Posts Tagged ‘Bank Industry Fraud’

New York Attorney General Sues Credit Suisse For Residential Mortgage-Backed Securities Fraud

January 2, 2013

On November 20, 2012, the New York Attorney General, Eric Schneiderman, along with the Residential Mortgage-Backed Securities (RMBS) Working Group filed a Martin Act complaint against Credit Suisse Securities LLC.  The complaint accuses Credit Suisse of deceiving investors about the quality of the mortgage loans which were part of the RMBS the company was selling.

Fraud and a general lack of oversight in the RMBS industry was a huge factor in the recent financial market crash.  RMBS are pools of mortgages deposited into trusts and then sold as securities to investors.  According to the allegations, Credit Suisse told its investors that it carefully evaluated the mortgages-backed securities and that it regularly monitored them to ensure their quality, but it allegedly did neither.  The complaint further accuses Credit Suisse of not evaluating the loans, and actively ignoring any defects that it happened to uncover.  Additionally, Credit Suisse was accused of loaning to borrowers who were incredibly likely to default on their loans.  When people defaulted on their loans, Credit Suisse’s investors lost at least $11.2 billion.

This case against Credit Suisse is one of many that have been filed and pursued against large financial institutions related to fraud in connection with the sale of RMBS in the wake of the recent financial crisis.  The attorneys at Tycko & Zavareei encourage the RMBS Working Group to continue to investigate and prosecute these types of cases and to bring to justice the individuals and institutions whose misconduct contributed to bringing the Nation’s financial system to its knees.

Please keep checking our website for more updates on the progression of this case and to learn more about fraud in connection with RMBS, as well as other types of fraud involving our financial institutions, and what you can do to help fight it.


Court Denies Motion to Dismiss in Fraud Case Against Wells Fargo and Mortgage Investors Corporation

December 6, 2012

Last month, United States District Judge Amy Totenberg denied in part a motion to dismiss in a whistleblower lawsuit that was originally filed against eight banks: Countrywide Home Loans, Inc., PNC Bank, First Tennessee Bank, SunTrust Mortgage, CitiMortgage, JP Morgan Chase, Wells Fargo Bank, and Mortgage Investors Corporation (MIC).

Prior to Judge Totenberg’s decision, six of the Defendants in the case agreed to settle the claims brought against them for a total of $161.7 million.  The remaining Defendants, Wells Fargo and MIC will now need to continue to litigate the case.

According to the complaint, the banks made false certifications to the Veterans Administration in order to receive loan guarantees from the Government.  The banks then allegedly charged military veterans hidden fees on their refinanced home loans and when the loans went into default, the banks tried to collect on the fraudulently procured government loan guarantees.  The lawsuit was filed under seal in 2006 by whistleblowers Victor Bibby and Brian Donnelly.  In 2011 the Government decided not to intervene and the case was unsealed.

To stay updated on the progress of the litigation, keep checking our website or contact us at


May 29, 2012

The Obama administration has created a task force charged with investigating fraud in connection with the packaging and sale of residential mortgage backed securities (RMBS).  Dubbed the Residential Mortgage-Backed Securities Working Group, the task force is a collaborative effort between the Securities and Exchange Commission, the Department of Justice, and many United States Attorneys’ Offices that was formed in response to the wrongful behavior in the RMBS market that contributed to the financial collapse of 2008.  The task force is actively seeking and investigating information from corporate insiders with knowledge of misconduct relating to loan origination, underwriting, and sponsorship of RMBS.

The Government has many tools at its disposal to combat and punish mortgage fraud, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Financial Institutions Anti-Fraud Enforcement Act, and the False Claims Act.  All three of these provisions allow whistleblowers to receive substantial awards if the Government receives a monetary recovery based on information provided by the whistleblower.

The lawyers at Tycko & Zavareei LLP specialize in representing whistleblowers under the Dodd-Frank, False Claims, and Financial Institutions Anti-Fraud Enforcement acts.  If you believe that you have information regarding fraud in connection with residential mortgage-backed securities, please contact us at or 202-973-0900.

CitiMortgage, Inc. to Pay $158.3 Million to Settle Mortgage Fraud Allegations

February 21, 2012

On February 15, 2012, the United States Attorney’s Office for the Southern District of New York announced yet another case they brought against lenders for mortgage fraud.  CitiMortgage Inc., a subsidiary of CitiBank, has admitted to and accepted responsibility for committing fraud against the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA).  The bank has agreed to pay $158.3 million to settle claims brought under the False Claims Act and Financial Institutions Reform, Recovery, and Enforcement Act.  This settlement announcement follows other recently announced and similar cases against banks and lenders for their irresponsible lending practices.

CitiMortgage was one of the many participants the FHA’s Direct Endorsement Lender Program.   Under this program, participating lenders have the authority to originate, underwrite, and endorse mortgages for FHA insurance.  If a lender, such as CitiMortgage, approved a mortgage loan for FHA insurance and the loan later defaulted, the lender would be able to submit an insurance claim to HUD and get paid.  Under this program, the government agencies do not review loans before they are approved for FHA insurance, so participating lenders need to comply with very specific rules in order to ensure that they are complying with the program.

According to the complaint, CitiMortgage failed to meet all of the HUD/FHA requirements for some loans, failed to fully review loans that it endorsed for FHA insurance under the Direct Endorsement Lender Program, endorsed FHA insured loans that were ineligible under the program, and submitted false certifications to the government about these ineligible loans.  As a result of this irresponsible and fraudulent behavior, HUD was required to pay millions of dollars to CitiMortgage when the insured loans defaulted.

Here are some numbers that reflect the severity and irresponsibility of CitiMortgage’s actions:

  • CitiMortgage has endorsed nearly 30,000 mortgages for FHA insurance, many of which did not meet the requirements for federally insured mortgage loans.
  • Since 2004, over 30% of loans originated or underwritten by CitiMortgage have gone into default.
  • CitiMortgage’s default rate rose to more than 47% for loans originated in 2006 and 2007.

This settlement goes a long way to righting some of the wrongs that CitiMortgage committed against the Government, and the American taxpayers.  We are confident that recoveries such as this one will help to change the lending process that currently exists in this country.  Lenders are now acutely aware of the fact that their fraudulent behavior will not go unnoticed and that they will be punished for it.

CitiMortgage’s fraud was reported to the government by a whistleblower who filed a complaint against them under the qui tam provisions of the False Claims Act.  If you are aware of fraud being committed, you can take action and help stop it.  Contact the qui tam attorneys at Tycko & Zavareei, LLP today to learn about what you can do.

Bank of America to Pay Government $1 Billion Settlement – The Largest Mortgage Fraud Settlement In The History Of The False Claims Act

February 15, 2012

On February 9, 2012, the United States Attorney’s Office for the Eastern District of New York announced the largest ever False Claims Act settlement relating to mortgage fraud.  Bank of America, Countrywide Financial Corporation, and other Countrywide subsidiaries have been under investigation since 2009 and were accused of mortgage origination and underwriting fraud.  They have agreed to pay 1 billion dollars to settle the allegations.

The bank, through Countrywide, was accused of making and granting Federal Housing Administration insured loans to unqualified home buyers.  Additionally, the companies were accused of using inflated appraisals to originate mortgage loans and consequentially defrauding the FHA insurance fund.

The settlement will be split into two parts.  An immediate payment of $500 million will go directly to FHA.  The second $500 million will be used to fund a modification to Countrywide’s loan program.  This new program will help borrowers with underwater mortgages by modifying their original loans.  If, at the end of three years, the $500 million has not been entirely used by the program, the remainder will go to the Government.

One of the major reasons for the current economic and financial crisis in the United States is irresponsible and fraudulent behavior relating to the residential mortgage loan industry.    It is recoveries, such as this one, that will help to contribute to the change and upwards movement our economy so desperately needs.  Not only does this settlement get back the money that the government was allegedly defrauded into paying, it also takes major steps to help individuals who were negatively influenced by irresponsible lending practices.

To learn more about mortgage and other types of fraud and how you can help combat it, visit our website at

Wall Street Reform Passes Congress, Increases Whistleblower Protections And Rewards

July 16, 2010

On July 15, 2010, Congress gave final approval of the Restoring American Financial Stability Act (H.R. 4173).  President Obama is expected to sign the bill into law next week.  The aim of the bill is to transform financial regulation in light of the 2008 financial crisis.

The bill contains a number of whistleblower provisions designed to increase accountability and transparency in the financial system.  It encourages individuals to expose fraudulent activities in the financial services sectors.  It also contains a number of protections for whistleblowers from retaliation by their employers.  The following are the highlights of the main provisions of the bill related to whistleblowing.

Whistleblowing to the Securities and Exchange Commission

Section 922 of the act amends the Securities Exchange Act of 1934 by inserting a provision entitled “Securities Whistleblower Incentives and Protection.”  Under this provision, SEC will be required to pay a reward to individuals who provide original information to the SEC which results in monetary sanctions exceeding $1 million.  The amount of the award will be 10-30 % of the total amount of monetary sanctions.  The determination of the amount of the award will be made at the discretion of the Commission.  The award may be appealed to the appropriate Court of Appeals in the United States within 30 days after the Commission issues its determination.

No award shall be made to a whistleblower, however, who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower provided information or to any whistleblower who gains this information through the performance of an audit of financial statements required under the securities laws.  Employees of the Department of Justice, an appropriate regulatory agency, the Public Company Accounting Oversight Board or a law enforcement organization shall not be eligible for an award either.

Section 922 also protects whistleblowers from retaliation by employers.  A whistleblower who is discharged or faces other discrimination by his or her employer may bring an action for relief under this section.  Relief shall include reinstatement with the same seniority status, twice the amount of back pay otherwise owed to the individual and compensation for litigation costs.

Whistleblower Protection for Financial Services Employees

Title X of the act contains a whistleblower provision that covers a broad range of employees in the financial services who suffer retaliation from their employers for disclosing unlawful conduct or refusing to participate in unlawful conduct related to the offering of a consumer financial product or service.  The scope of the coverage is quite broad in that the section applies to organizations that extend credit or service or broker loans, provide real estate and financial advisory services, or provide consumer report information in connection with any decision regarding the offering or provision of a consumer financial product or service.

Section 1057 of the act provides a right of action to an employee in the financial services industry who faces retaliation from her employer for disclosing information about unlawful or fraudulent conduct related to the provision of a consumer financial product or service. The following actions are protected by the bill:

· providing information to an employer, the Bureau of Consumer Financial Protection or any State, local or Federal government agency that relates to the violation of consumer financial protections laws under the act;

· testifying in a proceeding against an employer resulting from the enforcement of consumer protection laws in the act;

· helping to initiate any proceeding of consumer financial protection laws under the act;

· objecting or refusing to participate in any activity that the employee reasonably believes to be in violation of any law subject to the jurisdiction of the Bureau of Consumer Financial Protection.

A person who believes that he or she has been discharged or otherwise discriminated against by a person in violation of this law may bring a complaint with the Secretary of Labor.  The Secretary of Labor shall initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit and may also provide relief to the discharged individual.  Either party may file objections to the findings and request a hearing no later than 30 days after the notification from the Secretary of Labor.

If the Secretary of Labor does not issue a final order within 210 days after the date of filing of a complaint, or within 90 days after the receipt of a written determination, the complainant may bring an action in the appropriate district court of the United States.  Any person adversely affected or aggrieved by a final order may file a petition for review in the United States Court of Appeals of appropriate jurisdiction no later than 60 days after the order is issued.


Expansion of Whistleblower Protection in the Sarbanes-Oxley Act

Another relevant provision is Section 929(A) of the act, which broadens the scope of the whistleblower provision in the Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act.  The section amends the whistleblower provision to explicitly provide protection against retaliation to employees of a subsidiary or affiliate “whose financial information is included in the consolidated financial statements of [a publicly] traded company.”  Employees at nationally recognized statistical ratings agencies, such as Moody’s and Standard & Poor’s will now have whistleblower protection.

Amendment to the Federal False Claims Act

The act amends the provision in the Federal False Claims Act that provides relief to whistleblowers who face retaliation from their employers.  The amendment specifies a three (3) year deadline for bringing retaliatory discharge actions against employers. Previously, the False Claims Act had been silent on the limitations period for actions brought under this section.  The U.S. Supreme Court addressed the uncertainty on this issue by declaring that the most closely analogous state limitations period should apply to this section.  The bill removes all ambiguity on this issue by laying down a three year statute of limitations period for actions brought under the retaliatory provision of the False Claims Act.

In order to prevent the financial fraud and consumer exploitation that contributed to the recent financial crisis, it is essential to promote accountability in the financial system.  The Restoring American Financial Stability Act recognizes that encouraging and incentivizing whistleblowing is an important step toward achieving this goal.

Bank Executive Accused Of Attempted TARP Fraud

March 16, 2010

Federal prosecutors have accused Charles J. Antonucci, Sr., the former president and CEO of Park Avenue Bank of New York, with 10 counts of fraud, bribery and other criminal acts, including attempting to defraud the U.S. Government’s Troubled Asset Relief Program.  Mr. Antonucci is alleged to have made false statements to regulators in order to obtain approximately $11 million from the TARP program.  Prosecutors believe Mr. Antonucci’s criminal conduct was part of a desperate effort to save Park Avenue Bank from failing.  In addition to attempting to defraud TARP, Mr. Antonucci is also alleged to have set up a series of fraudulent transactions to make it seem as though he was loaning $6.5 million of his own money to recapitalize the bank, when in fact the money came from the bank.  Mr. Antonucci is further accused of stealing more than $103,000 from pastors of a church in Coral Springs, Florida.

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