by Brian Mahany
By now, most of our readers and many in the mortgage industry know that we have the largest federal false claims action in the U.S., HUD’s $2.4 billion case against Allied Home Mortgage and CEO Jim Hodge. We have proudly represented former Allied employees who didn’t get paid and the American taxpayers who the government says were fleeced for hundreds of millions of dollars. Naturally, we try to stay atop of all things Allied. The latest news comes from London. Lloyds of London, to be exact. Several days ago the underwriters at Lloyds filed suit seeking to get out of paying claims on behalf of Allied.
According to the complaint, Lloyds is not obligated to defend Allied in our case because the policy excludes “deceptive trade practices” and because our fraud suit does not arise from Allied’s performance of professional services.
Since we are involved in the underlying lawsuit against Allied, we are unable to comment specifically on Lloyd’s suit. We can say, however, that insurance policies typically exclude claims of fraud from coverage. This is exactly what Lloyds claims in its suit.
The complaint brought by the government against Allied and Hodge claims that Allied “originated loans out of hundreds of branches never disclosed to HUD, submitted knowingly false statements to HUD concerning its branch operations and accumulating sanctions, and lied to conceal its dysfunctional operations from HUD.”
Lloyds says it has no duty to defend Hodge nor to pay any claims arising out of the lawsuit based on the language in its policy. The complaint says they not only want to get released from defending the case they also want the defendants to pay back any money spent by the insurer for Allied’s legal bills to date.
The noose continues to tighten around Allied, Hodge and his henchmen. Although Hodge has apparently started another mortgage company, its remains extremely unlikely that he could ever earn enough to pay all the claims against him and his companies.
A copy of the complaint is available from the United States District Court for the Southern District of New York’s PACER system. If you don’t have access, drop us a line and we will gladly send it to you.
The law firm of Mahany & Ertl represents whistleblowers in suits against banks, mortgage servicers, health care companies and government contractors. If you know of fraud in which taxpayers were harmed, give us a call. Whistleblowers are entitled to up to 30% of what is collected on behalf of the government. We also represent bank mortgage company employees with claims for unpaid commissions.
For more information, contact attorney Anthony Dietz at . For immediate help, contact attorney Brian Mahany at or by direct dial at . All communications are covered by the attorney – client privilege and are kept in confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in may jurisdictions.