Wells Fargo to pay $108M in suit over vets’ home loans

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - RUS­SELL GRAN­THAM

AT­LANTA — Wells Fargo & Co. has agreed to pay $108 mil­lion to the fed­eral gov­ern­ment to set­tle al­le­ga­tions from two At­lanta-area whistle­blow­ers that the bank charged fraud­u­lent fees on vet­er­ans’ home re­fi­nanc­ing loans.

The set­tle­ment award, dis­closed by an At­lanta firm rep­re­sent­ing the whistle­blow­ers, is the largest so far to re­sult from the 11-year-old law­suit. Two former met­ro­pol­i­tan At­lanta mort­gage bro­kers sued eight banks or mort­gage lenders on be­half of the gov­ern­ment. The law­suit was filed in fed­eral dis­trict court in At­lanta.

“We’re glad it’s over, at

Last year, the fed­eral Con­sumer Fi­nan­cial Pro­tec­tion Bureau and other agen­cies al­leged that the bank’s em­ploy­ees broke the law by open­ing more than 2 mil­lion credit card, check­ing and sav­ings ac­counts with­out cus­tomers’ knowl­edge, in order to meet sales quo­tas and win bonuses.

least as to Wells Fargo,” said one of the two whistle­blow­ers, Vic­tor Bibby. The sec­ond is Brian Don­nelly. In 2012, SunTrust Banks, JPMor­gan Chase, Coun­try­wide Home Loans and three other ma­jor lenders agreed to pay $162 mil­lion to set­tle sim­i­lar al­le­ga­tions by the whistle­blow­ers. An­other law­suit is pend­ing against a St. Peters­burg, Fla., lender, Mort­gage In­vestors Corp. In 2013, the lender laid off hun­dreds of em­ploy­ees and stopped mak­ing new home loans, blam­ing tougher reg­u­la­tions un­der the fed­eral Dodd-Frank Act. A Wells Fargo spokesman said the bank changed its meth­ods for han­dling vet­er­ans’ re­fi­nanc­ing loans sev­eral years ago to fix the al­leged prob­lems and that the com­pany set­tled the law­suit to “put the mat­ter be­hind us.” The San Fran­cisco-based bank, which is the At­lanta area’s sec­ond-largest bank in terms of to­tal de­posits, has been bruised lately in a num­ber of le­gal skir­mishes over its prac­tices. Last year, the fed­eral Con­sumer Fi­nan­cial Pro­tec­tion Bureau and other agen­cies al­leged that the bank’s em­ploy­ees broke the law by open­ing more than 2 mil­lion credit card, check­ing and sav­ings ac­counts with­out cus­tomers’ knowl­edge, in order to meet sales quo­tas and win bonuses. Last month, Wells Fargo said it would re­fund cus­tomers af­ter ad­mit­ting that about 570,000 bor­row­ers may have been wrongly pushed into auto in­sur­ance poli­cies that they didn’t need. In the At­lanta whistle­blower case, which af­fected home-own­ing vet­er­ans across the na­tion, Bibby and Don­nelly al­leged that Wells Fargo il­le­gally col­lected lawyers’ fees and clos­ing costs from bor­row­ers who re­fi­nanced their mort­gages, even though such charges were barred un­der the Depart­ment of Vet­er­ans Af­fairs’ re­fi­nanc­ing pro­gram. The bank hid the fees by mis­la­bel­ing them, ac­cord­ing to At­lanta law firm But­ler Wooten & Peak, one of three firms that rep­re­sented the whistle­blow­ers. The law firm said tax­pay­ers also lost money be­cause of the al­leged fraud. Un­der the VA’s loan guar­an­tee pro­gram, the agency paid Wells Fargo a por­tion of any loans on which the bor­row­ers de­faulted, even though the fraud­u­lent fees would have negated the gov­ern­ment loan guar­an­tees, the law firm said. On Fri­day, Wells Fargo spokesman Crys­tal Drake said, “To­day, we are set­tling this long­stand­ing law­suit, which did not seek any re­funds for in­di­vid­ual vet­er­ans, in order to put the mat­ter be­hind us, and to fo­cus on restor­ing trust in Wells Fargo.” She said the bank had pre­vi­ously made com­pen­sa­tion avail­able to af­fected vet­er­ans. “More than six years ago,” she said, “when ques­tions about fees on cer­tain [Vet­er­ans Af­fairs] re­fi­nance loans were raised, we re­solved those con­cerns by im­prov­ing our in­ter­nal con­trols to en­sure that veteran cus­tomers only pay ap­pro­pri­ate fees on re­fi­nances.” Un­der the fed­eral whistle­blow­ers law, known as the Fed­eral False Claims Act, peo­ple with knowl­edge of wrong­do­ing by a com­pany can sue on be­half of the gov­ern­ment and col­lect up to 30 per­cent of any re­sult­ing set­tle­ment or jury award. “Ul­ti­mately the gov­ern­ment de­cided not to par­tic­i­pate” in the law­suit, But­ler Wooten said in a news re­lease. Jim But­ler, with But­ler Wooten, said the whistle­blow­ers’ share of the $270 mil­lion in to­tal set­tle­ments with the seven lenders is still be­ing ne­go­ti­ated with the fed­eral Jus­tice Depart­ment.

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