JPMorgan Chase Agrees to Settle False Claims Act Suit
According to the United States Attorney for the Southern District of New York, JP Morgan Chase has agreed to pay $614 million to settle allegations by a whistleblower in a qui tam action that it violated the False Claims Act. According to its website, New York-based JP Morgan Chase is a worldwide financial services firm with $2.4 trillion in assets.
Whistleblower Keith Edwards initially filed a qui tam case against JP Morgan Chase alleging that it knowingly originated and underwrote mortgage loans that were not eligible for mortgage insurance and guarantees by the Department of Housing and Urban Development’s Federal Housing Administration (“FHA”) or the Department of Veterans Affairs (“VA”). The government later joined the whistleblower’s qui tam action.
In its Complaint, the government alleged that, between 2002 and the present, JPMorgan Chase approved thousands of FHA mortgage loans and hundreds of VA mortgage loans that were not eligible for either FHA or VA insurance because the loans did not meet the agencies’ underwriting criteria. According to the government, JP Morgan Chase falsely certified that the mortgage loans were qualified for either FHA or VA insurance and the submission of those certifications constituted false claims in violation of the False Claims Act. When borrowers defaulted on the unqualified loans, the VA and FHA incurred substantial losses when they were required to pay mortgage insurance claims on the unqualified mortgages.
In the settlement, JPMorgan Chase admitted that it submitted false certifications to the VA and FHA that induced the agencies to provide government insurance for thousands of loans that did not meet the agencies’ eligibility requirements and ultimately resulted in losses to the government when the borrowers defaulted. In addition, JP Morgan Chase admitted that it failed to report hundreds of loans that it had identified as deficient or fraudulent in a self-audit to the agencies.
The settlement requires JPMorgan Chase to pay $614 million within thirty days. The whistleblower will receive a percentage of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.
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