The U.S. Department of Justice (DOJ) has filed a friend-of-the-court brief in a lawsuit brought against Wells Fargo & Co. by two former employees who were fired after they reported misdemeanors they had noticed to their supervisors. The DOJ’s filing concluded that the appellate court, which had earlier dismissed the case, should revisit and modify its analysis. Two whistleblowers who filed a False Claims Act (FCA) lawsuit against Wells Fargo accusing the bank of engaging in improper mortgage practices may get another chance. The DOJ is encouraging the U.S. Second Circuit Court of Appeals to revise the legal analysis it made last year when it dismissed the case.
The Plaintiffs, Paul Bishop and Robert Kraus, in a complaint filed in 2011, said the Wall Street bank had requested Federal Reserve loans on various occasions when it was in violation of certain banking regulations. The False Claims Act is designed to encourage people to bring to light evidence of fraud against the government. The San Francisco Business Times elaborates, reporting that Wachovia Bank, which Wells Fargo acquired amid the financial crisis of 2008, misled federal regulators by hiding billions of dollars in losses when applying for Federal Reserve loans, according to the whistleblower complaint.
The lawsuit alleges that Wachovia’s Federal Reserve loans were obtained while moving records to an off-balance-sheet entity designed to make Wachovia’s books look better by hiding billions in losses, The San Francisco Business Times reported. This offshore entity was called the “Black Box” by Wachovia executives.
The False Claims Act lawsuit does not relate to complaints accusing Wells Fargo of opening millions of fake accounts for its customers without their authorization. The Plaintiffs claim they were fired in retaliation for speaking out against Wells Fargo’s unlawful activity to their superiors.
Source: Insurance Journal, New York Times and Reuters and The San Francisco Business Times
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