Missouri Federal Judge Dismisses Motion to Dismiss False Claims Law Case | Weiner Brodsky Kider PC


A federal judge in the U.S. District Court for the Western District of Missouri recently dismissed a residential mortgage lender’s petition to dismiss a false claims law case, finding that the federal government has sufficiently alleged that the company had knowingly submitted false or fraudulent requests for payment or approval. , and material misrepresentation for a false or fraudulent claim.

The government alleged that the lender’s employees routinely forged the signatures of FHA direct rider underwriters and approved temporary unskilled workers to endorse home equity conversion mortgages (HECMs) for FHA insurance. The government argued that its complaint, which described these alleged violations of HUD rules and regulations, contained enough information to show that the lender had falsely certified its compliance with HUD requirements in its annual certifications and on level certifications. loan on the HECMs it had approved during the relevant period. period of time, resulting in false claims for payment.

The lender argued that the government’s False Claims Act claims should be dismissed under Federal Rules of Civil Procedure 12 (b) (6) and 9 (b) because the government’s complaint did not allege falsity, materiality, causation and science. The lender claimed that the government did not sufficiently allege: (1) that the lender used unqualified DE underwriters; (2) that its DE underwriters failed to exercise due diligence; and (3) any false certification that could give rise to action. The lender cited the government’s admission that it had not pursued the administrative actions available as proof of the immateriality of these alleged violations. Further, the lender claimed that the government’s complaint did not show how its alleged use of unqualified underwriters prevented the detection of inflated valuations during the underwriting process, or how inflated valuations were the predictable result of misconduct. presumed. Finally, the lender claimed that the certifications were not false or that the lender’s interpretation of HUD rules, regulations and guidelines was reasonable.

The government argued that it had sufficiently allege the “who, what, where, when and how” of its claim under the False Claims Act. The tribunal agreed with the government, finding that the government’s claims of falsity, materiality, causation and scienter were sufficient to survive the dismissal.

The court also dismissed the lender’s petition to dismiss the government’s claims under Articles 1006 and 1014 of the Financial Institutions Reform, Collection and Enforcement Act (FIRREA). The lender again argued that the government did not plead fraudulent intent and that the alleged misrepresentation was material. However, the court found that the government’s claims of “willful and conscious conduct” and forged signatures and other misrepresentations were satisfactory in arguing fraud for its FIRREA claims. The court also held that if materiality was not a condition required by §§ 1006 and 1014, the government had argued the importance “more than enough”.

Finally, the court ruled that the government sufficiently allege the government’s last two allegations that: (1) the lender had breached a contract with the FHA by not providing the protections against the risk of loss that it had agreed to provide; and (2) the lender breached its fiduciary duty to the FHA.

For the above reasons, the court dismissed the lender’s motion to dismiss. The case is United States of America v. James B. Nutter & Co., no. 4: 20-cv-00874 (WD Mo.).


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