Archive

March 29, 2018

Barclays Capital, Inc. and several of its affiliates agreed to pay $2 billion to settle claims of violating  (together, Barclays) to settle claims of violating the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) relating to Barclays’ underwriting and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.  Specifically, the government alleged that Barclays caused billions of dollars in losses to investors by engaging in a fraudulent scheme to sell 36 RMBS deals, and that it misled investors about the quality of the mortgage loans backing those deals. DOJ

September 19, 2017

A judgment of roughly $296 million was awarded against the entities formerly known as Allied Home Mortgage Capital Corporation and Allied Home Mortgage Corporation and a judgment of roughly $25 million was awarded against Allied's president and CEO Jim Hodge, following a jury verdict that Allied and Hodge violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for over a decade of fraudulent misconduct while participating in the Federal Housing Administration (“FHA”) mortgage insurance program.  According to the evidence presented at trial, Allied and Hodge abused the FHA mortgage insurance program by falsely certifying that thousands of high risk, low quality loans were eligible for FHA insurance and then submitting insurance claims to FHA when any of those loans defaulted.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act.  The whistleblower will receive an award from the proceeds of the government's recovery. DOJ (SDNY)

May 16, 2017

Austin-based Financial Freedom agreed to pay more than $89 million to resolve charges it violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) in connection with its participation in a federally insured Home Equity Conversion Mortgages or "reverse mortgage" program.  According to the government, Financial Freedom sought to obtain insurance payments for interest from the Federal Housing Administration despite failing to properly disclose the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings.  The allegations originated in a whistleblower declaration filed pursuant to FIRREA by Sandra Jolley, a consultant for the estates of borrowers who took out HECM loans.  She will receive a whistleblower award of $1.6 million from the proceeds of the government's recovery. DOJ

January 11, 2017

Volkswagen AG agreed to plead guilty to three criminal felony counts and pay a $2.8 billion criminal penalty as a result of the company’s long-running scheme to sell approximately 590,000 diesel vehicles in the U.S. by using a defeat device to cheat on emissions tests mandated by the Environmental Protection Agency and California Air Resources Board, and lying and obstructing justice to further the scheme. In separate civil resolutions of environmental, customs and financial claims, VW also agreed to pay $1.5 billion for a total payout of $4.3 billion in criminal and civil penalties. DOJ

November 30, 2016

A Houston jury found the entities formerly known as Allied Home Mortgage Capital Corp., Allied Home Mortgage Corp., and their president and chief executive officer Jim C. Hodge liable for violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) relating to mortgage fraud.  After a five-week trial, the jury awarded the United States roughly $93 million in damages, including more than $7 million against Hodge.  The allegations originated in a whistleblower lawsuit filed by former Allied manager Peter Belli under the qui tam provisions of the False Claims Act.  He will receive a yet-to-be determined whistleblower award from the proceeds of the government’s recovery.  Whistleblower Insider

July 26, 2016

Massachusetts-based State Street Bank and Trust Company agreed to pay a total of at least $382.4 million -- including $155 million to the DOJ, $167.4 million in disgorgement and penalties to the SEC, and at least $60 million to ERISA plan clients in an agreement with the Department of Labor -- to settle allegations that it deceived its custody clients when providing them with indirect foreign currency exchange (FX) services.  According to the government, State Street admitted that contrary to its representations to certain custody clients, it did not price FX transactions at prevailing interbank market rates and instead executed FX transactions by applying a predetermined, uniform mark-up (if the custody client was a FX purchaser) or mark-down (if the custody client was an FX seller) to the prevailing interbank rate for FX.  State Street is also alleged to have falsely informed custody clients that it provided “best execution” on FX transactions, that it guaranteed the most competitive rates available on FX transactions and that it priced FX transactions based on a variety of factors when, in fact, prices were largely driven by hidden mark-ups designed to maximize State Street’s profits.  The allegations originated from famed Bernie Madoff whistleblower Harry Markopolos under the whistleblower provisions of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  State Street will pay an additional $147.6 to resolve private class action lawsuits filed by the bank’s customers alleging similar misconduct.  DOJ

July 26, 2016

State Street Bank and Trust Company will pay $382.4 million in a global settlement for misleading mutual funds and other custody clients by applying hidden markups to foreign currency exchange trades.  As part of its custody bank line of business, State Street safeguards clients’ financial assets and offers such services as indirect foreign currency exchange trading (Indirect FX) for clients to buy and sell foreign currencies as needed to settle their transactions involving foreign securities.  An SEC investigation found that State Street realized substantial revenues by misleading custody clients about Indirect FX, telling some clients that it guaranteed the most competitive rates available on their foreign currency trades, provided “best execution,” or charged “market rates” on the transactions.  Instead, State Street set prices largely driven by predetermined, uniform markups and made no effort to obtain the best possible prices for these clients.  State Street will pay $167.4 million in disgorgement and penalties to the SEC, a $155 million penalty to the Department of Justice, and at least $60 million to ERISA plan clients in an agreement with the Department of Labor.  SEC

February 11, 2016

Morgan Stanley agreed to pay a $2.6 billion penalty “for misleading investors about the subprime mortgage loans underlying the securities it sold” in the period leading up to the financial crisis.  As part of the agreement, Morgan Stanley admitted that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its residential mortgage-backed securities (RMBS) which ultimately caused investors, including federally insured financial institutions, to lose billions of dollars from investing in Morgan Stanley in the 2006-07 timeframe.  The $2.6 billion civil penalty resolves claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  In addition, the states of New York and Illinois announced their own settlements with Morgan Stanley for $550 million and $22.5 million, respectively.  When combined with prior settlements with other regulators -- $225 million to the National Credit Union Administration; $1.25 billion to the Federal Housing Finance Agency; $86.95 million to the Federal Deposit Insurance Corporation; and $275 million to the SEC -- this brings to almost $5 billion the total payout by Morgan Stanley in connection with its fraudulent sales of RMBS.  Whistleblower Insider

April 21, 2015

R.J. Zavoral & Sons, Inc., John Zavoral, Peter Zavoral and Craig Pietruszewski agreed to pay $1.85 million to resolve allegations they violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act by making false statements to the Small Business Administration (SBA) and the US Army Corps of Engineers relating to the Heartsville Coulee Diversion construction contract they were awarded for flood control work in and around East Grand Forks, Minnesota.  DOJ

August 21, 2014

Bank of America agreed to pay $16.65 billion to resolve federal and state mortgage fraud claims against the bank and its former and current subsidiaries, including Countrywide Financial Corporation andMerrill Lynch. It is the largest civil settlement with a single entity in American history. And it includes a $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), the largest FIRREA penalty ever. As part of the settlement, BofA acknowledged misrepresenting the quality of billions of dollars worth of risky mortgage loans. Whistleblower Insider