JP Morgan Gets Hit Again
Hot on the heels of its chairman’s recent pay increase, banking giant JP Morgan Chase (JPMC) now must pay hundreds of millions of dollars to settle major claims brought under the False Claims Act.
The timing is a little strange. First the board of directors approves Jamie Dimon’s new pay package. Then the bank is ordered to pay the U.S. government $614 million dollars to settle claims it defrauded the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Veterans Affairs (VA), and the Federal Housing Administration (FHA).
Here’s how the story was reported by ABC News Radio:
“The financial services company will pay $614 million for violating the False Claims Act by knowingly underwriting non-compliant mortgages that received federal insurance coverage from the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA).”
The United States Department of Justice’s own announcement on the case quotes Associate Attorney General Tony West to put some perspective on the case:
“The resolution announced today is a product of the Justice Department’s continuing efforts to hold accountable those whose conduct contributed to the financial crisis,” said Associate Attorney General Tony West. “This settlement recovers wrongfully claimed funds for vital government programs that give millions of Americans the opportunity to own a home and sends a clear message that we will take appropriately aggressive action against financial institutions that knowingly engage in improper mortgage lending practices.”
That is exactly why the False Claim Act exists. It is meant to provide incentives to people who want to help protect vital government programs. Way down at the bottom of that press release, the DOJ tells us who the hero of the story is: “The settlement resolves allegations in a complaint filed by a private whistleblower.”
Here’s hoping that the whistleblower got the full measure of reward under the law. The DOJ reports that the (allegedly) wrongful practices settled by this action began as early as 2002. The DOJ also claims the bank admitted some measure of fault.
Is $614 million a lot of money? You bet it is; but consider the scope of the allegations settled by this action according to the DOJ:
“JPMC admitted that, for more than a decade, it approved thousands of FHA loans and hundreds of VA loans that were not eligible for FHA or VA insurance because they did not meet applicable agency underwriting requirements. JPMC further admitted that it failed to inform the FHA and the VA when its own internal reviews discovered more than 500 defective loans that never should have been submitted for FHA and VA insurance.”
Ten years is a long time. When the usual suspects start complaining that the False Claims Act is unfair or that whistleblowers should not receive protections or incentives under the law — or they try to make it harder for whistleblowers to report serious allegations to the government — think about this case. The bank had to pay $614 million, at least in part, because even after JP Morgan learned what was going on it did not stop the wrongful practices.
What actually stopped the fraud? The whistleblower working with the DOJ.
