Once the JPMorgan settlement was set, U.S. Attorney General Eric Holder said that other banks would be next on the government’s radar. It looks like the Department of Justice didn’t leave much time for the dust to settle: A Wells Fargo executive has been added to a government lawsuit over “reckless” spending leading up to the financial crisis.
Wells Fargo Vice President Kurt Lofrano, who was in charge of the company’s quality control, has been named as an additional defendant in the government’s lawsuit against the bank. The government says that Lofrano’s job included self-reporting materially defective loans to the U.S. Department of Housing and Urban Development (HUD), according to the Wall Street Journal (WSJ).
In its filing in a Manhattan court, the government said Lofrano “concealed the bank's bad loans and shoddy underwriting to protect its enormous profits.” The government also said that Wells Fargo did not self-report a single bad loan to HUD before 2005. According to his LinkedIn profile, Lofrano has been Wells Fargo's vice president of credit risk since 2000.
The government has filed suit against Wells Fargo under the False Claims Act, seeking “hundreds of millions of dollars.” The lawsuit accused the financial services firm of having a “regular practice of reckless origination and underwriting” government-backed loans.
The complaint says that Wells Fargo claimed more than 100,000 loans met Federal Housing Administration standards. But in actuality, the suit says, more than half of did not. When these bad loans fell through, the government was forced to foot the bill.
At the time of the original suit, Wells Fargo claimed that the company had acted in “good faith and in compliance” with governmental regulations. The company had no comment to the WSJ about Lofrano’s addition to the suit.
For more about the government’s ongoing financial crisis litigation, check out these InsideCounsel stories: