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Andrew Schilling Quoted in Bloomberg BNA Article, "Ninth Circuit Blocks False Claims Act Suit, Doesn't Rule Out All GSE-Based FCA Claims"

Andrew W. Schilling

Andrew Schilling was quoted in Chris Bruce's Bloomberg BNA article, "Ninth Circuit Blocks False Claims Act Suit, Doesn't Rule Out All GSE-Based FCA Claims," on February 29, 2016. 

The U.S. Court of Appeals for the Ninth Circuit blocked a False Claims Act (FCA) lawsuit that said Bank of America, JPMorgan Chase, Wells Fargo and other institutions made false certifications to Fannie Mae and Freddie Mac as agents of the U.S. government, but refused to rule out all government-sponsored enterprise-based claims (United States ex rel. Adams, 9th Cir., No. 14-cv-15031, 2/22/16).

The ruling dooms FCA lawsuits involving allegations of false requests or demands for payment made to Fannie Mae or Freddie Mac as officers, employees or agents of the United States, under 31 U.S.C. 3729(b)(2)(A)(i), the provision at issue in this suit. It was brought by private parties who said lenders and servicers misrepresented the status of homeowner association liens in Nevada.

But the ruling leaves the door open for claims under another provision — Section 3729(b)(2)(A)(ii), which doesn’t require claims to be made directly to the government. Although the district court suggested that demands or requests for payment to the two governmentsponsored enterprises (GSEs) could never form the basis for a False Claims Act suit, Section 3729(b)(2)(A)(ii) might give rise to FCA liability, said Judge Barry G. Silverman, writing for a three-judge panel.

Door Left Ajar. Andrew Schilling, a partner in the New York office of Buckley Sandler and a leader in the firm’s False Claims Act and Financial Institutions Reform Recovery and Enforcement Act practice, called the Ninth Circuit’s decision ‘‘far more narrow’’ than that of the district court.

That leaves open the prospect of more government action down the road, Schilling told Bloomberg BNA Feb. 24.

‘‘While the district court suggested that the False Claims Act could never be used for fraud committed against Fannie and Freddie, the court of appeals basically said, ‘never say never,’ leaving the door slightly ajar for the government to attempt to bring such cases in the future,’’ said Schilling, a former assistant U.S. Attorney and chief of the civil division at the U.S. Attorney’s Office for the Southern District of New York. ‘‘While the plaintiffs therefore lost this round, the government may not be deterred by this ruling from continuing to pursue investigations of banks and mortgage lenders who sell and service GSE loans.’’

Originally published in Bloomberg BNA; reprinted with permission.