DOJ Announces Plan to Improve Forensic Practitioners’ “Professional Responsibility”

Washington, D.C.-  The Department of Justie announces new steps to improve “professional responsibility” among forensics practitioners.

 The DOJ announcement:

Justice Department Announces New Steps to Advance and Strengthen Forensic Science

Changes Include New Code of Professional Responsibility for Practice of Forensic Science

The Department of Justice announced new steps today as part of its ongoing commitment to strengthening and advancing forensic science.  The department will implement a number of steps that will promote professional responsibility among forensics practitioners, institute best practices and advance the relationship between the academic research of forensic science and implementation in the field.

“Today’s announcement marks yet another step forward in the department’s efforts to strengthen the practice of forensic science in our nation’s laboratories and courtrooms,” said Deputy Attorney General Sally Q. Yates.  “We are continually looking at ways to ensure that forensic evidence is collected, analyzed and presented in a responsible and scientifically rigorous manner.”

The new policies include adopting a new code of professional responsibility that builds upon existing policies and accreditation requirements for departmental forensic examiners and laboratories. The department believes the code will improve education and guidance on professional responsibility while establishing a process for identifying and addressing violations of professional conduct.

Department forensic laboratories will also review their policies and procedures to ensure that forensic examiners are not using the expressions “reasonable scientific certainty” or “reasonable (forensic discipline) certainty” in their reports or testimony.  Department prosecutors will also abstain from using these expressions when presenting forensic reports or questioning forensic experts in court unless required by a judge or applicable law.  This decision complements the department’s efforts, announced earlier this year, to provide better guidance to forensic examiners and federal prosecutors on how to properly characterize the strength of forensic evidence in the courtroom.

The department also announced policies to implement greater transparency and access to forensic laboratory quality assurance documents and a plan to explore a grant funding of multiyear post-doctoral fellowships at federal, state and local forensic science service providers and forensic medicine service providers.

The new policies arose out of recommendations made by the National Commission of Forensic Science, which was established to advance the field of forensic science and make suggestions to the Attorney General on how to ensure that reliable and scientifically valid evidence is used when solving crimes.  The Attorney General’s decision to implement several of the commission’s recommendations was announced at a meeting of the commission today.  A memo was also sent to all department component heads directing the implementation of the recommendations.  Additional information on the department’s ongoing work to strengthen forensic science can be found at www.justice.gov/forensics.

 

GeyerGorey LLP 

GeyerGorey LLP is experienced in working with clients to successfully resolve the toughest, most complicated white collar criminal investigations, including FCPA, frauds including grant fraud and procurement fraud, and competition matters including antitrust and anti-dumping cases. Our partners all have over 20 years of senior level experience with the US Department of Justice and deep expertise in the field of federal white collar crimes. We know how the government’s enforcement agencies think and what they look for in these types of investigations. We use these insights to help our clients mount an effective and efficient defense that specifically addresses any red flags that federal agents look for when conducting an investigation. If your organization is under investigation, or you are concerned that an investigation may be launched, GeyerGorey LLP may be the right firm for you. Call Now +1 (888) 293-0644

Two Medicare Companies to Forfeit Total of $12 Million to Settle False Claim Allegations

Cinnaminson, NJ- Two medical equipment companies and their brother-CEOs will forfeit a grand total of $12 million to settle False Claims allegations. Both companies, U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc., made unrequested phone calls to Medicare beneficiaries , seeking to sell them unnecessary medical equipment.

The DOJ post on the matter:

Diabetic Medical Equipment Companies to Pay More Than $12 Million to Resolve False Claims Act Allegations

U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc. and the two owners and presidents of those companies have agreed to pay the United States more than $12.2 million to resolve allegations that they violated the federal False Claims Act by using a fictitious entity to make unsolicited telephone calls to Medicare beneficiaries in order to sell them durable medical equipment, the U.S. Department of Justice announced.  U.S. Healthcare Supply LLC, based in Milford, New Jersey, has agreed to pay more than $5 million, and Jon P. Letko, its owner and president, has agreed to pay more than $1 million.  His brother, Edward J. Letko, the owner and president of Oxford Diabetic Supply Inc., a medical equipment supplier that allegedly also participated in the scheme, has agreed to pay $6 million plus interest.

“We will continue to hold health care providers accountable for attempting to circumvent Medicare statutes and regulations that help prevent the submission of claims for medically unnecessary services and supplies,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Arrangements which clearly disregard program requirements in order to enhance the financial interests of health care providers will not be tolerated.”

“Cold-calling people to sell them expensive medical equipment is prohibited for a reason: unsuspecting patients shouldn’t be coerced into making medical decisions about devices and equipment – which they may not even need – on the basis of a sales pitch,” said U.S. Attorney Paul J. Fishman for the District of New Jersey.

The settlement announced today resolves allegations that U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc. set up and controlled an entity called Diabetic Experts Inc., which they used to make unsolicited telephone calls to Medicare beneficiaries in order to sell them durable medical equipment.  The companies submitted claims to Medicare for the equipment that they sold based on these unsolicited calls.  This conduct violated the Medicare Anti-Solicitation Statute.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $30.5 billion through False Claims Act cases, with more than $18.4 billion of that amount recovered in cases involving fraud against federal health care programs.

 

 

GeyerGorey LLP is experienced in working with clients to successfully resolve the toughest, most complicated white collar criminal investigations, including FCPA, frauds including grant fraud and procurement fraud, and competition matters including antitrust and anti-dumping cases. Our partners all have over 20 years of senior level experience with the US Department of Justice and deep expertise in the field of federal white collar crimes. We know how the government’s enforcement agencies think and what they look for in these types of investigations. We use these insights to help our clients mount an effective and efficient defense that specifically addresses any red flags that federal agents look for when conducting an investigation. If your organization is under investigation, or you are concerned that an investigation may be launched, GeyerGorey LLP may be the right firm for you. Call Now +1 (888) 293-0644

U.S. Gov Awards $1.5 Million in Lost CAFRA Suit, article and more below

Washington, D.C.-  The former Taiwanese First Family has won $1.5 million from the U.S. after filing a CAFRA suit, per DOJ.  Preceding the suit, the Department of Homeland Security and Immigration and Customs Enforcement launched a bilateral initiative to investigate the family’s purchase of a New York City, NY condominium and Keswick, VA Estate (amounting to the aforementioned $1.5 million).  The HSI-ICE team discovered the properties were acquired via bribe dollars, tracing back to a 2004 payout from a Taiwanese banker, Yuanta Securities, in exchange for the then-presidency’s competition protection.  Although the First Family used a series of shell companies and offshore accounts to hide the source of the funds, the HSI-ICE team confiscated the properties upon exposition of the bribery.  

The DOJ article regarding the case is reproduced below with its original link following.

United States Returns $1.5 Million in Forfeited Proceeds from Sale of Property Purchased with Alleged Bribes Paid to Family of Former President of Taiwan

The Department of Justice announced today that it is returning approximately $1.5 million to Taiwan, the proceeds of the sale of a forfeited New York condominium and a Virginia residence that the United States alleged in its complaint were purchased with the proceeds of bribes paid to the family of Taiwan’s former President Chen Shui-Bian.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) made the announcement.

According to the civil forfeiture complaints filed in this case, Yuanta Securities Co. Ltd. paid a bribe of 200 million New Taiwan dollars (equivalent to approximately $6 million USD) to former First Lady Wu Shu-Jen in 2004, during former President Chen Shui-Bian’s administration.  The bribe was allegedly paid to ensure that the president would use his power so that the Taiwan authorities would not oppose Yuanta’s bid to acquire a financial holding company.  The former first family used Hong Kong and Swiss bank accounts, shell companies and a St. Kitts and Nevis trust to transfer the bribe proceeds needed to purchase the properties in Keswick, Virginia, and New York.  The properties were owned by the former first family of Taiwan through two limited liability companies.  In October 2012, U.S. District Courts in Virginia and in New York entered final forfeiture judgments against these two properties without opposition by the record owners.  The United States then sold these two properties and obtained approximately $1.5 million in proceeds, which is being returned to Taiwan.

“The Kleptocracy Initiative was established to prevent corrupt leaders from using the United States as a safe haven for their ill-gotten gains,” said Assistant Attorney General Caldwell.  “We are committed to rooting out foreign official corruption and preventing corrupt officials from enjoying their spoils in the United States.  We appreciate the cooperation of Taiwan law enforcement in this matter.”

“After many years of collaborative work, we are happy to return these funds to their rightful owners,” said Executive Associate Director Edge.  “This is part of an ongoing effort by HSI to identify and seize illegal assets in the United States obtained by corrupt foreign leaders who abuse our financial systems in order to conceal the illicit proceeds of their crimes.  HSI special agents in our 62 offices in 43 countries will continue to work with our domestic offices and international law enforcement partners to hold these individuals accountable.”

ICE-HSI investigated the case, with assistance from the agency’s attaché in Hong Kong, HSI Miami’s Foreign Corruption Investigation Group and the Taiwan Supreme Prosecutors Office’s Special Investigations Division.  Trial Attorney Jennifer Wallis and former Deputy Chief Linda Samuel of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) prosecuted the case.  The Criminal Division’s Office of International Affairs also provided valuable assistance.

The Justice Department’s Kleptocracy Asset Recovery Initiative is carried out by a dedicated team of prosecutors in AFMLS, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit those harmed.  Individuals with information about possible proceeds of foreign corruption located in or laundered through institutions in the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov

HSI’s Foreign Corruption Investigations Group targets corrupt foreign officials around the world who attempt to utilize U.S. financial institutions to launder illicit funds.  The group conducts investigations into the laundering of proceeds emanating from foreign public corruption, bribery or embezzlement.  The objective is to prevent foreign derived ill-gotten gains from entering the U.S. financial infrastructure, to seize identified assets in the United States and repatriate these funds on behalf of those affected.

Greentech Inc, OSI Pharmaceuticals Face $67 Million Settlement Fine, $10 Million to Whistleblower

Washington, D.C.-  Whistleblower Brian Shields of Greentech Inc. ignites investigations of Greentech Inc (San Francisco, CA) and OSI Pharmaceuticals LLC (Farmingdale, NY) following exposure of information into False Claims Act violations.  Both companies are alleged to have skewed reports of efficacy for anti-lung cancer drug Tarceva for the sake of kickback profit.  The two companies are now facing a $67 million settlement fee, $10 million of which will be rewarded to whistleblower Shields in accordance to SEC’s whistleblower program.

The original article is reproduced below with its link following.

 

Pharmaceutical Companies to Pay $67 Million To Resolve False Claims Act Allegations Relating to Tarceva

Pharmaceutical companies Genentech Inc. and OSI Pharmaceuticals LLC will pay $67 million to resolve False Claims Act allegations that they made misleading statements about the effectiveness of the drug Tarceva to treat non-small cell lung cancer, the Department of Justice announced today.  Genentech, located in South San Francisco, California, and OSI Pharmaceuticals, located in Farmingdale, New York, co-promote Tarceva, which is approved to treat certain patients with non-small cell lung cancer or pancreatic cancer.  OSI Pharmaceuticals LLC is the successor to OSI Pharmaceuticals Inc., which was acquired by Astellas Holding US Inc. in 2010 and converted to a limited liability company in 2011.

“Pharmaceutical companies have a responsibility to provide accurate information to patients and health care providers about their prescription drugs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will hold those companies accountable that mislead the public about the efficacy of their products.”

The settlement resolves allegations that, between January 2006 and December 2011,  Genentech and OSI Pharmaceuticals made misleading representations to physicians and other health care providers about the effectiveness of Tarceva to treat certain patients with non-small cell lung cancer, when there was little evidence to show that Tarceva was effective to treat those patients unless they also had never smoked or had a mutation in their epidermal growth factor receptor, which is a protein involved in the growth and spread of cancer cells.

As a result of today’s $67 million settlement, the federal government will receive $62.6 million and state Medicaid programs will receive $4.4 million.  The Medicaid program is funded jointly by the state and federal governments.

“This settlement demonstrates the government’s unwavering commitment to pursue violations of the False Claims Act and recover taxpayer dollars spent as a result of misleading marketing campaigns,” said U.S. Attorney Brian Stretch for the Northern District of California.

“Pharmaceutical companies that make misleading or unsubstantiated statements about their products can put patients at risk,” said Deputy Commissioner Howard R. Sklamberg for FDA’s global regulatory operations and policy. “The FDA will continue to work to protect the public’s health by ensuring that companies do not mislead healthcare providers about their products.”

“Drug manufacturers that make misleading claims about their product’s effectiveness can jeopardize the health of patients – in this case, cancer patients,” said Special Agent in Charge Steven J. Ryan for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).  “Our agency will continue to protect both patients and taxpayers by holding those who engage in such practices accountable for their actions.”

The settlement resolves allegations filed in a lawsuit by former Genentech employee Brian Shields, in federal court in San Francisco.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  Shields will receive approximately $10 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $29.8 billion through False Claims Act cases, with more than $18.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement is the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of California, with assistance from the HHS-OIG, the HHS Office of Counsel to the Inspector General, the HHS Office of the General Counsel-CMS Division, the FDA’s Office Chief Counsel, the FDA’s Office of Criminal Investigations, the Office of the Inspector General for the Office of Personnel Management, the FBI, the Department of Defense Office of the Inspector General, the Office of the General Counsel for the Defense Health Agency and the National Association of Medicaid Fraud Control Units.

The case is captioned United States ex rel. Shields v. Genentech, Inc., et al., Case No.  CV 11 0822 MEJ (N.D. Ca.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Original Link

Fourth Individual in NYPA Big-Rigging Scandal Comes Forward, Faces up to Three Years and $250,000

Washington, D.C.-  The New York Power Authority (NYPA) has recently come under multilateral investigation over allegations of bid rigging, tax fraud, and market fixture.  The DOJ, IRS, and New York Inspector General are all working jointly in this case and have subsequently made their fourth indivdual charge.  John Simonlacaj (White Plains, NY) has confessed to aiding the NYPA in filing false tax returns and now faces up to three years in prison and a $250,000 fine.

The original article is reproduced below with its link following.

 

Fourth Individual Charged in Ongoing New York Power Authority Procurement Fraud Investigation

The Department of Justice, the Internal Revenue Service (IRS) and the New York State Inspector General, which are all conducting a joint federal and state investigation into bid-rigging, fraud and tax-related offenses in the award of contracts at the New York Power Authority (NYPA), announced today that a Westchester County, New York, resident pleaded guilty today to aiding and assisting in the filing of a false tax return.

According to the one-count felony charge filed in the U.S. District Court for the Southern District of New York, in White Plains, New York, John Simonlacaj caused another individual to file a Form 1040 for the tax year 2010 that substantially understated that individual’s taxable income.  Simonlacaj pleaded guilty to aiding and assisting in the filing of a false tax return, which carries a maximum penalty of three years in prison and a $250,000 fine.

“Our investigation into bid rigging and fraud by companies supplying the New York Power Authority has uncovered a variety of criminal activity,” said Principal Deputy Assistant Attorney General Renata Hesse, head of the Justice Department’s Antitrust Division.  “Filing a false tax return is a serious offense and we are pleased to have worked with our partners in law enforcement to prosecute the criminal violation.”

“We say many times the FBI won’t stop until we find everyone responsible for their roles in a criminal investigation,” said Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office.  “These charges prove our tenacity in digging until we hit the bottom of the pile and uncover anyone who had a part in criminal wrongdoing.”

“Today’s plea marks yet another defendant admitting guilt following a bid rigging investigation that began at the state level. My office and those of my federal law enforcement partners, will continue to follow the evidence wherever it may lead,” said New York State Inspector General Catherine Leahy Scott.

“Mr. Simonlacaj is now held accountable for his role in filing a false tax return,” said Special Agent in Charge Shantelle P. Kitchen of the IRS Criminal Investigation New York Field Office.  “Towards pursuing its goal of ensuring that that everyone pays their fair share of taxes, IRS Criminal Investigation remains committed to this ongoing investigation.”

The investigation is being conducted by the Antitrust Division’s New York Office with the assistance of the FBI, IRS Criminal Investigation and the New York State Office of the Inspector General.  NYPA is cooperating with the investigation.  Anyone with information on bid rigging or other anticompetitive conducted related to the award or performance of municipal and state contracts should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit http://www.just

Original Link

 

SEC Whistleblower Program Continues, Rewards Two Individuals $450,000

Washington, D.C.- The SEC has continued to demonstrate its power in its new whistleblower program, rewarding two whistleblowers with $450,000 jointly. The third SEC whistleblower award this month, this payout follows a multi-million dollar settlement just last week, illustrating the SEC’s conviction in protecting, encouraging, and rewarding whistleblowers.

Article reproduced below, with original link following.

SEC ANNOUNCES THIRD WHISTLEBLOWER AWARD THIS MONTH, TWO INDIVIDUALS SPLIT $450,000

By Richard L. Cassin | Monday, May 23, 2016 at 1:28PM

The Securities and Exchange Commission awarded more than $450,000 jointly to two individuals Friday for a tip that led the SEC to open a corporate accounting investigation and for their help once the investigation was underway.

The whistleblower award is the third announced by the SEC during May, bringing the month’s payouts to $10 million, the agency said.

“The recent flurry of awards reflects the high-quality nature of the tips the SEC is receiving as public awareness of the whistleblower program grows,” Sean McKessy, chief of the SEC’s Office of the Whistleblower, said in a statement Friday.

“These two individuals not only submitted valuable tips to help open our investigation but also provided valuable assistance as we proceeded,” McKessy said.

On May 17, the SEC awarded between $5 million and $6 million to a whistleblower whose information led the SEC to uncover securities violations which would have been “nearly impossible to detect” without the company insider’s help.

The award was the third highest ever granted under the SEC whistleblower program since the program’s inception in 2011.

On May 13, the SEC awarded a whistleblower more than $3.5 million for producing evidence against his or her company during an ongoing investigation “that strengthened the SEC’s case.”

In that case, the SEC first denied an award to the whistleblower because the informaiton related to an investigation that had already started.

After the whistleblower appealed, the SEC reversed its decision.

By law, the SEC has to protect the confidentiality of whistleblowers and not disclose information that might reveal a whistleblower’s identity.

The agency has now awarded more than $68 million to 31 whistleblowers since the program started in 2011.

The biggest award so far was more than $30 million in 2014. A 2013 award topped $14 million.

Whistleblowers can be eligible for awards when they voluntarily provide the SEC with “unique and useful information that leads to a successful enforcement action.”

Awards can range from 10 percent to 30 percent of recoveries when amounts collected are more than $1 million.

The SEC received more than 4,000 tips last year.

Original Link

SEC Whistleblower Program Continues, Rewards Two Individuals $450,000

Cinnaminson, NJ- The SEC has continued to demonstrate its power in its new whistleblower program, rewarding two whistleblowers with $450,000 jointly. The third SEC whistleblower award this month, this payout follows a multi-million dollar settlement just last week, illustrating the SEC’s conviction in protecting, encouraging, and rewarding whistleblowers.

Article reproduced below, with original link following.

SEC ANNOUNCES THIRD WHISTLEBLOWER AWARD THIS MONTH, TWO INDIVIDUALS SPLIT $450,000

By Richard L. Cassin | Monday, May 23, 2016 at 1:28PM

The Securities and Exchange Commission awarded more than $450,000 jointly to two individuals Friday for a tip that led the SEC to open a corporate accounting investigation and for their help once the investigation was underway.

The whistleblower award is the third announced by the SEC during May, bringing the month’s payouts to $10 million, the agency said.

“The recent flurry of awards reflects the high-quality nature of the tips the SEC is receiving as public awareness of the whistleblower program grows,” Sean McKessy, chief of the SEC’s Office of the Whistleblower, said in a statement Friday.

“These two individuals not only submitted valuable tips to help open our investigation but also provided valuable assistance as we proceeded,” McKessy said.

On May 17, the SEC awarded between $5 million and $6 million to a whistleblower whose information led the SEC to uncover securities violations which would have been “nearly impossible to detect” without the company insider’s help.

The award was the third highest ever granted under the SEC whistleblower program since the program’s inception in 2011.

On May 13, the SEC awarded a whistleblower more than $3.5 million for producing evidence against his or her company during an ongoing investigation “that strengthened the SEC’s case.”

In that case, the SEC first denied an award to the whistleblower because the informaiton related to an investigation that had already started.

After the whistleblower appealed, the SEC reversed its decision.

By law, the SEC has to protect the confidentiality of whistleblowers and not disclose information that might reveal a whistleblower’s identity.

The agency has now awarded more than $68 million to 31 whistleblowers since the program started in 2011.

The biggest award so far was more than $30 million in 2014. A 2013 award topped $14 million.

Whistleblowers can be eligible for awards when they voluntarily provide the SEC with “unique and useful information that leads to a successful enforcement action.”

Awards can range from 10 percent to 30 percent of recoveries when amounts collected are more than $1 million.

The SEC received more than 4,000 tips last year.

Original Link

Guild Mortgage’s D.C. Location Enter Federal Suit for Knowingly Underwriting Loans for FHA Housing

Cinnaminson, NJ- Guild Mortgage knowingly filed hundreds of falsely underwritten loans to Federal Housing Administration (FHA) over the course of six years, most of which were defaulted upon.

Original Article:

United States Files Lawsuit Alleging That Guild Mortgage Improperly Originated and Underwrote FHA-Insured Mortgage Loans 

The United States has filed a complaint in the U.S. District Court for the District of Columbia against Guild Mortgage Company (Guild) under the False Claims Act for improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA), the Justice Department announced today.  Guild is a mortgage lender headquartered in San Diego, California.

“This case is another example of the  Justice Department’s continued efforts to ensure that lenders that participate in the FHA mortgage insurance program act in good faith and conduct appropriate due diligence when committing the United States to insure home loans,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “To protect the housing market and the FHA fund, we will continue to hold responsible lenders that knowingly violate the rules.”

Guild participated in the FHA insurance program as a direct endorsement (DE) lender.  As a DE lender, Guild had the authority to originate, underwrite and certify mortgages for FHA insurance.  If a DE lender such as Guild approves a mortgage loan for FHA insurance and the loan later defaults, the U.S. Department of Housing and Urban Development (HUD), FHA’s parent agency, is responsible for the losses resulting from the defaulted loan.  Under the DE lender program, neither the FHA nor HUD reviews the underwriting of a loan before it is endorsed for FHA insurance.  HUD therefore relies on DE lenders to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and DE lenders must certify that every loan endorsed for FHA insurance is underwritten according to the applicable FHA standards.

The government’s complaint alleges that, from January 2006 through December 2011, Guild knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten FHA-insured loans.  The complaint further alleges that Guild grew its FHA lending business by ignoring FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages.  For example, Guild allegedly allowed underwriters to waive compliance with FHA requirements when underwriting a loan.  Additionally, Guild used unqualified junior-underwriters who did not have a DE certification to waive mandatory conditions on higher risk loans where HUD required underwriting only by highly trained DE underwriters.

The government’s complaint further alleges that Guild’s senior management focused on growth and profits and ignored quality.  From 2006 to 2012, Guild conducted at least 125 branch audits in which almost 40 percent resulted in either a qualified rating or unsatisfactory rating.  A qualified rating was defined as having a “significant number of findings, and/or findings noted that have more serious impact or risk to Guild,” or “Knowledge of procedures and controls; however, they appear to be inefficient.”  An unsatisfactory rating was defined as one where “serious concerns were noted: lack of knowledge, procedures, and/or controls in branch.”  The complaint alleges that, through Guild’s quality control reviews, significant defects were found in over 20 percent of the FHA loans reviewed between 2006 and 2011 and over half the loans had either significant or moderate defects.  Significant defects included fraud, misrepresentation and other serious findings while moderate defects included not following guidelines.  However, Guild did not calculate or distribute any error rate during the relevant time period, thus management was not presented with these findings.  Additionally, for many of the quarters from 2006 through 2009, Guild did not even distribute any of the quality control findings to management.  As a result, Guild management often did not review or remediate findings from quality control audits during these years.  In the quarters where Guild management actually did review quality control findings, it did so almost a year after the loans closed and failed to timely remediate any identified problems.  In 2013, when Guild finally began addressing the quality of its FHA underwriting, Guild’s head of quality control pointed out the ineffectiveness of its past efforts at addressing loan quality:  “I’m not optimistic about training reminders and individual follow-ups being all that effective.”

The government’s complaint alleges that as a result of Guild’s knowingly deficient mortgage underwriting practices, HUD has already paid tens of millions of dollars of insurance claims on loans improperly underwritten by Guild, and that there are many additional loans improperly underwritten by Guild that are currently in default and could result in further insurance claims on HUD.  For example, the government’s complaint identifies a mortgage loan that was improperly underwritten in violation of HUD requirements, causing the borrower to default and HUD to pay the loss on the loan.  Specifically, Guild failed to verify the borrower’s prior rental payments, overstated the borrower’s income, failed to develop a credit history for the borrower who had no credit score, exceeded FHA’s qualifying debt to income ratio without determining whether certain compensating factors were present, and failed to identify the source of a large deposit made to the borrower’s account.  The underwriter at Guild improperly waived multiple conditions and allowed an unauthorized junior underwriter to do the same for other conditions.  In sworn testimony, the Guild underwriter admitted the loan failed to comply with FHA underwriting requirements.

“The Federal Housing Administration’s insurance program is meant to encourage lenders to expand opportunity for homeownership by providing financing to prospective buyers who otherwise might not be able to enter the housing market,” said U.S. Attorney Channing D. Phillips for the District of Columbia.  “To ensure that prospective homebuyers realize the dream of long term homeownership, the program has strict rules and is not a license for lenders to carelessly subject federal dollars to risk. This lawsuit is designed to help the FHA – and American taxpayers — recoup tens of millions of dollars in losses attributable to a lender accused of improperly underwriting FHA-insured mortgages and committing the government’s guarantee to mortgages that failed to comply with program rules.”

“The decision to intervene in this matter should serve as a reminder of the priority given to pursuing lenders that violate HUD program rules in order to hold them accountable and the value of private citizen participation, including whistleblowers, in pursuing lenders that violate the rules,” said HUD Inspector General David A. Montoya.

“FHA relies on the honesty and integrity of those lenders participating in our program,” said HUD’s General Counsel Helen R. Kanovsky.  “The action we take today should send a clear message that we will not tolerate the abuse of our programs or of the families who should benefit from them.”

The lawsuit was brought under the qui tam, or whistleblower, provisions of the False Claims Act by a former employee of Guild.  Under the act, a private party may bring suit on behalf of the United States and share in any recovery.  The government may intervene in the case, as it has done here.  The False Claims Act allows the government to recover treble damages and penalties from those who violate it.

The investigation of this matter was a coordinated effort among HUD, its Office of Inspector General, and the U.S. Attorney’s Office for the District of Columbia and the Civil Division’s Commercial Litigation Branch.

The action is captioned United States ex rel. Dougherty v. Guild Mortgage Company (D.D.C.).  The claims asserted in the complaint are allegations only and there has been no determination of liability.

Original Article Link

Official Filing

Hitachi Chemical Plea Agreement Part 1- Robert Connolly

Hitachi Chemical Plea Agreement: Part 1—Enhancement of Compliance Program as a Condition of Probation

SEC Awards Over $5 Million to Whistleblower, Provides Anonymity

Washington, D.C.- The Security and Exchange Commission’s (SEC) whistleblower program continues to build momentum, awarding its third-highest whistleblower payment ($5-6 million) as well as censoring his/her identity and former employer.

 The subsequent article is reproduced below, with original link following.

 

SEC Awards More Than $5 Million to Whistleblower Award is SEC Program’s Third Highest to Date

FOR IMMEDIATE RELEASE

2016-91

Washington D.C., May 17, 2016 — The Securities and Exchange Commission today announced that it will award between $5 million and $6 million to a former company insider whose detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information.

“Employees are often best positioned to witness wrongdoing,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “When they report specific and credible tips to us, we will leverage that inside knowledge to advance our enforcement of the securities laws and better protect investors and the marketplace.”

Today’s award is the SEC’s third highest to a whistleblower.  In September 2014, the agency announced a more than $30 million whistleblower award, exceeding the prior highest award of more than $14 million announced in October 2013.  Since the inception of the whistleblower program in 2011, the SEC has awarded more than $67 million to 29 whistleblowers, including one for more than $3.5 million announced last week.

“The whistleblower program has seen tremendous growth since its inception and we anticipate the continued issuance of significant whistleblower awards in the months and years to come,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action.

Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

For more information about the whistleblower program and how to report a tip: www.sec.gov/whistleblower.

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