We knew the Justice Department had been had been using the False Claims Act and piggybacking on whistleblower suits to go after big players in the mortgage crisis. Now we have a better idea of the extent of the campaign, thanks to the settlement agreements that the DOJ filed Monday in connection with last month’s $25 billion foreclosure settlement.
Buried within the five 300 page-plus consent decrees are details of six False Claims Act qui tam suits against Bank of America and JPMorgan Chase that are settling for a combined $227.9 million as part of the landmark deal. At least three of the whistleblower suits had been made public before Monday, but the documents provide fresh details and background about three previously unreported cases.
The whistleblower suits were originally brought by a collection of plaintiffs firms including Grant & Eisenhofer; Hagens Berman Sobol Shapiro; and Butler Wooten & Fryhofer. “We were privileged to play some role in what will be an historic settlement,” said Reuben Guttman of Grant & Eisenhofer.
Guttman’s firm represents whistleblower Lynn Szymoniak, who will receive $18 million of a $95 million settlement with Bank of America, JPMorgan, Wells Fargo, and Citigroup to resolve allegations of loan servicing misconduct. Guttman called the deal a “partial settlement” but declined to say whether other banks continue to face claims in Szymoniak’s federal district court suits in North and South Carolina. The U.S. attorney in South Carolina said in a press release that the deal was the largest False Claims Act settlement in the state’s history; the North Carolina case remains sealed. Along with Grant & Eisenhofer, Szymoniak is represented by Janet, Jenner, & Suggs and South Carolina attorney Richard Harpootlian.
In Atlanta, JPMorgan Chase agreed to a $45 million settlement in a qui tam suit brought by two mortgage brokers, Victor Bibby and Brian Donnelly. The Justice Department decided in September not to intervene in the suit, which was filed in 2006 by Butler, Wooten & Fryhofer; Wilbanks & Bridges; and Phillips & Cohen.
“We think that JPMorgan Chase made a wise decision to resolve the claims against them given their exposure,” said Butler Wooten’s Brandon Peak. As part of the settlement, the brokers stand to receive 26 percent of the award, Peak said, or $11.7 million.
William Custer IV of Bryan Cave represented JPMorgan in the Atlanta case along with Andrew Cereseny of Debevoise & Plimpton, who was closely involved in negotiations over the national settlement. Several other defendants remain in that suit, including Wells Fargo, Bank of America, and Citigroup. A motion to dismiss is pending.
Two qui tam suits referenced in the DOJ agreements were filed in Brooklyn federal district court by Hagens Berman. They both appear to be connected to a previously reported $1 billion Bank of America settlement to resolve False Claims Act investigations by the Brooklyn U.S. Attorney’s Office. The Litigation Daily confirmed last month that one of the cases–a suit brought by whistleblower Kyle Lagow alleging appraisal fraud–was connected to the global foreclosure settlement.
Monday’s documents show that Lagow’s case will settle for $75 million. Another Brooklyn Hagens Berman case, brought by whistleblower Gregory Mackler, is settling for $6.5 million. Mackler sued Bank of America last year for allegedly defrauding the Home Affordable Modification Program, according to a complaint that was unsealed last week. Judge Sandra Townes has given the Justice Department until Friday to intervene in the Lagow and Mackler cases. Their lawyers, Steven Hagen and Shayne Stevenson of Hagens Berman, either declined comment or did not respond to requests for comment.
A sixth whistleblower suit, meanwhile, remains sealed in Massachusetts federal district court. That suit, brought against JPMorgan Chase by a plaintiff with the surname Harris, is settling for $6.19 million, according to the consent decree. Spokespeople for JPMorgan and for the U.S. attorney’s office in Massachusetts did not respond to requests for comment.
The consent decrees don’t contain any mention of yet another whistleblower suit that Citigroup settled for $158 million last month, although at the time both the bank and the DOJ described the settlement as part of the larger $25 billion foreclosure deal. The relator in that case, Sherry Hunt, is represented by Finley Gibbs of Rotts & Gibbs.
This article originally appeared in The AmLaw Litigation Daily.
