U.S. government sues Wells Fargo
Uncle Sam was there to help Wells Fargo & Co. with bailout money when the financial crisis hit, but now the lender is paying the price for its role in the recession.
October 11, 2012 at 05:30 AM
2 minute read
The original version of this story was published on Law.com
Uncle Sam was there to help Wells Fargo & Co. with bailout money when the financial crisis hit, but now the lender is paying the price for its role in the recession. The U.S. government has filed a lawsuit against Wells Fargo in Manhattan federal court under the Federal False Claims Act. The suit is accusing Wells Fargo of “reckless” lending, deceiving the Federal Housing Administration (FHA) and leaving the government to foot the bill.
The lender's alleged wrongdoing dates back to May 2001. The lawsuit accuses Wells Fargo of having a “regular practice of reckless origination and underwriting” government-backed loans, and of claiming more than 100,000 loans met FHA guidelines, when in truth, more than half of them did not.
The government is seeking “hundreds of millions of dollars” in damages against Wells Fargo, and bringing its case under the False Claims Act means that if it succeeds in proving the alleged violations, it could collect treble damages.
Wells Fargo denied the allegations in a statement made Tuesday, saying it has acted in “good faith and in compliance” with the regulations.
Read more at the Wall Street Journal.
For more InsideCounsel stories about the recession, see below:
Median starting salaries plummet
Financial instability may mean mergers are the best option for small law firms
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