by Brian Mahany
We have been following the several federal false claims act cases brought by the United States Attorney in Manhattan. It’s no secret that we represent the whistleblower in the largest of those cases.
Earlier this year, the government intervened in a case brought by a Citi V.P. in Missouri, Sherry Hunt. We reported on that case days after Citi agreed to settle the charges for $158 million.
Sherri was the mortgage quality control manager for Citi. Her job was to inspect mortgage documents and protect the bank from fraud and bad investments. Because many of Citi’s mortgages were insured by the government (FHA), Citi was required to make sure the borrower had the ability to pay and to see that the property was properly appraised. She claims that Citi lied to HUD and presented loans that contained “outright fraudulent information.” By lying about the quality of loans it was presenting, Citi defrauded the government and ultimately the taxpayers who fund the FHA.
She claims one group of mortgages was so poor that another bank refused to buy the loans. Undeterred, Citi packaged them and asked GNMA, another government agency, to guarantee them. Citi never told the government that many of the loans were substandard. According to her, almost half the loans in that pool defaulted soon afterwards.
When a federally insured loan defaults, the government steps in. That means if appraisals were doctored and the borrowers have no money, you and I are left footing the bill.
As noted earlier, the settlement of the case is old news. Last week’s coverage by Bloomberg gives a great behind-the -scenes perspective not available from the court documents, however.
Of particular note is Bloomberg’s report that Ms. Hunt, the whistleblower, was paid $31 million for her information and for being brave and coming forward to report the fraud. As we have said before, whistleblowers are the new American heroes. While the government struggles to investigate mortgage fraud, the federal false claims act passed just after the Civil War allows ordinary citizens to become private attorney generals and get paid for their efforts if successful.
Whistleblowers can earn as much as 30% of the amount of money collected by or on behalf of the government. With the fallout from the mortgage and housing crisis measuring in the hundreds of billions, there is plenty of room for other Sherry Hunts to come forward.
To bring a whistleblower claim in federal court you must have nonpublic information detailing a fraud against the government. Because many mortgages are insured by the government, mortgage fraud qualifies. If you are or were an underwriter, quality assurance specialist, branch manager or employee with knowledge of fraud, give us a call. We proudly represent whistleblowers and help them – and taxpayers – bring justice to Wall Street, shoddy defense contractors and corrupt medical providers.
If you have information and would like to discuss how you can receive your own award, contact attorney Anthony Dietz at or the author, attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney client privilege and kept in strict confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.