unit.

Read the original article in the Chicago Tribune.

Wells Fargo VP to be Prosecuted by US DOJ in $200 Million Mortgage Fraud

December 16th, 2013 at 10:15am

The United States Department of Justice has been given the green light to add Wells Fargo & Co Vice President Kurt Lofrano as a defendant in its lawsuit accusing the bank of mortgage fraud.

Manhattan U.S. District Judge Jesse Furman accepted the feds’ amended complaint to add Lofrano, which is almost a first (see below). The federal government has faced criticism from consumers, their attorneys and consumers’ rights groups of being afraid to criminally prosecute bank employees, in contrast to Iceland, where bankers have received prison sentences for committing fraud.

In this case, the U.S. DOJ is accusing the country’s top lender of misleading the Department of Housing and Urban Development (HUD) into believing many of its loans qualified for federal insurance and were therefore safe. Instead, the losses suffered by taxpayers have reached into the hundreds of millions of dollars.

According to prosecutors, Lofrano played a “critical role” in Wells Fargo’s decision not to report to HUD more than 6,000 materially defective loans that the bank falsely certified for Federal Housing Administration insurance. Lofrano, who was the VP for Quality Control from 2002-2010, kept information that many of the loans were defective, causing HUD (= taxpayers) to pay out close to $200 million in insurance claims to cover the ineligible loans.

The federal government’s goal is to find Kurt Lofrano liable under the federal False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

The only other bank official who has been prosecuted is Rebecca Mairone, a former mid-level executive at Bank of America Corp’s Countrywide unit. Both Marone and Countrwide were found liable by a Manhattan federal jury in October for selling defective home loans to Fannie Mae and Freddie Mac.


New York Judge Rejects Wells Fargo Motion to Dismiss U.S. Lawsuit of Fraud

September 27th, 2013 at 3:16am

In a surprise defeat to Wells Fargo, U.S. District Judge Jesse Furman in Manhattan has rejected the bank’s motion to dismiss the U.S. Attorney’s lawsuit accusing it of fraud in the sale of mortgages to HUD.

Judge Furman is following the decisions of his fellow judges on the Manhattan federal court, Jed Rakoff and Lewis Kaplan, in cases they are hearing against Bank of America Corp and Bank of New York Mellon Corp., respectively. He agreed with the interpretation of the U.S. Department of Justice’s interpretation of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). FIRREA was enacted following the savings-and-loan meltdown in the mid-1980s and gives the government the right to sue for fraud when a federally-insured financial institution is involved.

The lawsuit was brought by then U.S. Attorney Preet Bharara in Manhattan in October 2012. Bharara cited Wells Fargo’s alleged “longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance.”

Wells Fargo had argued that the FIRREA claim should be dismissed because the only institution affected by its conduct was itself.

Trial began earlier this week in the Bank of America case being heard in front of Judge Rakoff. In that case, the government is accusing the second-largest U.S. bank of violating FIRREA through the fraudulent sale of risky loans to Fannie Mae and Freddie Mac. Read more by clicking on the link to this post on the California Real Estate Fraud Report.

In 2012, the government settled False Claims Act mortgage cases for $1 billion with Bank of America, $202.3 million with Deutsche Bank AG, $158.3 million with Citigroup Inc and $132.8 million with Flagstar Bancorp Inc.

The case is U.S. v. Wells Fargo Bank NA, U.S. District Court, Southern District of New York, No. 12-07527.

Read the original article in Reuters.

© Copyright 2007-2018 Monique Bryher

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