InfoBytes Blog

Senate Confirms Anthony West as Associate Attorney General

On July 25, the U.S. Senate confirmed Anthony West to serve as the DOJ’s Associate Attorney General, a position he has held in an “acting” capacity since March 2012. In that role Mr. West advises and assists the Attorney General and the Deputy Attorney General in formulating and implementing departmental policies and programs related to a broad range of issues, including civil litigation, federal and local law enforcement, and public safety. Prior to March 2012, Mr. West served as the Assistant Attorney General for the Civil Division – the largest litigating division at the DOJ – where he emphasized the Civil Division's authority to bring civil and criminal actions to enforce the nation's consumer protection laws, and served in various positions on the Financial Fraud Enforcement Task Force. In addition, the DOJ’s Civil Rights Division's home page indicates that Jocelyn Samuels is serving as Acting Assistant Attorney for the Civil Rights Division.  Ms. Samuels previously served as Principal Deputy Assistant Attorney General for that division and as Senior Counselor to the Assistant Attorney General for Civil Rights. She replaces Thomas Perez who recently was confirmed to serve as Secretary of Labor.

Civil Fraud Actions DOJ U.S. Senate

Federal Government Civil Fraud Suit Targets Mortgage Lender and Its President

On April 4, the U.S. Attorney for the Southern District of New York and HUD officials announced a civil fraud suit alleging FCA and FIRREA claims against a mortgage lender and its president for falsely certifying loans and other actions under the FHA’s Direct Endorsement Lender Program. Many of the allegations mirror those in prior mortgage fraud cases brought by the government, including claims that the lender failed to maintain adequate quality control processes, incentivized employees to expedite loan approval, failed to disclose to HUD all loans containing evidence of fraud or other serious underwriting problems, and made repeated false certifications to HUD. However, this is only the second time the government has brought claims based on the FHA’s annual certification process, as opposed claims based on certifications of individual loans. The complaint also alleges that the firm’s president and owner personally performed underwriting and provided false certifications to HUD in a number of instances. The government’s decision to name an individual also may evidence a new trend in its mortgage fraud enforcement practices. The government claims that to date HUD has paid more than $12 million in insurance claims on loans underwritten by the lender. The complaint does not specify total damages, but does seek more than $40 million in treble damages and penalties on the FCA claims.

HUD Civil Fraud Actions DOJ False Claims Act / FIRREA

California Federal Court First to Outline Factors Governing FIRREA Civil Penalty Awards

On March 6, the U.S. District Court for the Central District of California identified for the first time factors for courts to consider when assessing a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). United States v. Menendez, No. CV 11-06313, 2013 WL 828926 (C.D. Cal. Mar. 6, 2013). The DOJ sued a real estate broker, alleging he committed bank fraud when he submitted a false certification on behalf of a homeowner to HUD in connection with the homeowner’s short sale. The DOJ claimed the certification was false because it represented that there were no hidden terms or special understandings with the buyer of the property, when in fact the broker himself, through a company he controlled, also was the buyer of the property and intended to immediately resell the property for a profit of nearly $40,000. Drawing upon principles applied by courts in other civil penalty contexts, the court considered eight factors to assess the civil penalty under FIRREA: (i) the good or bad faith of the defendant and the degree of scienter; (ii) the injury to the public and loss to other persons; (iii) the egregiousness of the violation; (iv) the isolated or repeated nature of the violation; (v) the defendant’s financial condition and ability to pay; (vi) the criminal fine that could be levied for the conduct; (vii) the amount of the defendant’s profit from the fraud; and (viii) the penalty range available under FIRREA.

In this case, the court found that the first three weighed in favor of a substantial civil penalty: (i) the broker acted with intent to defraud; (ii) HUD suffered a loss; and (iii) the broker’s bank fraud was egregious. The court found that the next two factors favored the broker: (iv) the admissible evidence reflected only a single instance of bank fraud, and (v) the broker recently received a discharge from bankruptcy court and had limited ability to pay. Finally, the court found that the civil penalty requested by the government — nearly $1.1 million — was excessive, considering that (vi) the amount of the criminal penalty for bank fraud was capped at $1 million, and the likely fine under the sentencing guidelines would have been “in the $20-30,000 range;” (vii) the broker’s profit was only approximately $40,000; and (viii) FIRREA precluded a penalty in excess of $1 million when the gain or loss was less than $1 million, as it was in this case. The court awarded a civil penalty of $40,000, an amount proportionate to the broker’s profit.

Civil Fraud Actions False Claims Act / FIRREA