According to news reports, Taylor, Bean & Whitaker Mortgage Corp.’s bankruptcy trustee is poised to settle a False Claims Act lawsuit brought by the U.S. Justice Department. The lawsuit alleged that Taylor Bean submitted fraudulent mortgages to the Federal Housing Administration. The settlement is expected to about $320 million.
Taylor Bean, which originated $17 billion in home loans in the first half of 2009, filed for bankruptcy later that year as a $3 billion scheme involving fake mortgage assets unraveled. Six Taylor Bean executives were convicted and jailed for their roles in the fraud, including former chairman Lee Farkas, who is currently serving a 30-year prison term for conspiracy and fraud.
Two former employees of Home America Mortgage Inc., a mortgage lender that Taylor Bean acquired in 2009, sued the company in 2006 under the False Claims Act, which permit private parties to sue for false or fraudulent claim on behalf of the government and to share in any recovery. The final sum paid by Taylor Bean’s estate will be a percentage of the $320 million settlement based on the total value of claims against it in bankruptcy proceedings, which could be as low as 2.5 cents on the dollar.
There was no comment from the Justice Department on this settlement as terms were still being finalized amongst the parties.
The case is captioned United States ex rel. Comfort Friddle and Stephanie Kennedy v. Taylor, Bean & Whitaker Mortgage Corp., et al., Civ. No. 06-3023-JEC (N.D. Ga.)