IBERIABANK to pay $11.7 million fine, whistleblowers to get 20 pct
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IBERIABANK to pay $11.7 million fine, whistleblowers to get 20 pct

| Dec 12, 2017 | False Claims Act

“It is troubling when financial institutions, who have fiduciary responsibilities and are expected to conduct themselves as honest brokers, wrongfully exploit federally funded programs,” said HUD’s acting deputy inspector general as a major settlement was announced.

Louisiana-based IBERIABANK Corporation, IBERIABANK and IBERIABANK Mortgage Company agreed to a settlement with the Justice Department in which the organization will pay $11,692,149 to the U.S. to resolve False Claims Act allegations. IBERIABANK allegedly granted FHA mortgage insurance on mortgages that did not qualify. It also failed to follow mandatory program rules and maintain a quality control program regarding its underwriting practices.

The organization admitted the following facts as part of the settlement:

  • Between 2005 and 2014, IBERIABANK, a direct-endorsement lender in the FHA insurance program, wrongly certified mortgage loans for FHA insurance when they did not meet HUD standards and were therefore ineligible.
  • HUD was forced to pay claims on some of the wrongly certified mortgages. In some cases, the loan files generated by IBERIABANK contained inadequate documentation of items such as the borrower’s income, the borrower’s down payment and unresolved appraisal discrepancies.
  • IBERIABANK made incentive payments to underwriters and others in regards to some loans. Commissions for these loans were prohibited. In 2010, HUD notified IBERIABANK that it was in violation of that prohibition and the bank said it was no longer paying underwriter commissions. The bank, however, continued to make incentive payments through 2014.
  • IBERIABANK’s own audits and reviews found that the bank’s quality reviews were not being timely performed and didn’t comply with HUD requirements. However, it failed to report material violations of HUD requirements as required by law.
  • As a result of this conduct, HUD was forced to insure ineligible mortgages and subsequently incurred losses when claims were made on the insurance.

Today’s settlement should serve as a cautionary tale that [HUD] will continue to aggressively utilize [the False Claims Act] in pursuit of those that seek to undermine federal housing programs,” said the acting deputy inspector general.

Whistleblowers to receive 20-percent share of nearly $11.7 million

This settlement involved allegations brought forward by former employees of IBERIABANK in Little Rock, Arkansas. When private citizens report fraud against the government under the False Claims Act, they are entitled to a share in any recovery. In this case, the whistleblowers will divide 20 percent of the total settlement of $11,692,149 — or an estimated $2,338,429.80 apiece.