The Financial Institutions Reform, Recovery and Enforcement Act of 1989 has a little known provision that allows a whistleblower to report instances of bank and financial institution fraud.  The law allows private individuals to submit confidential claims to the Department of Justice.  The department can then investigate and use its enforcement powers to recover penalties or damages, or the department can refer the case to private cause to pursue the claim on behalf of the government.  Private citizens initiating such claims receive a bounty payment on any recovery.  The types of violations that may be reported under the FIRREA include false statements in connection with a credit or loan application, misrepresenting status to obtain a loan, or making false entries in the books of a financial institution. 

See article here:  http://www.acba.org/ACBA/pdf/TLJ/TLJv13-21-102111.pdf

Massachusetts Attorney General Martha Coakley has announced that she will oppose the inclusion of MERS (Mortgage Electronic Registration System) issues in the $20 billion mortgage settlement deal proposed by the Department of Justice. The deal would release the banks from legal claims in state investigations and lawsuits. Despite pressure from the Department of Justice to sign on to the settlement, several states have launched investigations into the use of the MERS system, which homeowner advocates and activists have claimed transferred mortgages, but never recorded them with local registries of deed. Therefore, the transactions, and thereby the mortgages are invalid, leaving the titles to homes “clouded.” The homeowner could then find themselves unable to sell or refinance properties without going to court.

New York Attorney General Eric Schneiderman shares Coakley’s concerns, and launched his own investigation into MERS and the mortgage issues in April. Schneiderman said he was shocked to learn the government’s multi-state probe lacked documents and had no witness depositions. Elizabeth Warren, a senior adviser to President Obama agreed, stating that the government may not have fully investigated the allegations of illegal seizures of homes.

 For more information see:  http://www.huffingtonpost.com/richard-zombeck/post_2212_b_910015.html

The new attorney general in New York, Eric Schneiderman, is taking an aggressive lead in the inquiries by state officials concerning banks overcharging state and local pension funds for foreign-exchange currency transactions over the past decade. Schneiderman is investigating Bank of New York Mellon Corp.’s (“BNY Mellon”) charging of New York pension funds for thousands of transactions. Similar investigations against BNY Mellon as well as State Street Corp. of Boston (“State Street”) are underway in Virginia, Florida, Massachusetts, North Carolina, Ohio, Oklahoma, and California. The Securities and Exchange Commission and the Department of Justice are also investigating the matter.

The investigations were sparked by a whistleblower group that includes Harry Markopolos, a financial fraud investigator who warned the SEC for years of the now infamous Bernie Madoff Ponzi scheme. In 2009, California announced a lawsuit against State Street, and this year, Virginia and Florida took over investigations in qui tam lawsuits filed in those states. The 1921 Martin Law would permit Schneiderman to sue on behalf of funds in other states. Additionally, the Martin Law allows him to pursue securities fraud without proving the intent to defraud. BNY Mellon met with prosecutors in Virginia at a mediation meeting on August 2, presumably to discuss the possibility of a settlement. The results of those discussions are not expected to be known until at least August 11.

 For more information see:  http://online.wsj.com/article/SB10001424053111904292504576484441822166386.html

A former loan officer for Bank of America has sued the company for taking money from borrowers who were seeking to refinance their mortgages and then failing to follow through by actually processing the applications. Linda Langlois, 58, began working for the Bank in August, 2009, and processed several applications for refinances daily, at $399 per borrower. She became suspicious when the potential borrowers starting calling her months later, checking into the status of their applications, when each application should have taken only 60 to 90 days to process. In many cases, nothing had been done on the applications, and the borrowers, already behind when originally seeking to refinance, were no longer qualified when their credit applications had to be run again. Further, according to Langlois, she and other loan officers were denied commissions to which they were entitled based on their business generation. Langlois’ suit alleges unfair and unlawful lending practices by the Bank, and seeks back wages and employee benefits as a result of her termination.

For more information, see: http://jacksonville.bizjournals.com/jacksonville/stories/2010/07/26/story6.html?b=1280116800%5e3697891&ana=e_vert