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Feb 24, 2012 by |

Citigroup to Pay $158M in Whistleblower Fraud Claim Over Insurance for Mortgages

Citigroup to Pay $158M in Whistleblower Fraud Claim Over Insurance for Mortgages

Citigroup Inc., a Manhattan-based financial services corporation and the third-largest US bank, will pay $158 million in a settlement regarding US civil claims that Citigroup defrauded the government into insuring thousands of high-risk home loans through its CitiMortgage unit. This lawsuit was brought under the False Claims Act by whistleblower Sherry Hunt, a CitiMortgage employee in Missouri.


Among the various allegations against Citigroup was the government accusation that Citigroup falsely certified that several of its loans qualified for insurance from the Federal Housing Agency. Investigators into the issue say that over 30% of the nearly 30,000 mortgage loans that CitiMortgage underwrote or made since 2004 have defaulted. As a result, the U.S. Federal Housing Agency lost almost $200 million in insurance claims.

Attorneys representing the U.S. government say that despite previous audits that found “numerous defects” in CitiMortgage’s overseeing of loans in default, the quality control deteriorated. They further allege that CitiMortgage pressured and enticed workers – particularly quality control personnel – to ignore problems and potential risks regarding loans and defaults. In one instance, personnel who ignored problems were said to have been rewarded with higher salaries. In another example, the company held a special award ceremony recognizing workers who challenged defects that were reported by the quality control unit. Furthermore, the complaint holds that CitiMortgage and its fraud units failed to report mortgages that defaulted early or had other signs of mortgage fraud.

This settlement payout comes just after Citigroup’s agreement to pay as much as $2.22 billion related to last week’s $25 billion U.S. settlement with five mortgage servicers regarding allegations of foreclosure abuses. The five banks in that settlement were:  Bank of America, Wells Fargo & Co., JPMorgan Chase & Co, Citigroup, and Ally Financial.

Whistleblowers are entitled to 25% of rewards in cases such as these. For more information on whistleblower practices and rewards in California and for a free and confidential consultation with a Whistleblower Attorney in California, contact us.

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