Whistleblower Suit Accuses Lender Of Defrauding Government Out Of Millions

A whistleblower lawsuit has been bouncing around in a Brooklyn, New York Federal Court since May, 2005 in which four "whistleblowers" accused M & T Mortgage Corp., a subsidiary of M & T Banking Corp., of "knowingly and recklessly present[ing] fraudulent claims for millions of dollars to the United States Department of Housing and Urban Development (HUD) for ... mortgage insurance claims on properties ... after recklessly taking assignments of forged, and therefore, void mortgages thereon, after knowing that the mortgages were forged ..."

Among other accusations in the original lawsuit is the claim that inflated mortgages, for which no funds were actually advanced, were written and forged, and then assigned to banks for the purpose of defrauding HUD.

A recent (July 9, 2007) press release reports on what is apparently an updated development in the case:

• "The whistle blower suit stems from a case involving more than 50 mortgages owned by M & T on properties in Manhattan and Brooklyn that were fraudulently secured through HUD's 203K program for non-profits. A new admission by M & T's lawyer reveals there are nearly 400 fraudulent mortgages worth a half-billion dollars. Indeed, on Friday night, June 29, 2007, Todd Marcus, the attorney for M & T, admitted in a letter to the court that his client never made him aware of a secretive deal between the bank and HUD, in which HUD agreed to pay off not just these 50 fraudulent mortgages, but an astonishing total of 374 fraudulent mortgages worth some $500 million! Marcus previously represented to the court that M & T had no knowledge of any fraud in the origination of any of these loans. The deal between M & T was reached six years ago, according to a letter dated January 11, 2001. Although his law partner attended the meeting at which the deal was reached, Marcus told the court on Friday that he was not aware of the agreement or even the letter's existence until April of this year!"

The press release quotes the plaintiff's attorney, Peter S. Gordon, as saying "[The] admission to the court by M & T attorney Todd Marcus concerning these 50 fraudulent mortgages, as well as the 324 other ones, not only propels the whistle-blower lawsuit forward, but could also result in a number of criminal indictments."

For more, see:

1) Copy of Federal whistleblower lawsuit - Pugatch, et al. vs. M & T Mortgage Corp.

2) July 9, 2007 Press Release - M & T Bank Subject of Whistle Blower Lawsuit; Bank Accused of Defrauding Government Out of Millions From Forged Mortgages (from Earthtimes.org) or (from PR Newswire).

3) Go here for other posts on whistleblower suits involving alleged fraudulent mortgage lending practices.