The United States Department of Justice (DOJ) announced last month that Fifth Third Bank (FTB) has agreed to pay $85 million to settle claims under the Federal False Claims Act (FCA). The suit was brought by a whistleblower under the qui tam provisions of the FCA, which permits private parties to sue on behalf of the government when they believe an individual or company has been committing fraud against the government.
FTB was required to self-report any serious deficiencies, patterns of noncompliance, or fraud to the U.S. Department of Housing and Urban Development (HUD) within 60 days of learning of the incidents. FTB violated that requirement. The bank had been unlawfully certifying loans as being eligible to be insured by the Federal Housing Administration (FHA). The bank’s false representations cost HUD millions of dollars as those loans defaulted. From 2003 to 2013, FTB had certified 1,439 materially defected loans, 36 percent of which defaulted, forcing HUD to pay the insurance claims.
Federal insurers rely on banks when determining when to provide insurance. When a bank fraudulently assures the government a loan is eligible for the FHA insurance, the government is forced to pay the insurance claims when the loan inevitably defaults, which results in taxpayer money being spent as a result of the fraud.
FTB voluntarily disclosed the information without knowledge of the whistleblower compliant. The bank admitted the wrongdoing and accepts responsibility for its violations. As a result, the bank has revamped its business practices, including terminating the employees responsible for the false mortgage violations and fraudulent appraisal practices. The government intervened in this whistleblower lawsuit and entered into this settlement with FTB. This $85-million settlement does two things:
• It restores taxpayer dollars, and
• It deters other banks from profiteering on non-compliance with the law.
George Mann, former FTB employee, the whistleblower who reported the fraud, had this to say:
The culture of the Bank at that time emphasized profits over compliance with federal regulations. This type of behavior is exactly what led to the financial crisis and, no matter what the outcome, I felt it was my responsibility to speak up and do the right thing.
The qui tam provision of the FCA provides incentives for whistleblowers to do the right thing and speak up. These incentives include 15 to 30 percent of the funds the government recovers. For example, Mr. Mann, the whistleblower, could receive up to $25.5 million for his critical role in the case. If you are aware of fraud being committed against the federal or state governments, you could be rewarded for doing the right thing by reporting the fraud. If you have any questions about whether you qualify as a whistleblower, feel free to contact one of the lawyers at Beasley Allen listed above in this issue for a free and confidential evaluation of your claim.
Sources: prnewswire.com and justice.gov
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