The U.S. District Court for the Southern District of New York (Manhattan) unsealed a whistleblower lawsuit against financial services firm JPMorgan this week. The qui tam lawsuit, originally filed in January 2013 by Keith Edwards of Louisiana, accused JPMorgan of violations of the False Claim Act for mortgage fraud. In the settlement, JPMorgan acknowledged its wrongdoing and agreed to pay $614 million to the federal government.
Since 2002, JPMorgan originated thousands of residential home loans insured and guaranteed by the Federal Housing Administration and Department of Veterans Affairs that were not actually eligible based on the underwriting requirements of the relevant agency. JPMorgan falsely certified to the agencies that the loans met the required underwriting standard. When the loans defaulted, the government lost millions. An internal audit by JPMorgan revealed more than 500 loans improperly submitted to the FHA and VA for insurance, but JPMorgan did not notify the government about its discovery.
The percentage of money the government will pay to Edwards as a whistleblower reward has not yet been set. The False Claims Act provides for an award to the whistleblower of between 15 and 30 percent of the amount recovered by the government. Because the Justice Department intervened in the case, the relator is entitled to 15 to 25 percent. Edwards was employed by JPMorgan in Louisiana at the banks government insuring unit when he discovered the fraud.
The lawsuit is one of eight civil fraud cases brought by the Office of the U.S. Attorney for the Southern District of New York regarding improper residential mortgage lending by the nation’s banks. Citigroup, Deutsche Bank and Flagstar Bancorp have already agreed to pay settlements for their misconduct.
2014 has already been a busy year for fraud settlements by our nation’s banks. JPMorgan agreed to pay $2 billion to settle charges related to its failure to report the Ponzi scheme conducted by Bernard L. Madoff to the government. Bank of America recently settled with a group of mortgage securities investors for $8.5 billion. And Morgan Stanley agreed to pay $1.25 billion to the Federal Housing Finance Agency for its sale of mortgage securities to Fannie Mae and Freddie Mac.
Young Law Group is a nationwide leader in the False Claims Act and has successfully represented clients in some of the nation’s largest qui tam cases for over a decade. For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.