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Appeals court upholds whistleblower qui tam lawsuit vs. IberiaBank

whistleblower law

Whistleblower plaintiff attorney explains how the legal process works

An appeals court recently upheld a lower court ruling against IberiaBank, which previously agreed to pay an $11.6 million fine to resolve allegations of violating the False Claims Act by falsely claiming they were complying with federal mortgage loan requirements, according to a recent court decision by the United States Court of Appeals, Fifth Circuit, which has jurisdiction over Texas, Louisiana and Mississippi.

The legal case against IberiaBank was initiated in 2015 by a former IberiaBank employee and a then-current IberiaBank employee who filed a qui tam whistleblower lawsuit involving IberiaBank, according to the Fifth Circuit Appeals Court decision, which affirms a Feb. 13, 2019 decision by United States District Court for the Eastern District of Louisiana. That lower court granted a request to dismiss a lawsuit filed by IberiaBank against its insurance providers, Chubb Limited and Travelers Insurance.

As a result, IberiaBank must pay the $11,692,149 fine it agreed to pay the federal government in 2017 to resolve allegations of falsely certifying mortgage loans from the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD).

“Mortgage lenders must follow FHA program rules designed to avoid putting federal funds at risk and increasing the chances that borrowers may lose their homes,” Principal Deputy Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division, said in 2017.  “The Department will continue to hold accountable lenders that knowingly violate material program requirements that cause the government to guarantee ineligible loans.”

How does the False Claims Act apply to mortgage loans?

Created in 1863, the False Claims Act rewards individuals who report government fraud and other criminal activity.  It is also known as the “Lincoln Law” because it was initially created due to widespread military contractor fraud during the American Civil War.

Revised several times since then, including in 1986, the False Claims Act now applies to all forms of fraudulently billing the government for goods or services, bribery, kickbacks, double billing or making false statements to the federal government for financial gain.

In terms of mortgage loans, the U.S. Department of Justice has spent the past several years actively pursuing violations of the False Claims Act involving the FHA’s mortgage insurance program. In particular, the Department of Justice “uncovered evidence that certain lenders were originating loans insured by the FHA that the lenders knew were not eligible for such insurance. Nevertheless, these lenders submitted false certifications to the FHA that those loans were in fact eligible for FHA mortgage insurance, causing the FHA to pay hundreds of millions of dollars in ineligible claims,” according to a 2016 Department of Justice news release.

Many of these legal cases were initiated by whistleblowers, including a 2020 case, in which Guild Mortgage Company agreed to pay the U.S. government $24.9 million to resolve allegations of knowingly violating the False Claims Act by knowingly approving ineligible loans that defaulted and resulted in claims to the FHA for mortgage insurance, according to a 2020 Department of Justice news release.

Understanding the IberiaBank case

Between Jan. 1, 2005, and Dec. 31, 2014, the U.S. Department of Justice claims IberiaBank falsely certified mortgage loans insured by the FHA. In particular, the U.S. Department of Justice claims IberiaBank paid incentive payments to underwriters and others who performed underwriting activities for loan applications.

Many of the underwriters paid by IberiaBank helped create loan applications with loan files that “contained inadequate documentation of the borrower’s income, unresolved appraisal discrepancies concerning declining home values in the relevant neighborhood, and inadequate verification related to the borrower’s down payment,” according to a 2017 Department of Justice news release.

The federal government warned IberiaBank in 2010 that the company was not in compliance with HUD regulations. Those regulations prohibit banks from paying loan underwriters a commission. At the time, IberiaBank said it was no longer paying underwriters a commission. However, a Department of Justice investigation revealed that IberiaBank continued to pay underwriters incentive payments through Dec. 31, 2014. IberiaBank admitted to such facts as part of its 2017 settlement agreement with the U.S. Department of Justice, which was recently upheld by the United States Court of Appeals, Fifth Circuit

How can a whistleblower lawyer help?

If you become aware of wrongdoing involving your employer or another company which violates the False Claims Act, you might think you don’t need a lawyer to assist you with your case, especially if the U.S. Department of Justice is investigating your whistleblower complaint.

Many whistleblower cases turn out to be very complicated legal matters. In particular, your employer or the company identified in your whistleblower complaint might take legal action against you. In particular, you might encounter legal complications that could jeopardize your career or your financial well-being.

For more than 30 years, the whistleblower plaintiff attorneys at Brewer & Pritchard, P.C. in Houston, Texas have been representing individuals who initiate whistleblower cases. We’re familiar with state and federal laws that apply to whistleblower cases. As a result, we can skillfully guide you through the legal process related to your particular legal matter.

Learn more about how we can help you with your whistleblower complaint. Contact our law firm and schedule an appointment today. We handle whistleblower cases on behalf of plaintiffs nationwide.

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