March 12, 2012
FOR IMMEDIATE RELEASE
CONTACT PERSON: Fran Trapp
(803) 929-3000
Fran.Trapp@usdoj.gov

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$95 MILLION SETTLEMENT WITH THE NATION’S

FIVE LARGEST MORTGAGE SERVICERS PARTIALLY RESOLVES

SOUTH CAROLINA FALSE CLAIMS ACT LAWSUIT

COLUMBIA, South Carolina —- A $95 million settlement with the nation’s four largest mortgage servicers was announced today by United States Attorney Bill Nettles.

Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, and Citigroup Inc. agreed to the settlement to address allegations that the defendants participated in a nationwide practice of failing to obtain required mortgage assignments which resulted in servicing misconduct, and using false assignments to submit Federal Housing Administration mortgage insurance claims, all in violation of the federal False Claims Act, 31 U.S.C. § 3729. This is the largest False Claims Act settlement  ever obtained by the District of South Carolina. The settlement was reached as part of the $25 billion dollar global resolution between the same defendants, the United States of America, the state attorneys general, and others.

The United States and the state attorneys general filed today in the U.S. District Court in the District of Columbia proposed consent judgments with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., to resolve violations of state and federal law. Included in the proposed settlement agreements, is the partial settlement for four of the defendants of allegations that the United States Attorney’s Office for the District of South Carolina began investigating in the Spring of 2010. In particular, the government investigated allegations that the defendants participated in a pervasive nationwide scheme involving the  wholesale fabrication of mortgage assignments and other servicing abuses.

The False Claims Act allows the government to bring civil actions against entities that knowingly use or cause the use of false documents to obtain money from the government or to conceal an obligation to pay money to the government. The lawsuit in this case was initially filed by Lynn Szymoniak under the qui tam or whistleblower  provision of the False Claims Act. This provision entitles a private person to bring a lawsuit on behalf of the United States, where the private person has information that the named defendant has knowingly violated the False Claims Act.

Under the False Claims Act, the private person, also known as a “whistleblower,” is entitled to a share of the government’s recovery. In this matter, the whistleblower will receive $18 million from the proceeds of the settlement.

“Whistleblowers play an important role in protecting taxpayer funds from fraud and abuse,” said U.S. Attorney Nettles. “Settlements like this one help maintain the integrity of the federal mortgage servicing process.”

“By this agreement we are making an important first step to hold mortgage servicers accountable for fraudulent and abusive practices not only in South Carolina but  nationwide. I am proud of the tireless work of this office to investigate this case across the country,” said U.S. Attorney Nettles.

“We see this historic settlement as one of national importance as our success in this case marks a precedent setting application of the False Claims Act to complex financial fraud,” said U.S. Attorney Nettles. “It also demonstrates the role that whistleblowers can play in working with the government to return dollars to the federal treasury and to expose wrongdoing.”

“We are very pleased by this settlement but at the same time our investigation is ongoing as we continue to ascertain the full magnitude of wrong doing and to seek redress for the United States Government,” said U.S. Attorney Nettles.

This settlement was the result of a coordinated effort by Assistant United States Attorneys Fran Trapp and Jennifer Aldrich of the U.S. Attorney’s Office for the District of South Carolina along with the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina and the Offices of Inspector General and legal counsel departments for HUD, the Treasury and the Federal Reserve in investigating the allegations.

Lynn Szymoniak, the whistleblower, was represented by South Carolina attorney Richard Harpootlian along with the firm of Grant & Eisenhofer (G&E) including firm partner Reuben Guttman, of the Washington, DC office, who heads the G&E False Claims Litigation Group and firm partner James Sabella of the New York office, who is a senior member of the G&E Securities Fraud Litigation Group. Kenneth Suggs and Howard Janet of Janet, Jenner, & Suggs in Maryland and South Carolina also represented Ms. Szymoniak.

The allegations contained in the complaint against the Defendants are merely accusations and do not constitute a determination of liability.

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