Financial Fraud Cases Under False Claims Act Continue, As Deutsche Bank and MortgageIT Face Mortgage Fraud Suit

The 2008 financial sector collapse has led to another False Claims Act case against financial institutions. Today, Deutsche Bank and MortgageIT were named in a mortgage fraud case under the False Claims Act, filed by U.S. Attorney Preet Bharara of the Southern District of New York.

The government’s Complaint alleges that Deutsche Bank and MortgageIT “repeatedly lied to be included in a Government program to select mortgages for insurance by the Government. Once in that program, they recklessly selected mortgages that violated program rules in blatant disregard of whether borrowers could make mortgage payments. While Deutsche Bank and MortgageIT profited from the resale of these Government-insured mortgages, thousands of American homeowners have faced default and eviction, and the Government has paid hundreds of millions of dollars in insurance claims, with hundreds of millions of dollars more expected to be paid in the future.”

While health care fraud has been the subject of most qui tam cases under the False Claims Act in recent years, bank fraud, mortgage fraud, and other financial fraud and abuse promise to be growing areas of enforcement in False Claims Act cases.

Financial fraud can fall not only within the False Claims Act–the nation’s major whistleblower law–but also within the IRS Whistleblower Program and the new SEC Whistleblower Program and CFTC Whistleblower Program being created as a result of the 2010 Dodd-Frank financial reform law.

We have followed the IRS, SEC, and CFTC whistleblower programs carefully as we have pursued cases on behalf of our whistleblower clients. After meeting separately with the Chairman of the SEC and its commissioners, and later with the Chairman of the CFTC to discuss their agencies’ proposed whistleblower rules, I will be in D.C. on May 11 to address the IRS rules for whistleblower claims. Of course, the False Claims Act under which Deutsche Bank and MortgageIT were sued was the model for these newer whistleblower programs. We have written extensively about the dramatic success of this law enforcement statute in fighting fraud that robs taxpayer funds.

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