A prominent foreclosure law firm was charged with defrauding Fannie Mae through a scheme to submit falsely inflated bills to the mortgage servicing companies it worked for, knowing the federal housing authority would ultimately be on the hook through reimbursement payments, the Manhattan U.S. Attorney's Office announced Wednesday.

“As alleged in the complaint, for years [Rosicki, Rosicki & Associates] exploited its relationship with Fannie Mae, a government-sponsored entity, for its own financial gain by knowingly causing Fannie Mae to pay artificially inflated costs for foreclosure-related services,” U.S. Attorney Geoffrey Berman of the Southern District of New York said in a statement.

The government's complaint against Rosicki and a pair of wholly owned affiliates came as a complaint-in-intervention in a suit already being pursued by a whistleblower against the law firm, Peter Grubea.

The alleged False Claims Act violations by Rosicki began in the aftermath of the housing crisis a decade ago. An embattled Fannie Mae began using servicers to help, among other things, pursue foreclosures. These servicers would retain law firms, such as Rosicki, to go through the legal foreclosure process.

These firms at times hired third parties to handle various pieces of the process. These contractors would submit their bills to the law firms, who would turn around and submit the bills to the servicers, who would then be reimbursed for the cost of handling the foreclosures by Fannie Mae.

Rosicki used the services of Enterprise Process Service Inc., a service-of-process company, and Paramount Land Inc., a title search company, which it owned. These companies would then contract out work to third parties to serve process and perform title searches required to complete mortgage foreclosures on Fannie Mae-owned loans.

According to prosecutors, beginning in 2009 Rosicki used the affiliates as “vehicles for marking up foreclosure expenses as much as possible, while adding as little operating expense as possible, in order to maximize … revenue.”

While Enterprise and Paramount paid the vendors they contracted competitive rates, the bills they would turn around and submit were “exponentially higher” than what the vendors had charged. Senior attorneys, including partners at Rosicki, were aware that revenue margins were from 300 to 750 percent, according to prosecutors.

These fraudulently inflated expenses caused Fannie Mae to pay millions of dollars for falsely inflated foreclosure expenses, the U.S. Attorney's Office stated.

In a statement, a spokesman for Rosicki said the law firm “has been a highly respected leader in the housing mortgage industry and widely admired for its dedication towards improving the broader community.”

“The charges leveled against the firm are based on questionable legal theories, have no merit and will be vigorously challenged in court,” the spokesman said.

The suit has been assigned to U.S. District Judge Jed Rakoff of the Southern District of New York.