Wells Fargo’s bid to block the government’s most recent charges against it stemming from the mortgage crisis—primarily alleged violations of the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”)—took a blow earlier this month when a court ruled that its $5 billion contribution to the multi-bank, $25 billion settlement in April over foreclosure practices did not preclude the new charges. Previous coverage of Wells Fargo’s attempt to preclude the litigation is here. U.S. District Judge Rosemary Collyer ruled that the settlement did not bar all civil or administrative claims against Wells Fargo, including those under the False Claims Act, paving the way for prosecutors in the United States Attorney’s Office for the Southern District of New York to move forward with the suit.
Collyer’s decision left the bank’s lawyers, led by teams from Fried Frank and K&L Gates, vehemently protesting the court’s interpretation of contested language in the settlement. According to Collyer, that language indicated the government retained the right to sue Wells Fargo for material violations of Housing and Urban Development/ Fair Housing Administration (“HUD-FHA”) requirements, only barring claims based on false annual certifications regarding the bank’s compliance with those requirements. Collyer stated that the current charges do not fall under the precluded claims, finding Wells Fargo ignored the plain language of the settlement in coming to a mistaken interpretation. As a result, the government can bring allegations under the False Claims Act in the current suit.
Collyer, however, did not address the pending case directly. The court for the Southern District of New York will still have to make a final determination as to whether the prosecution has pled barred claims as the case moves forward.
The defense team has strongly attacked the government’s charges in its court filings, framing the current charges as part of a broader effort to avoid honoring FHA and HUD commitments to insure thousands of defaulting mortgages as it attempts to wrongly implicate the financial industry for the defaults.
The prosecution has not yet filed its response to Wells Fargo’s motion to dismiss the current suit.
[…] From the Bench: Wells Fargo’s Contribution to Mortgage Settlement Does Not Bar Some Future Claims […]