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Andrew W. Schilling Quoted in Inside Mortgage Finance Article, “FHA Lenders Win Big in Seventh Circuit FCA Ruling That Makes It Harder for DOJ, HUD to Argue Cases”

Inside Mortgage Finance

Andrew W. Schilling

Andrew W. Schilling was quoted on December 21, 2017 in an Inside Mortgage Finance article, “FHA Lenders Win Big in Seventh Circuit FCA Ruling That Makes It Harder for DOJ, HUD to Argue Cases,” which discussed the significant ruling for FHA lenders in United States v. Luce. The article stated, “ In Luce, defendant Robert Luce, president and owner of MDR Mortgage Corp., was previously indicted in a matter unrelated to his firm. However, notwithstanding the indictment, Luce continued to state in mandatory disclosures to the Department of Housing and Urban Development that he and other officers were not currently subject to criminal proceedings. He did so for three years, during which his company originated 2,500 loans of which 250 went into default. In 2011, the DOJ filed an FCA complaint against Luce, alleging violation of FHA’s certification requirements so that his company could continue making FHA loans. As part of his defense, Luce argued that the Seventh Circuit should adopt more stringent causation criteria in accordance with the U.S. Supreme Court’s 2016 ruling in Universal Health Services, Inc. v. United States ex rel. Escobar. In its decision, the Seventh Circuit stated: ‘The proximate-causation standard ‘separates the wheat from the chaff,’ allowing FCA claims to proceed against parties who can fairly be said to have caused a claim to be presented to the government, while winnowing out those claims with only attenuated links between the defendant’s specific actions and the presentation of the false claim.’”

Schilling noted, “As soon as the government figured out Luce’s past conviction, it immediately moved to debar him. That showed that materiality mattered to the government whether someone has been convicted or not. On the other hand, the materiality issue in Luce is more of a one-off case because the certification referred to in the case is not the one that is being typically alleged against lenders.”

Going forward, Schilling says he "expects FCA litigation to continue because the cases are driven by whistleblowers. 'I don’t think the government will be deterred by decisions such as in Luce, although it makes their arguments harder. It is more likely to have more impact during settlement.'”

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