Wells Fargo pays $108M to settle whistleblower case alleging fraud in veterans’ mortgage refinance loans

ATLANTA, GEORGIA, Aug. 4, 2017 – Wells Fargo has agreed to pay $108 million to the federal government to settle a whistleblower case alleging the bank cheated military veterans and taxpayers by charging hidden, illegal fees in veterans’ home mortgage refinancing transactions.

Today’s settlement by Wells Fargo brings the total recovery to taxpayers from this case to $275.7 million.

Six banks previously settled similar charges against them in the same “qui tam” (whistleblower) lawsuit in 2010. They are: JPMorgan Chase ($45 million), Countrywide Home Loans Inc. ($45 million), PNC Bank ($38 million), First Tennessee Bank ($16 million), SunTrust Mortgage ($10.2 million) and CitiMortgage ($7.5 million).

The case remains pending against one other mortgage lender, Mortgage Investors Corp.

The whistleblowers in the case, Victor Bibby and Brian Donnelly, are former mortgage brokers based in Atlanta. The qui tam lawsuit was filed in federal district court in Atlanta in 2006.

Mary Louise Cohen of Phillips & Cohen LLP was co-counsel on the case. James Butler of Butler Wooten & Peak was lead counsel. He and his firm successfully litigated the lawsuit, along with co-counsel Wilbanks & Gouinlock.

The loans at issue were “Interest Rate Reduction Refinancing Loans,” which allow veterans with existing Veterans Administration loans on their homes to refinance the loans so they can take advantage of lower interest rates.

The lawsuit was filed under the False Claims Act, which allows private citizens to file whistleblower lawsuits against entities that are defrauding the government and recover funds on the government’s behalf. To encourage whistleblowers, the law grants whistleblowers 15 percent to 30 percent of the recovery, based on whether the government joins the case and the assistance whistleblowers and their counsel provide. For more information, see “What is a qui tam case?”

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