Jury Verdict Expands to $298 Million in False Claims Act/FIRREA Case as Court Assesses Treble Damages and Penalties

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Jury Verdict Expands to $298 Million in False Claims Act/FIRREA Case as Court Assesses Treble Damages and Penalties

Jury Verdict Expands to $298 Million in False Claims Act/FIRREA Case as Court Assesses Treble Damages and Penalties

LEXOLOGY-

A federal court in Texas recently entered a massive judgment against a mortgage originator for financial crisis conduct, transforming an already severe $93 million jury verdict into a $298 million punishment, and issuing one of the first judicial opinions regarding how to assess penalties under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”).

The suit began in 2011 as a whistleblower action, in which the government quickly intervened, alleging the submission of false Federal Housing Administration (“FHA”) insurance claims by Americus Mortgage Corporation (formerly known as Allied Home Mortgage Capital Corporation), one of its affiliates, and its CEO (collectively, “Allied”) between 2001 and 2011. The matter eventually proceeded to a five-week jury trial, where Allied was found liable for multiple violations of the False Claims Act (“FCA”) and FIRREA. The conduct proven at trial involved:

  • Submission of 1,192 FHA insurance claims for loans that were recklessly underwritten and ineligible for FHA insurance;
  • Submission of 103 FHA insurance claims for loans originated in branches without proper HUD registration, using registration numbers of other, registered branches;
  • Submission of nine false annual certifications to HUD relating to compliance with quality control requirements; and
  • Submission of an email from Allied to a HUD employee in 2009 containing 18 falsified quality control reports.

[LEXOLOGY]

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