Wells Fargo’s Lofrano Was ‘Critical’ to Fraud, U.S. Says
Wells Fargo & Co. (WFC) Vice President Kurt Lofrano played a “critical role” in helping the bank hide fraudulent home loans that cost the U.S. $189 million, the U.S. government claimed in a filing in Manhattan federal court.
Lawyers for the U.S. today asked a judge to let it add Lofrano to its fraud suit claiming Wells Fargo was reckless in underwriting mortgage loans and failed to report fraudulent and noncompliant loans to the U.S. Department of Housing and Urban Development. The fraud forced the Federal Housing Administration to pay $189 million in insurance claims on defaulted loans, the U.S. said.
Lofrano, who was in charge of self-reporting for Wells Fargo, “played a critical role in the bank’s decision not to report to HUD, as required, more than six thousand materially defective loans that Wells Fargo had falsely certified to HUD for FHA insurance,” the government said in the filing.
The U.S. sued Wells Fargo last year under the Federal False Claims Act and the Financial Institutions Reform, Reinvestment and Recovery Act of 1989. The government said it notified Wells Fargo Nov. 1 that it planned to add Lofrano to the case.
“Wells Fargo is very disappointed that the government is seeking to add Mr. Lofrano as a defendant in this civil case, Ancel Martinez, a spokesman for the San Francisco-based bank, said in an e-mail today. ‘‘Wells Fargo has not been presented with any facts or circumstances warranting this action nor has the government explained why it is even remotely appropriate to include Mr. Lofrano more than a year after first filing suit.’’
Martinez said Lofrano is a ‘‘well-respected team member’’ and that Wells Fargo stands by him ‘‘unequivocally.’’ He said the bank has denied all allegations of wrongdoing.
Lofrano worked as Wells Fargo’s vice president in charge of quality control from 2002 through 2010, according to the government. He is still with the bank, Martinez said today.
The suit against Wells Fargo is part of the government’s attempts to recover losses from defaulted mortgages insured by the FHA. In September, U.S. District Judge Jesse M. Furman, who’s overseeing the suit, threw out some claims against Wells Fargo, ruling they were filed too late.
Wells Fargo in April 2012 agreed to pay $5 billion as its share of a settlement of abusive foreclosure practice claims by the government. A federal judge in Washington rejected Wells Fargo’s argument that the agreement barred the government’s suit against Wells Fargo.
The case is U.S. v. Wells Fargo, 12-cv-07527, U.S. District Court, Southern District of New York (Manhattan).
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