JP Morgan Chase Pays $45 Million to Settle Whistleblower Lawsuit Alleging Fraud in Veterans’ Home Mortgage Loans, Whistleblowers to Receive $11.7 Million

On March 13, 2012, JPMorgan Chase agreed to pay the government $45 million to settle a lawsuit that alleged that the financial giant hid illegal fees in veteran’s home mortgage refinancing transactions and sought to collect on void government loan guarantees.  Two whistleblowers filed a qui tam lawsuit under the False Claims Acts in 2006 in U.S. district court in Atlanta, Georgia.

The whistleblowers, Victor Bibby and Brian Donnelly, worked as mortgage brokers for a Georgia-based mortgage brokerage firm, U.S. Financial Services Inc.  In 2005, the pair began noticing that mortgage lenders were charging veterans hidden fees on home loans refinanced under the government’s Interest Rate Reduction Refinancing Loans program.

The whistleblowers reported becoming suspicious after the lenders allegedly instructed them not to show clients a fee the companies were charging for attorneys’ fees on loan documents, but rather to include that fee as a “title examination fee”. After being ignored by the mortgage lenders, Bibby and Donnelly filed a qui tam lawsuit, which remained under seal until recently in order to allow the government time to investigate the claims.

As a result of the settlement Bibby and Donnelly are slated to receive 26% of the settlement amount, or $11.7 million.

The lawsuit sought to recover money not only from JP Morgan Chase, but also from seven other banks and mortgage companies including CitiMortgage, Bank of America, Wells Fargo Bank, PNC Bank, and Washington Mutual Bank. JPMorgan Chase is the first to settle the claims, while the lawsuit against the other financial institutions is still pending.

“Our lawsuit alleges that these lenders committed blatant fraud,” said co-lead counsel for JP Morgan Chase, Marlan Wilbanks.  “Although JPMorgan Chase has paid to settle its claims, we are looking forward to moving the case against the other defendant lenders.  These banks should be held accountable for causing the government to pay millions of dollars on void loan guarantees.”

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.

Tagged: False Claims Act (FCA), Whistleblower Laws (Federal)