Whistleblower Lawsuit Against Wachovia, Owned by Wells Fargo, Unsealed in Federal Court
Wells Fargo, which purchased failing bank Wachovia, faces a newly-unsealed whistleblower lawsuit dating back to 2011, which alleges that Wachovia’s investment bank violated accounting rules and internal controls for short-term profit.
Two whistleblowers, including a former employee of Wachovia, filed the qui tam lawsuit on behalf of the federal government, because the bank defrauded US regulatory agencies which helped bail out several financial institutions after the economic crash in 2008.
Wells Fargo now faces the whistleblower lawsuit, because the bank purchased Wachovia in 2008. This is the latest in a string of qui tam lawsuits against banking institutions for their roles in the financial US meltdown.
In 2006, Wachovia purchased a mortgage company, Golden West Financial, which reportedly had poor internal controls and inadequate underwriting practices. In 2007, Wachovia began reporting billions of dollars in losses related to subprime mortgage investment, which led to Wachovia’s failure and their eventual purchase by banking giant Wells Fargo.
The whistleblower lawsuit states that, although Wachovia allowed the mortgage institution’s unsound banking practices to continue, the Charlotte-based bank accepted federal bail-out money after making false claims about its financial statements and concealing “mismanagement and fraudulent practices.”
The government “should do right by the U.S. taxpayer and recover monies from Wachovia and Wells Fargo under the U.S. False Claims Act for having bailed them out under outrageously false and fraudulent pretenses,” the complaint states.
According to the whistleblower suit, Wachovia routinely placed loans in an off-the-balance-sheet entity called the College Street Funding Master Trust, which was internally known as the Black Box. The whistleblowers, who worked with Wachovia’s and Golden West Financial’s accounting departments, claim that the Black Box was specifically created to skirt regulatory constraints on the amount of loans that the bank count keep on its balance sheets.
Other major banks, including Bank of America, CitiGroup, and Chase, have faced mortgage fraud and whistleblower lawsuits in recent years.
What is a Whistleblower Lawsuit?
“Qui Tam” are the first words of a Latin clause referring to the plaintiff as “one who sues as much for the state as for himself or herself.” These private citizens, known as “relators” or “whistleblowers,” relate information to the government and share in any money recovered.
It is a provision of the Federal Civil False Claims Act that allows a private citizen to file a suit, in the name of the U.S. Government, charging fraud by government contractors and other entities that receive or use government funds.
Common whistleblower actions include:
- Health care fraud, including Medicare and Medicaid fraud,
- defense contractor fraud, and
- other kinds of fraud
Qui tam lawsuits have been, and continue to be, a very effective and successful tool in combating government procurement and program fraud. To bring a qui tam action under the statute, an individual must have personal knowledge and actual evidence of fraud. Successful qui tam claimants will be rewarded a portion of the money the government recovers.
Bolstered by amendments passed by Congress in 1986, the law has armed private citizens who have independent and direct knowledge of fraud, with a weapon to prosecute government contractors and others who are defrauding the Government.
The Strom Law Firm Protects Whistleblowers in South Carolina
If you have first-hand knowledge of government fraud occurring at your place of employment or your doctor’s office, including Medicaid fraud, the attorneys at the Strom Law Firm can help protect your rights. In order to help the government provide the best possible services, Medicare and Medicaid fraud must be reported as soon as possible. The attorneys at the Strom Law Firm understand the complexity of qui tam and whistleblower suits, and we offer free, confidential consultations to discuss the facts of your case. Contact us today.803.252.4800
