2016 Financial and Mortgage Fraud False Claims Act Recoveries
Part of the huge success the Department of Justice had in obtaining $4.7 billion in fraud recoveries in 2016 was in the financial and housing market sectors. The DOJ recovered $1.2 billion from Wells Fargo and another $113 million from Freedom Mortgage Corp. Both companies confessed to originating and submitting residential mortgages for Federal Housing Administration approval knowing that the loans failed to meet the requirements thus increasing the chances for loan default. When the loans defaulted, the consumers who obtained the loans saw their homes lost to foreclosure and many brought claims against the FHA to try to back the loans.
Wells Fargo and Freedom Mortgage also acknowledged that they failed to notify the FHA of the loan risks, despite having internal company reports confirming the dangers. Kurt Lofrana, the VP of Credit Risk and Quality Assurance for Wells Fargo admitted that Wells Fargo certified that Wells Fargo was in compliance with the Federal Housing Authority’s Direct Endorsement Lender program even though it knew it was not in compliance.In short, the banks make large profits at the expense of the taxpayer while minimizing or even eliminating their own default risks
The recent recoveries, between 2009 and 2016, were due to a Financial Fraud Enforcement Task Force set up during the administration of President Barack Obama. The task force was composed of state and local law enforcement (such as California’s law enforcement), federal agencies, and many others. The Task Force is just one component of aggressive False Claims Act litigation. Many other cases were brought by whistleblowers who are eligible to retain a recovery of up to 30% for properly disclosed information that leads to a Department of Justice judgment or settlement against fraudulent operators.
Other fraud recoveries in 2016 including whistleblower actions involving procurement fraud in the defense sector, health care fraud, for-profit schools that schemed to secure federal education funds and fraudulent claims involving British Petroleum and the 2010 Deepwater Horizon/Macando Well oil spill in the Gulf of Mexico.