Financial Institution Fraud

December 22nd, 2017

California announced a $125 million settlement with the Royal Bank of Scotland (RBS), an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to California’s public employee and teacher pension funds, CalPERS and CalSTRS, respectively. Mortgage-backed securities are complex investments which include thousands of mortgage loans of potentially varying quality, where the buyer typically relies on assurances that the loans have been carefully screened and are not too risky. An investigation conducted by the Attorney General’s Office found that the descriptions of these mortgage-backed securities to investors failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to remove poor quality loans from the investments was not adequately performed. RBS was aware of the misrepresentations but failed to correct them. This resulted in millions in losses to CalPERS and CalSTRS. CA

December 8, 2017

Louisiana-based Iberiabank Corporation, Iberiabank and Iberiabank Mortgage Company agreed to pay roughly $11.7 million to resolve allegations they violated the False Claims Act by falsely certifying they were complying with Federal requirements in order to obtain insurance on mortgage loans from the Federal Housing Administration.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former Iberiabank employees Kelley R. Shackleford and Karen Mills.  They will receive a whistleblower award of roughly $2.2 million from the proceeds of the government's recovery.  DOJ

September 7, 2017

The Securities and Exchange Commission today announced that State Street has agreed to pay more than $35 million to settle charges that it fraudulently charged secret markups for transition management services and separately omitted material information about the operation of its platform for trading U.S. Treasury securities. An SEC order finds that State Street’s scheme to overcharge transition management customers generated approximately $20 million in improper revenue for the firm.  State Street used false trading statements, pre-trade estimates, and post-trade reports to misrepresent its compensation on various transactions, especially purchases and sales of bonds and other securities that trade outside large transparent markets. SEC

October 23, 2017

Mark Johnson, former head of global foreign exchange cash trading at HSBC Bank, was found guilty for his role in a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as “front running.”  DOJ

August 8, 2017

PHH Corp., PHH Mortgage Corp. and PHH Home Loans agreed to pay roughly $75 million to resolve charges they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) that did not meet applicable requirements.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former PHH employee Mary Bozzelli.  She will receive a whistleblower award of roughly $9 million from the proceeds of the government's recovery.  DOJ

November 21, 2017

The CFPB ordered Citibank, N.A. to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty for misleading borrowers into believing that they were not eligible for a valuable tax deduction on interest paid on certain student loans, incorrectly charging late fees and added interest to the student loan balances of borrowers who were still in school and eligible to defer their loan payments, and misleading consumers about how much they had to pay in their monthly bills and failing to disclose required information after denying borrowers’ requests to release loan cosigners. CFPB

November 20, 2017

The CFPB fined Xerox Business Services, LLC, now called Conduent Business Services, a $1.1 million civil penalty for software errors that led to the sending of incorrect consumer information about more than one million borrowers to credit reporting agencies. The company also failed to notify all of its auto lender clients about known flaws in its software that led to the errors. CFPB

November 15, 2017

The CFPB sued Think Finance for its role in deceiving consumers into repaying loans that were not legally owed. The Bureau seeks to recoup relief for harmed consumers and impose a penalty. CFPB

November 8, 2017

The CFPB sued Freedom Debt Relief, the nation’s largest debt-settlement services provider, and its co-CEO Andrew Housser for charging consumers without settling their debts as promised, making customers negotiate their own settlements, misleading customers about fees and the reach of its services, and failing to inform customers of their rights to funds they deposited with the company. The Bureau is seeking seeking compensation for harmed consumers, civil penalties, and an injunction against Freedom and Housser to halt their unlawful conduct. CFPB