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Citigroup Settles Mortgage Fraud Lawsuit for $151 Million, Whistleblower to Collect $31 Million


Last Wednesday, U.S. District Judge Victor Marrero approved a settlement in which Citigroup Inc., the nation’s third-largest bank, agreed to pay $158.3 million to settle claims that it defrauded the federal government by misleading the government into insuring high-risk home mortgages.

The settlement  resolves a lawsuit against Citigroup brought by a whistleblower under the federal False Claims Act. The whistleblower, Ms. Sherry Hunt, a quality control manager at Citibank, is entitled to collect $31 million of the settlement amount for her role in exposing the fraudulent conduct.

According to the lawsuit, Citigroup falsely certified that many of its mortgage loans qualified for insurance under the FHA program of the Department of Housing and Urban Development (HUD). Among Hunt’s allegations was the claim that Citibank employees erased the records of approximately 1,000 loans that a Citibank quality-control team had designated as potentially fraudulent. In violation of HUD requirements, these defects that the quality control identified were not included in reports to the government.

According to government investigators, 30% of the HUD-insured mortgaged made or underwritten by Citibank since 2004 have gone into default, resulting in a nearly $200 million loss to the government. In its complaint against Citibank, the government noted that “a substantial percentage of those claims resulted from loans that were ineligible for FHA insurance and never should have been insured.”

As part of the settlement agreement, CitiMortgage, a subsidiary of Citibank “admits, acknowledges and accepts responsibility” for having misled the government into insuring high-risk home mortgages.

Since the False Claims Act was amended in 1986, more than $34 billion of fraud against the government has been recovered.  According to the U.S. Attorney’s office in the Southern District of New York, the $158.3 million settlement is the second-largest amount ever paid in a mortgage fraud case.

The whistleblower, Ms. Hunt, is still employed by Citigroup and is now a vice president of quality assurance.  Commenting on her role as a whistleblower, Ms. Hunt said:

 “I had to do something to stop them . . . I felt that if I were brave enough to come forward and take a stand, then maybe others would, too.”

The Employment Law Group® law firm focuses on the area of whistleblower protection law, and has helped many clients come forward to file suit against employers that fraudulently billed the U.S. government and has helped whistleblowers protect their careers.

Department of Health and Human Services Announces Record-Breaking $4.1 Billion in Healthcare Fraud Recoveries in 2011

Last week, the Department of Justice (DOJ) and the Department of Health and Human Services (HHS) announced that the federal agencies succeeded in recovering $4.1 billion in fraudulent healthcare payments in 2011.  This figure – detailed in the annual Health Care Fraud and Abuse Control Program (HCFAC) report – is a record high, with recovered funds having increased nearly 50% since 2009.

According to the report, between 2009 and 2011 the federal government collected $7.20 for every $1.00 spent on fighting fraud. This is an increase from the period between 1997 and 2008 in which the government recovered $5.10 for every dollar spent on countering fraud.

Officials attributed the rise in recoveries to increased efforts to screen healthcare providers by conducting site visits to ensure that healthcare providers deemed to be moderate fraud risks have a legitimate office before these providers can be enrolled to participate in Medicare and Medicaid. Additionally, those providers considered to be higher risks are now subject to criminal background checks.

According to the report, approximately $2.4 billion of the recovered funds were recovered by cases brought under the False Claims Act (FCA).  The FCA allows individual citizens to bring charges in the name of the U.S. government against parties who fraudulently receive government funds. The qui tam provision of the FCA allows individuals who bring such lawsuits to receive 15 to 30% of the total amount funds recovered.

Among the common types of fraudulent health care claims, the HCFAC report details:

“unlawful pricing by pharmaceutical manufacturers, illegal marketing of medical devices and pharmaceutical products for uses not approved by the FDA, Medicare fraud by hospitals and other institutional providers, and violations of laws against self-referrals and kickbacks.”

The nearly $2.4 billion recovered under the FCA in 2011 marks the second consecutive year in which the government has recovered more than $2 billion in FCA claims. Since the beginning of 2009, HHS has recovered in excess of $6.6 billion in federal health care spending under the FCA. It is estimated that there is $60 billion to $90 billion in Medicare fraud every year.

According to Attorney General Eric Holder, such fraudulent practices “harm all of us – government agencies and programs, insurers and health care providers, and individual patients.”

The Employment Law Group® law firm focuses in the areas of employment law and whistleblower protection law, has helped many clients file suit against employers that fraudulently billed the U.S. government, and has established favorable precedents under the retaliation provision of the False Claims Act.

OSHA Fines Wal-Mart $365,000 for Failing to Provide Employees at Rochester Store with Proper Training and Safe Working Conditions

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The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) last week cited a Wal-Mart Stores, Inc. (Wal-Mart) supercenter in Rochester, NY for 24 repeated and serious violations of workplace safety and health standards. Following an OSHA inspection, OSHA proposed that Wal-Mart pay $365,500 in fines.

The inspection conducted by OSHA’s Buffalo Area Office found that due to fall hazards and obstructed exit routes, employees would be unable to perform proper maintenance on a trash compactor. The inspection also found that employees received no training on how to use personal protective equipment and training on hazardous chemicals in the workplace. These repeat violations resulted in 10 citations for Wal-Mart.

Additionally, OSHA cited the same Wal-Mart store for 14 other serious violations such as failing to provide employees with proper training on how to handle exposure to blood and body fluids, exposing workers to confined space hazards, allowing a trash compactor to be operated with its door open, and displaying an illegible emergency exit sign.

OSHA area director Arthur Dube stated, “The sizable fines proposed here reflect not only the seriousness of these conditions but the fact that several of them are substantially similar to hazards identified at nine other Wal-Mart locations in New York and eight other states.”

The Employment Law Group® law firm has an extensive whistleblower practice and represents employees nationally who have been victims of retaliation.

Rowan Business Forms Ordered by OSHA to Pay Over $83,000 for Terminating Whistleblower Truck Driver Who Reported Hazardous Conditions

Last week the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) ordered Rowan Business Forms, a Salisbury, North Carolina-based commercial printing company, to reinstate and pay over $83,000 in back wages and compensatory damages to a former truck driver after OSHA found reasonable cause to believe that Rowan violated the whistleblower provision of the Surface Transportation Assistance Act (STAA).

The former truck driver alleged that Rowan retaliated against him after he raised concerns in 2009 that the company’s dump truck was leaking brake fluid. According to the former employee, the leaking brake fluid almost caused him to hit a car because the brake pedal went all the way down to the truck floor. He reported this incident to his supervisor and was told by the company manager that the leak would be repaired before the next delivery. However, when the truck driver discovered that the repair had not been performed, he refused to drive the truck because he was concerned about his safety. The company terminated him the following day.

The Employment Law Group® law firm has an extensive whistleblower practice and represents employees nationally who have been victims of retaliation.

Former Executive Alleges that GE Retaliated against Him for Objecting to Company’s Efforts to Influence Iraqi Officials

Khaled Asadi, a former General Electric executive based in Iraq, filed a lawsuit in federal court in Houston, Texas, against General Electric (GE) on February 3, 2012, alleging that the company retaliated against him after he raised concerns about potential internal corruption. Asadi states in his complaint, that he was coerced to step down from his position at GE because he objected to a decision that he believed could damage GE’s international reputation and may even violate the Foreign Corrupt Practice Act.

Asadi claims that in 2010, GE hired a woman who could influence a senior Iraqi official to help GE obtain contracts from the Iraqi Ministry of Electricity. After he raised the issue with his supervisor and the GE ombudsperson, GE assigned Asadi an “extremely negative and troubling performance review” and forced him to step down from his position, which he had held since 2006.

Asadi brought his suit under the Anti-Whistleblower Retaliation provisions of the Securities Exchange Act, which protects employees of publically traded companies who report unlawful behavior by their employers. Asadi is seeking reinstatement to his prior position at GE, lost wages, and  attorney fees and costs.

A spokesman for GE denied the accusation and stated, “Mr. Asadi’s termination had absolutely nothing to do with any allegations he is making. Regarding our contracts in Iraq, GE followed all requirements and his allegations are false.”

The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.