February 6, 2015 Mortgage Fraud
Exploring the Bibby Case: Where Did the Relators Go Wrong?
As we discussed in yesterday’s post, the Eleventh Circuit recently handed down a ruling in a case of first impression: What sort of punishment should a relator face for breaching confidentiality rules during the investigative stage of a whistleblower action? We reviewed the rules of filing under seal and why this is an important step in the overall False Claims Act lawsuit process. It is especially important in the Bibby case, which involves relators pitted against Wells Fargo alleging undercurrents of fraud pursuant to loans made to veterans.
Today we will review the specific facts of Bibby, highlighting the areas in which the relators could have exercised a greater adherence to confidentiality rules. Notwithstanding the relators’ discussions with the news media about their case, these whistleblowers were integral in achieving a significantly lucrative settlement on behalf of American taxpayers.
Tomorrow we will look at how the court actually arrived at its decision to implement a monetary sanction as opposed to dismissing the whistleblower’s reward altogether.
Background of Bibby
The Bibby case began in 2006 upon the filing of a whistleblower lawsuit under the False Claims Act’s qui tam provisions. As you know, these provisions allow for an individual plaintiff to initiate a civil claim on behalf of the U.S. (or state) government. In this case, two relators believed that several major lending institutions were committing fraud against the Veterans Administration with regard to VA-guaranteed Interest Rate Reduction Refinance Loans (IRRRL).
Under the regulations in place at the time, lenders were forbidden from charging certain fees and costs to the veteran borrowers. Nonetheless, banks including Wells Fargo are alleged to have unlawfully assessed these fees, promised the VA that the loans comported with federal and state laws, then sought payment and reimbursement on those loans in the event of default.
Breach in confidentiality
The complaint was filed under seal, as required by the False Claims Act. However, from there, the relators apparently engaged the news media. In this particular case, the Department of Justice requested several extensions of the typical 60-day timeframe within which False Claims Act complaints remain under seal. According to the findings rendered by the U.S. District Court, the relators engaged a television reporter and producer in order to relay the facts of the fraud. These communications are believed to have generated close to 175 pages of emails, including attachments, providing the media with explicit details about the status of the case and the ongoing investigation by the Department of Justice.
Several years later, during the discovery period for the portion of the case involving Wells Fargo, counsel for the bank discovered the so-called breach in confidentiality and attempted to have the relators’ entire 27 percent ($43 million) reward vacated and dismissed.
Contact us to learn more
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