May 29 (Bloomberg) -- A former Countrywide Financial Corp. manager whose fraud suit contributed to the mortgage industry’s $25 billion settlement with federal and state regulators received about $14.5 million for his efforts, his lawyers said.
Kyle Lagow, an appraisal manager for Countrywide from 2004 to 2008, claimed the company inflated the value of homes to support bigger loans, according to a statement today from Seattle-based law firm Hagens Berman Sobol Shapiro LLP. Charlotte, North Carolina-based Bank of America Corp. bought Countrywide in 2008 as mortgage defaults soared.
The complaint is among at least six whistle-blower lawsuits regulators included in the industry’s settlement of mortgage practices in February. Lagow sued the bank, the second-largest in the U.S. by assets, under the False Claims Act, charging that the company defrauded the U.S.
“The scheme both directly and indirectly cost the United States government billions of dollars and played an important role in the wave of foreclosures that fueled the financial meltdown of 2008,” Steve Berman, Lagow’s attorney, said in the statement.
The information that Lagow provided helped prompt a $1 billion settlement of Federal Housing Administration claims Bank of America announced earlier this year. The sum was included in the nationwide settlement. Rick Simon, a Bank of America spokesman, declined to comment on the award.
Lagow filed his whistle-blower complaint under seal in 2009, accusing Countrywide of violations of the U.S. False Claims Act. He said in the complaint filed in federal court that, since at least 2003, Countrywide inflated home appraisals to increase the value of loans it sold on the secondary mortgage market.
The inflated appraisals caused “numerous” false claims for payment made to the government for FHA-insured loans that went into default, according to the complaint.
Lagow worked as an appraiser at LandSafe Inc., a unit of Countrywide, in Plano, Texas, from June 2004 to November 2008, according to the complaint.
Employees of other banks have reaped millions of dollars in whistle-blower lawsuits tied to mortgages. Sherry Hunt, a quality-control manager at New York-based Citigroup Inc., collected $31 million as part of a $158.3 million settlement of FHA claims that the lender improperly declared loans fit for federal insurance.