Six Banks Pay $161 Million to Settle False Claims Act Charge

Six banks will pay $161.7 million to settle a False Claims Act lawsuit that alleged the banks illegal charged veteran borrowers hidden fees on refinanced home loans backed by the Veterans Administration.

Five banks settled this month– Countrywide Home Loans, Inc. ($45 million), PNC Bank ($38 million), First Tennessee Bank ($16 million), SunTrust Mortgage ($10.2 million), and CitiMortgage ($7.5 million).

In March, JP Morgan Chase agreed to pay $45 million to settle claims against it.

In Atlanta, United States District Judge Amy Totenberg allowed a whistleblower lawsuit to proceed against Wells Fargo and Mortgage Investors Corporation.

Wells Fargo and MIC had filed motions seeking dismissal of the lawsuit.

The lawsuit alleges that the banks’ misconduct has cost taxpayers hundreds of millions of dollars.

“We look forward to trying the case against Wells Fargo and Mortgage Investors,” said James E. Butler, Jr. of Butler Wooten & Fryhofer, LLP, lead counsel for the whistleblowers. “Those two are by far the biggest defendants – they have 70 percent of the damages exposure of the eight defendants.”

“Although the majority of the banks have settled the claims against them, the two largest defendants remain,” said Marlan Wilbanks of Wilbanks & Bridges, LLP in Atlanta, which also represents the whistleblowers. “Our clients have strong evidence against Wells Fargo and Mortgage Investors. This case will be simple for a jury to understand. The banks have misled veterans and cheated the taxpayers out of hundreds of millions of dollars over the last decade.”

The whistleblower lawsuit alleges that the eight banks cheated military veterans and taxpayers out of millions of dollars by hiding illegal fees in veterans’ home mortgage refinancing transactions and then sought to collect on government loan guarantees procured through the fraud when such loans went into default.

Any VA guarantees for those loans are void because unallowable fees were charged.

The whistleblower lawsuit was filed in 2006 in federal district court in Atlanta, Georgia, by whistleblowers Victor Bibby and Brian Donnelly.

Bibby and Donnelly were initially represented by the Atlanta, Georgia firm Wilbanks & Bridges.

The lawsuit remained under seal for years while the government considered whether to take over the case.

In 2011, Wilbanks & Bridges brought in additional law firms — Butler, Wooten & Fryhofer of Atlanta and Phillips & Cohen LLP of Washington, D.C.

In September 2011 the government decided not to intervene “at this time” and the lawsuit was unsealed.

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