by Ben Vernia | August 3rd, 2011
On July 29, the Department of Justice announced that it filed a civil suit against a Chicago-based mortgage company and its president. The gist of the case – bringing to mind the saying about the right hand not knowing what the left hand is doing – is that the after the president was indicted in 2005 for fraud, he and the company lied about his status in submissions to HUD. According to DOJ’s press release:
The United States has filed a civil lawsuit against Robert S. Luce, founder and president of MDR Mortgage Corp., a mortgage lending business located in Palatine, Ill., the Justice Department announced today. MDR participated in mortgage insurance programs administered by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA). The United States’ complaint seeks recovery under the False Claims Act and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
According to the complaint filed today in the U.S. District Court for the Northern District of Illinois, Luce was indicted on April 7, 2005, for mail fraud, wire fraud, obstruction of justice and making false statements. Between April 2005 and October 2008, Luce represented to HUD, and caused MDR employees to represent to HUD, that he was not under criminal investigation or indictment. These statements were false at the time they were made, and Luce knew they were false at the time he or other MDR employees made them. Because Luce was under indictment, MDR was not entitled to originate mortgage loans under FHA requirements. Yet, MDR originated more than 90 FHA-insured loans that later defaulted.
HUD was required to pay more than $1.6 million in insurance claims to holders of the defaulted mortgage notes, as well as costs and expenses on these loans. MDR is no longer participating in the HUD insurance programs.
The case was not brought by a whistleblower, and instead was part of the administration’s Financial Fraud Enforcement Task Force.
