Financial Fraud

A settlement has been reached to resolve False Claims Act allegations against Primary Residential Mortgage Inc and SecurityNational Mortgage Company.

The allegations arose from a lawsuit that claimed Primary Residential Mortgage Inc and SecurityNational Mortgage Company violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s Federal Housing Administration that did not meet applicable requirements.

On October 3, 2016, the Department of Justice announced, that as part of the settlements Primary Residential Mortgage Inc (PRMI) and SecurityNational Mortgage Company admitted they certified loans for FHA mortgage insurance that did not meet HUD underwriting requirements regarding borrower creditworthiness and eligibility.

PRMI admitted it endorsed loans that were not eligible for FHA mortgage insurance, including loans where:

• PRMI failed to document the assets used to qualify the borrower for FHA mortgage insurance and omitted liabilities owed by the borrower from the underwriting analysis;
• PRMI failed to document income used to qualify the borrower for FHA mortgage insurance;
• PRMI failed to verify the borrower’s earnest money deposit; and
• The borrower was delinquent on a second, pre-existing FHA mortgage.

SecurityNational admitted it endorsed loans that were not eligible for FHA mortgage insurance, including loans where:

• The borrower was delinquent on federal debt and had an unpaid court-ordered judgment;
• The borrower was four months delinquent on the underlying mortgage SecurityNational refinanced into an FHA loan;
• The mortgage loan amount exceeded HUD’s loan to value requirements;
• SecurityNational failed to document income used to qualify the borrower for FHA mortgage insurance; and
• SecurityNational failed to analyze the borrower’s delinquent credit history.

Primary Residential Mortgage Inc has agreed to pay the United States $5 million and SecurityNational Mortgage Company has agreed to pay $4.25 million.

A settlement reached to resolve False Claims Act Allegations against Branch Banking & Trust Company.

The allegations arose by lawsuit claiming Branch Banking & Trust Company violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.

On September 29, 2016, the Department of Justice announced that Branch Banking & Trust Company failed to comply with certain FHA origination, underwriting and quality control requirements. Branch Banking & Trust Company confessed that between January 1, 2006 and September 30, 2014, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s quality control requirements.  Additionally, during this period, Branch Banking & Trust Company quality control process did not satisfy certain FHA requirements. 

Branch Banking & Trust Company stated that the settlement will have no negative effect on Branch Banking & Trust Company's financial condition or results of operations as a result of previous accruals totaling $85 million. 

A former Monsanto executive who tipped the U.S. Securities and Exchange Commission (SEC) to misleading accounting surrounding sales of Monsanto’s Roundup herbicide has been awarded more than $22 million from the agency's whistleblower program.

The $22 million award is the second-largest total the SEC has awarded a whistleblower. The SEC credited the whistleblower’s “detailed tip and extensive assistance” with helping to stop a “well-hidden fraud” at Monsanto company. The award of exactly $22,437,800 was tied to an $80 million settlement between the SEC and Monsanto in February.

The attorney, who represented the whistleblower, said his client went to the SEC only after first trying to correct the issues internally.

“Company employees are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing. Without this whistleblower’s courage, information, and assistance, it would have been extremely difficult for law enforcement to discover this securities fraud on its own,” said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower.

So far, the SEC has awarded more than $107 million to 33 whistleblowers. The SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

A settlement has been reached to resolve False Claims Act Allegations against Marinello Schools of Beauty.

The allegations arose by a lawsuit claiming Marinello Schools of Beauty defrauded the federal government by falsifying student loan applications and exaggerating claims about enrollment and post-graduate employment.

According to the whistleblowers, Marinello and four of its executives engaged in six broad schemes, that included,  fabrication of high school diplomas, manipulation of student attendance records to make ineligible students eligible to receive financial aid, and the manipulation and misrepresentation of graduation and licensing and job placement statistics. 

The Department of Education also accused the school of not providing students with the necessary equipment to train, even though the school charged students between $2,500 and $2,750 for books and supplies.

Marinello’s attorney released a statement stating the school “strongly and categorically” deny the allegations made in the suit, calling them “utterly false” and adding that the settlement did not constitute an admission of wrongdoing.

The whistleblowers will receive a share of the settlement proceeds as a reward for prosecuting the case.

A settlement reached to resolve False Claims Act Allegations against My Pillow Inc.

The whistleblowers' share of the settlement will be $221,800.00.

The allegations arose by a lawsuit claiming My Pillow Inc knowingly failed to collect and remit New York use taxes on Internet and telephone sales to New York customers.

According to the Attorney General’s Office, from 2011-2015, My Pillow Inc failed to collect and remit approximately $537,000 in sales taxes on taxable sales made over the phone and through the Internet to New Yorkers and the Company intentionally made false records or statements concerning the sales taxes it was required to collect and remit.

“Out-of-state companies like My Pillow cannot shirk their obligations to New York," New York Attorney General Eric T. Schneiderman stated. "Companies that fail to collect and remit applicable sales taxes harm the state and local governments—something that cannot be tolerated.”

Based in Chaska, Minnesota, and founded in 2004 My Pillow Inc is a pillow manufacturing company.

A settlement has been reached to resolve False Claims Act Allegations against En Pointe Gov Inc, En Pointe Technologies Inc, En Pointe Technologies Sales Inc, Dominguez East Holdings LLC and Din Global Corporation.

The allegations arose by a lawsuit claiming En Pointe Gov Inc, En Pointe Technologies Inc, En Pointe Technologies Sales Inc, Dominguez East Holdings LLC and Din Global Corporation falsely certified that En Pointe Gov Inc was a small business in order to get contracts set aside for small businesses and underreporting sales under a General Services Administration (GSA) contract to avoid the payment of fees.

According to the government, between 2011 and 2014, the defendants were liable for false representations that En Pointe Gov Inc met Small Business Administration (SBA) requirements to get work that was only available to small businesses.  Specifically, the government claimed that En Pointe Gov Inc’s association with the other defendants rendered it a non-small business and, thus, ineligible for the small business set-aside contracts it obtained. Also, according to the government, the defendants caused En Pointe Gov Inc to file false quarterly reports with the GSA between 2008 and 2015 underreporting sales made under a GSA schedule contract that allowed other federal agencies to purchase from En Pointe.  En Pointe was supposed to return to GSA a percentage of its sales receipts and by allegedly misrepresenting the amount of its sales, En Pointe underpaid the fees that it owed to GSA.

The whistleblower's share of the settlement will be approximately $1.4 million.

A settlement reached to resolve False Claims Act Allegations against Harper Construction Company Inc.

The allegations arose by a lawsuit claiming Harper Construction Company fraudulently billed the government for work on several projects on military bases. Harper Construction Company intentionally used fake small disadvantaged businesses and then falsely certified to the government that it used legitimate small disadvantaged businesses.

According to the Department of Justice, the settlement involves four government contracts to construct facilities at Camp Pendleton and Camp Lejeune.  The contracts required Harper to subcontract a certain percentage of work to small disadvantaged businesses.  Such requirements arise from measures intended to ensure that a fair proportion of federal contract and subcontract dollars are awarded to small businesses.  It was alleged that Harper claimed it met this requirement when, in fact, it subcontracted with sham small disadvantaged businesses.  Also, Harper allegedly required the sham small businesses to pass through all of their work to an affiliated large business, Frazier Masonry Corporation.

The whistleblowers' share of the settlement will be $1,485,000. 

A settlement has been reached to resolve False Claims Act allegations against Paradigm Spine.

The allegations arose from a lawsuit that claimed Paradigm Spine caused health care providers to submit false claims to Medicare and other federal health care programs for spine surgeries by marketing the company’s coflex-F® device for surgical uses that were not approved by the U.S. Food and Drug Administration. Further, Paradigm caused false claims by giving false recommendations on how to code health claims for procedures involving the company’s coflex® device.

Paradigm Spine allegedly marketed coflex-F for surgical uses that were not approved by the FDA from 2011 to 2013 and allegedly provided health care providers with improper guidance on how to claim reimbursement for coflex from 2012 to 2015.

“A medical device manufacturer has a duty to be truthful about the approved uses of medical devices and the appropriate billing codes to use when seeking payment from the government,” said U.S. Attorney Rod J. Rosenstein.

The whistleblowers' share of the settlement will be approximately $105,300.

A settlement has been reached to resolve False Claims Act allegations against Deloitte Consulting LLP.

The allegations arose from a lawsuit that claimed Deloitte Consulting LLP submitted false claims under a General Services Administration contract.

General Services Administration gave Deloitte a contract for the provision of information technology services in 2000.  As part of the contract Deloitte was required to reduce the prices it charged the government if it offered lower prices to specific commercial customers during the course of the contract.  Allegedly, Deloitte failed to comply with the price reductions clause in its contract from 2006 and 2012; as a result, government customers paid more for Deloitte’s services than similar commercial customers.

“Contractors are expected to deal fairly with federal agencies when receiving taxpayer funds,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “As this settlement demonstrates, we will take action against those who knowingly fail to live up to the terms of their government contracts.”  

A settlement has been reached in Whistleblower case against Mountain States Contractors LLC.

The allegations arose by a lawsuit claiming Mountain States Contractors LLC, an affiliated company of Jones Brothers, submitted false claims for payment to the United States in connection with the United States Department of Transportation’s Disadvantaged Business Enterprise (“DBE”) Program.

The Department's Disadvantaged Business Enterprise (DBE) program's primary goal is to level the playing field by providing small businesses owned and controlled by socially and economically disadvantaged individuals a fair opportunity to compete for federally funded transportation contracts.

According to the United States Department of Justice, Mountain States and its affiliated company, HMA, as the prime contractors on a federally-funded construction projects, agreed that they would use DBEs to perform subcontracted work on the projects.  On several of these projects, Mountain States and HMA subcontracted with G&M Associates.  Even though G&M Associates is a certified DBE, evidence obtained during the investigation reveal that Mountain States had improperly “loaned” its employees to G&M to perform the DBE work on the projects.  The entities claimed these employees as DBE employees for purposes of obtaining payment for their work despite the fact that the prime contractors continued to provide their health insurance.  The prime contractors also improperly leased equipment to G&M, which the entities then counted against the projects’ DBE goals. A company executive alleges he was told to falsify documents to make it seem as if a minority contractor was doing the work.

The whistleblower will receive $500,000 as his share of the settlement.