Acting Manhattan U.S. Attorney Announces Award Of $296 Million Judgment Against Allied Home Mortgage

[nitpicker]

https://www.justice.gov/usao-sdny/pr/acting-manhattan-us-attorney-announces-award-296-million-judgment-against-allied-home

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Tuesday, September 19, 2017

Acting Manhattan U.S. Attorney Announces Award Of $296 Million Judgment Against Allied Home Mortgage Entities For Civil Mortgage Fraud

Court also Awards $25 Million Judgment against Allied’s President and CEO Jim C. Hodge

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced the award of a judgment yesterday totaling $296,298,325 against the entities formerly known as ALLIED HOME MORTGAGE CAPITAL CORPORATION (“ALLIED CAPITAL”) and ALLIED HOME MORTGAGE CORPORATION (“ALLIED CORPORATION”) (collectively, “ALLIED”), and a judgment in the amount of $25,340,496 against ALLIED’s President and Chief Executive Officer JIM C. HODGE (“HODGE”), for over a decade of fraudulent misconduct while participating in the Federal Housing Administration (“FHA”) mortgage insurance program. In November 2016, after a five-week trial in Houston, Texas, a unanimous jury found that ALLIED and HODGE violated the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), and caused over $92 million in damages to the United States. The judgment, ordered by the district court on September 14, 2017, trebles the jury’s $92 million FCA verdict and imposes additional statutory penalties under the FCA and FIRREA as determined by the Court in light of ALLIED and HODGE’s misconduct. The judgment was awarded by United States District Judge George C. Hanks Jr. of the Southern District of Texas, who presided over the trial.

Under the FCA, damages are subject to mandatory trebling. The FCA also provides for a per-violation penalty, which during the relevant time period was $5,500 to $11,000 for each violation, and FIRREA provides for a penalty of up to $1.1 million for each violation. In addition to trebling the $92 million damages determined by the jury, the Court imposed a penalty of $10,000 for each violation of the FCA found by the jury, for a total of $12,950,000 in FCA penalties, and the maximum $1.1 million penalty for each violation of FIRREA, for a total of $6.6 million in FIRREA penalties. Pursuant to the Court’s order, HODGE is liable for over $25 million in damages and penalties.
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According to the evidence presented at trial, ALLIED and HODGE abused the FHA mortgage insurance program by falsely certifying that thousands of high risk, low quality loans were eligible for FHA insurance and then submitting insurance claims to FHA when any of those loans defaulted. Specifically, ALLIED CAPITAL, with the knowledge and approval of HODGE, originated FHA-insured loans from more than one hundred “shadow” branch offices without the authorization of the United States Department of Housing and Urban Development (“HUD”), in order to evade oversight and disguise default rates. In addition, ALLIED CORPORATION, as a participant in HUD’s Direct Endorsement Lender program, recklessly certified thousands of loans for FHA insurance that were in fact ineligible for insurance under HUD’s guidelines. Finally, ALLIED and HODGE operated a dysfunctional quality control department that was not only unqualified and understaffed but also, at HODGE’s direction, submitted falsified quality control reports to HUD auditors and falsely certified that Allied was in compliance with HUD quality control guidelines.

The United States filed a complaint-in-intervention in this lawsuit in November 2011. At that time, the action was pending as a qui tam whistleblower lawsuit in the United States District Court for the Southern District of New York. In September 2012, the action was transferred to the United States District Court for the Southern District of Texas. The jury returned its verdict in favor of the government on November 30, 2016.
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[safeinOhio]

1. Thanks,

always look forward to shinning a light on white collar crime.