The Corporate World - Written by Beasley Allen on Tuesday, March 13, 2012 9:49 - 0 Comments

Citigroup To Pay $158 Million In Whistleblower Fraud Claim

Inc. has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit. The resolves claims under the federal against the bank in a “ brought by Sherry Hunt, a CitiMortgage employee in Missouri. In the , CitiMortgage “admits, acknowledges and accepts responsibility” for misleading the government into insuring risky home loans. The suit was filed in U.S. District Court in New York. According to investigators, the misconduct lasted for more than six years.

Claims brought under the have recovered more than $34 billion in federal and state cases since the law was amended in 1986, according to the Taxpayers Against Fraud Education Fund. In this case, the government accused of falsely certifying that many of its loans qualified for insurance from the Federal Housing Agency, which is part of the U.S. Department of Housing and Urban Development. Investigators said 9,636 (more than 30%) of nearly 30,000 HUD-insured mortgage loans that CitiMortgage made or underwrote since 2004 have defaulted, costing the agency nearly $200 million in insurance claims.

The government also contended that even after a 2008 HUD audit found “numerous defects” in CitiMortgage’s oversight of loans in default, quality control deteriorated. It said this was in part because the unit pressured workers to encourage quality control personnel to ignore problems, rewarding them with higher salaries if they succeeded. In January 2011, for example, CitiMortgage held a “Star Players Award” ceremony for the efforts of some workers to challenge defects reported by the quality control unit. According to the complaint, even after Citi’s fraud unit confirmed that loans were fraudulent, another unit responsible for self-reporting the loans to HUD rarely did. Some of the loans that Citi failed to report included mortgages that defaulted when their first payment was due and had other signs of mortgage fraud.

It should be noted that this $158.3 million is separate from ’s agreement to pay as much as $2.22 billion under the national with five big mortgage servicers over foreclosure abuses.

Source: Insurance Journal



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