Tag Archives: whistleblower

Wells Fargo stuck mortgage borrowers with extra fees, whistle-blower’s lawsuit says

As Wells Fargo & Co. continues to be hit with fallout from its sham-accounts scandal, the bank is facing allegations that it put the screws to customers in yet another way: by slapping them with fees for delays in processing mortgage applications.

A former Wells Fargo mortgage banker who worked in Beverly Hills alleged in a lawsuit this week that the bank falsified records so it could blame holdups on borrowers — and that it fired him for trying to report the practice.

The legal action follows a months-long internal investigation into the alleged abusive practices, one that contributed to an executive shake-up in the San Francisco bank’s mortgage business. ProPublica first reported on the alleged improper fees in January.

When borrowers apply for a mortgage, they are typically guaranteed a set interest rate — assuming the loan is approved within a certain time frame, often 30 to 45 days. If approval takes longer, the borrower can still get the promised rate but there are financing costs associated with extending the guarantee.
Read on.

Advertisements

U.S. joins whistleblower lawsuit that accuses Los Angeles of misusing HUD money

The federal government is joining a lawsuit that accuses the city of Los Angeles of misusing hundreds of millions of dollars from the Department of Housing and Urban Development that were earmarked for providing accessible housing for people with disabilities, the Department of Justice announced this week.

The lawsuit, which stems from a whistleblower complaint, alleges that the city of Los Angeles and the CRA/LA (formerly the Community Redevelopment Agency of the City of Los Angeles) falsely certified that they were in compliance with federal accessibility laws in connection with housing grants from HUD.

The lawsuit alleges that Los Angeles applied for “millions of dollars” in federal money, some of which it provided to the CRA/LA, for the development of affordable housing that is accessible for people with disabilities.

In order to receive the HUD funds, the city and the CRA/LA are required to comply with federal accessibility laws, including Section 504 of the Rehabilitation Act and the Fair Housing Act, and the duty to affirmatively further fair housing. These measures are meant to ensure that people with disabilities have fair and equal access to public housing.

Read on.

A Whistle Was Blown, but Who Was Listening?

The Securities and Exchange Commission calls itself the whistle-blower’s advocate. But one participant in the agency’s lauded whistle-blower program isn’t so sure.

He is Michael J. Lutz, an accounting specialist who raised his hand in early 2013 when he was at Radian Group, the giant mortgage insurer. At the time, Radian was still weathering the subprime crisis; it had insured loads of soured mortgages, and Mr. Lutz believed the company was lowballing the amount it might have to pay in claims on the loans.

Mr. Lutz, 31, worked at Radian’s headquarters in Philadelphia verifying that the company’s internal accounting controls were effective. This task is also known as Sarbanes-Oxley testing, named for the Enron-era legislation that bolstered the penalties for accounting fraud.

Radian was required to set aside reserves against potential losses on bad loans, and Mr. Lutz reckoned that his employer was materially understating those amounts. The company was looking to raise capital through a stock offering, and the lower the reserves, the better the company’s earnings would appear.

When Mr. Lutz voiced his concerns to his superiors, he said he was told to stand down.

“I felt like I was on an island,” Mr. Lutz told me in a phone interview. “This big-insurance-company-versus-this-little-guy is a very lonely and difficult situation to be in. But I felt I had no other choice. I was doing my job and doing what was right.”

After an investigation of Mr. Lutz’s allegations, Radian concluded that he was wrong: Its reserves had been appropriate.

Read on.

How many whistle-blowers did the Feds ignore? In the Wells Fargo case about 700.

Wow!

There were multiple red flags and missed signals at the OCC for years, the bank’s main regulator, the report said.

Most tellingly, bank examiners assigned to review Wells Fargo were aware of approximately 700 whistle-blower complaints related to “gaming of incentive plans” when they met with senior managers of the San Francisco-based bank in January 2010, the report said.

Carrie Tolstedt, who at the time headed the community banking division that was ground zero for the scandal was dismissive of the complaints, attributing them to a corporate culture that encouraged valid claims “which are then investigated and appropriately addressed,” the report said. Tolstedt also said the bank’s sales incentive programs were capped at 10% to 20% of bank workers’ total compensation “to keep motivation in check.” Tolstedt no longer works for the bank and has had to give back millions in compensation in connection with her role in the scandal.

According to the report, there was “no evidence that examiners required the bank to provide an analysis of the risks and controls, or investigated these issues further to identify the root cause and the appropriate supervisory actions needed.”

Additionally, Wells Fargo’s board of directors received regular reports dating back to 2005 indicating that the highest volume of internal ethics complaints at the bank involved “sales integrity violations.” The OCC’s Wells Fargo team received the same reports as early as 2010. However, the report said records don’t “indicate examiners investigated the root cause.”

Read on.

Government orders Wells Fargo to reinstate whistleblower

The federal government has ordered Wells Fargo to reinstate a former bank manager who lost his job after reporting suspected fraudulent behavior at the bank.

The Labor Department’s Occupational Safety and Health Administration (OSHA) announced on Monday that the bank must rehire the employee, as well as pay back wages, compensatory damages and attorneys’ fees totaling $5.4 million.

OSHA concluded that the manager was “abruptly” forced to leave a Los Angeles branch of the bank in 2010, after he told superiors he suspected two of his subordinates of bank, mail and wire fraud. The manager also called the bank’s ethics hot line. OSHA determined his whistleblowing was “at least a contributing factor in his termination.” The manager was not named.

Read on.

Supreme Court breathes new life into whistleblower case against Wells Fargo

With a ruling Tuesday, the U.S. Supreme Court revived a long-running whistleblower lawsuit that accused Wachovia’s investment bank of violating accounting rules and skirting internal controls to pursue short-term profits.

The Supreme Court vacated a judgment in August 2016 by the U.S. Appeals Court for the Second Circuit that had affirmed a lower court’s decision to dismiss the case filed by two whistleblowers, including one who had worked in Charlotte.

The high court ordered the appeals court to give the case further consideration in light of a June 2016 Supreme Court ruling that interpreted an aspect of the federal whistleblower law called the U.S. False Claims Act.

“It has obviously breathed new life into our case, which is very important for everyone involved,” said Joel Androphy, a Houston-based attorney representing the plaintiffs. “This has been a very long road.”

Prominent advocacy group takes JPMorgan whistleblower’s case

One of the country’s foremost nonprofit legal advocacy groups for whistleblowers has taken up the cause of former JPMorgan Chase broker Johnny Burris who was fired after refusing to put his elderly clients into the bank’s own high-priced products.

The Government Accountability Project, which has represented Edward Snowden and other prominent tipsters, filed an appeal of a Department of Labor decision to uphold the bank’s termination of Burris in 2013. That same decision, issued last month, also found that the bank did retaliate against Burris, who’s now an RIA based in Surprise, Arizona.

JPMorgan drew the largest SEC fine of 2015, $307 million, for inappropriately pushing its own products, three years after Burris provided the commission with more than a thousand pages of documents and secret recordings supporting his allegations. Burris also accuses several of his managers of lying under oath or omitting material facts during a FINRA arbitration case.

Read on.