Google the phrase “bank fraud” and almost everything you find is about crimes committed against banks. As long as we have had banks, there have been people trying to figure out a way to steal from those banks. This post is different – here we discuss crimes, fraud and misconduct committed by the bank. We also look at how the government has developed several bank fraud whistleblower programs designed to assist the public and insiders in stopping this type of fraud.
Today, when we talk about bank fraud committed by banks, most people think of Wells Fargo. Bank of America, Countrywide and HSBC also come to mind. Before talking about bank fraud whistleblower programs, let’s look at some of the biggest recent bank fraud cases in which the bank was the perpetrator.
Wells Fargo – Bank Fraud on Steroids
There is no one single Wells Fargo scam that stands out. It’s seems like every month there is a new scam involving America’s third largest bank.
Most recently, the most talked about scam is the millions of phony accounts created by Wells Fargo. The bank was caught encouraging employees to take customers’ money from actual accounts and open new accounts. The new accounts generate fees, of course. The bankers that participated in this scam made nice bonuses while unsuspecting customers footed the bill.
The bank paid $185 million in fines for the phony account scam and is facing numerous lawsuits from customers.
In 2016, Wells Fargo paid $5 billion to settle charges that it encouraged homeowners to take out loans they could never afford. Later they would force people out of their homes, often without improper, forged or no paperwork. They also failed to offer modifications.
The modification failure is important. After the banking crisis in 2008, Wells Fargo received $36 billion in bailout money from Congress (meaning our tax dollars). There were few strings on that money although banks were told to help struggling homeowners by offering loan modifications. They obviously didn’t.
The bank was also accused of giving 800,000 car buyers insurance they didn’t want or need. Those extra payments caused over 200,000 car owners to become delinquent (thus ruining their credit). 25,000 people had their cars repossessed. The bank later apologized.
Speaking of car repossessions, the bank also illegally repossessed over 400 cars of active duty servicemembers. While our fighting men and women were overseas defending our freedom, Wells Fargo was saying “Thank you for your service” by improperly taking their cars.
Wells Fargo is an equal opportunity thief. By that we mean they didn’t just rip off consumers and our soldiers. They also ripped off Uncle Sam. In 2016 they agreed to pay the government another $1.2 billion, this time for residential mortgage underwriting violations. The bank had falsely certified thousands of bad mortgages as being eligible for FHA underwriting.
The list goes on and on.
Bank of America and Countrywide
Wells Fargo isn’t the only bank to have ripped off Uncle Sam. Bank of America and Countrywide were even bigger thieves. [We served as counsel for two of the bank fraud whistleblowers who helped the government collect a record $16.65 billion. The whistleblowers shared over $150 million in rewards.]
HSBC – Supporting Terror Worldwide
While our military works tirelessly to combat terrorism worldwide, Europe’s biggest bank ($2.5 trillion) was accused by the U.S Senate of “exposing the US financial system to illegal funds from Mexican drug cartels, the North Korean and Cuban regimes, and Saudi Arabian terrorists.”
The bank apologized and admitted it failed to meet regulators’ standards.
In connection with money laundering for the Mexican drug cartels, HSBC later paid $1.2 billion.
Rate Manipulation – The Forex & LIBOR Scandals
Forex means foreign currency exchange. Five major banks – Barclays, JPMorgan Chase, UBS, Citi and the Royal Bank of Scotland had the honors of paying $5.7 billion after being accused of rigging these rates. Who got hurt? Businesses and consumers, of course.
Prices for both the euro and U.S. dollar were rigged by a group of traders who called themselves the cartel.
No sooner was the ink dry on the settlement when a group of investors claimed that all five banks were still at it along with Bank of America and HSBC. The only big bank seemingly missing was Wells Fargo.
The other major rate rigging scandal is LIBOR. Short for the London Interbank Offered Rate, it is the benchmark that often sets interest rate for home mortgages, student loans and borrowings by municipalities. Experts say the manipulation cost American borrowers billions of dollars.
Barclays was later fined $360 million by the United States. UBS paid $1.5 billion. Deutsche Bank paid $2.175 billion. Other banks and companies paying fines for their involvement in the LIBOR rate fixing scandal included Rabobank, Royal Bank of Scotland, JPMorgan Chase, Lloyds and Citi.
There are so many more bank fraud stories, in fact almost every reader has their own story or knows a family member that was ripped off by a bank.
Bank Fraud Whistleblower Rewards
Many of the largest bank fraud prosecutions were started by a whistleblower, someone on the inside. While homeowners often call to tell us about forged mortgage documents or an illegal foreclosure, they simply don’t have the requisite inside knowledge to show a pattern and practice of fraud.
Assuming you have inside knowledge, there are several bank fraud whistleblower programs available, many of which pay rewards.
FIRREA Whistleblower Rewards
FIRREA is the Financial Institutions Reform Recovery and Enforcement Act. Passed by Congress after the savings and loan crisis, this law was originally used to prosecute bank officers and customers whose actions caused many banks to fail.
Prosecutors love the law because it has a long 10-year statute of limitations and a low burden of proof. Bank whistleblowers love it because another law (FIAFEA) allows whistleblowers to receive an award of up to $1.6 million paid out of any FIRRREA fines.
Collecting a bank fraud whistleblower reward under FIRREA involves filing a declaration under seal with a designated person within the Department of Justice. There are very specific procedural rules including the need to have facts and examples.
While the case is being investigated, it remains under seal meaning secret. That means you are not free to tell others about the case or even disclose its existence.
False Claims Act and Bank Whistleblower Rewards
The False Claims Act dates back to 1867 and the U.S. Civil War. It has been used to pay billions in rewards. For a bank whistleblower to receive an award, there must be a financial loss to the government.
Some of the largest whistleblower rewards have gone to bank fraud whistleblowers. This includes whistleblowers who reported mortgage underwriting fraud involving Bank of America, Citi and JPMorgan Chase.
Since the VA, HUD, the FHA, Fannie Mae and Freddie Mac back most residential mortgage loans, a bank that fails to follow underwriting or servicing rules applicable to home mortgages is probably committing a violation of the False Claims Act.
The Act permits triple damages plus high penalties and legal fees. Whistleblowers can collect 15% to 30% of these monies and without a cap.
Collecting a False Claims Act reward requires a lawyer. You must file a sealed lawsuit in federal court in the name of the United States. While the case is being investigated it remains under seal.
Once the investigation is complete, the case can either be prosecuted by the Justice Department or by the whistleblower’s own lawyer.
Taking on a big bank is no easy task. It can require 1000’s of hours of work and be expensive. Make sure your lawyer is willing to prosecute if the government declines but finds that there is a case.
SEC Whistleblower Program
Most bank holding companies are public. That means they have stringent securities rules they must follow. These rules require proper books and records and adequate disclosures to shareholders.
The recent SEC prosecution of Deutsche Bank is proof that the SEC whistleblower program can be used by bank fraud whistleblowers to collect rewards.
In a shocking development, whistleblower Eric Ben-Artzi said he is declining his share of a $16.5 million SEC whistleblower reward because of the SEC’s failure to punish the bank’s top management.
Collecting an SEC whistleblower reward involves filing a claim with the SEC. The claim must be supported with detailed facts.
More Information for Bank Fraud Whistleblowers
The bank fraud whistleblower lawyers at Mahany Law have helped clients collect over $100 million in rewards. Whether you are a bank or mortgage company whistleblower, we can help.
Our services are offered worldwide, and we gladly accept cases on a contingent fee basis meaning we don’t get paid unless you get paid. All inquiries are kept confidential too.
To learn more, please visit our FIRREA whistleblower, False Claims Act and SEC whistleblower pages. We also have hundreds of stories on our searchable blog.
Ready to see if you qualify for a reward? Contact us online, by email *protected email* or by phone 414-704-6731 (direct).
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