A whistleblower will be paid $63.9 million for providing tips that led
to JPMorgan Chase & Co's agreement to pay $614 million and tighten
oversight to resolve charges that it defrauded the government into insuring
flawed home loans. The payment to the whistleblower, Keith Edwards, was
disclosed on Friday in a filing with the U.S. district court in Manhattan
that formally ended the case.
In the February 4 settlement, JPMorgan admitted that for more than a decade
it submitted thousands of mortgages for insurance by the Federal Housing
Administration or the Department of Veterans Affairs that did not qualify
for government guarantees. JPMorgan also admitted that it had failed to
tell the agencies that its own internal reviews had turned up problems.
The government said it ultimately had to cover millions of dollars of losses
after some of the bank's loans went sour, resulting in evictions and
"There were a lot of bad loans made during the financial boom, and
the United States taxpayer was left holding the bag through the VA and
FHA loan programs," Edwards' lawyer, David Wasinger, said in
a phone interview. "Hopefully the settlement sends a message to Wall
Street that this conduct is not allowed, and that in the future it will
be held accountable." Edwards could not immediately be reached for comment.
About $56.5 million of Edwards' award concerns the FHA portion of the
case, and $7.4 million concerns the VA portion. Wasinger declined to discuss
his legal fees.
Edwards, a Louisiana resident, had worked for JPMorgan or its predecessors
from 2003 to 2008, and had been an assistant vice president supervising
a government insuring unit. He originally sued in January 2013 under the
federal False Claims Act, which lets individuals sue government contractors
and suppliers for allegedly defrauding taxpayers. The U.S. Department
of Justice later joined as a plaintiff.
Whistleblowers can recover portions of False Claims Act settlements, which
often grow if the government gets involved. Wasinger also represented
Edward O'Donnell, whose tips led to an October 2013 jury finding that
Bank of America Corp was liable for fraud over defective mortgages sold
by its Countrywide unit. The government is seeking $2.1 billion of penalties
in that case. Citigroup Inc, Deutsche Bank AG and Flagstar Bancorp Inc
were among lenders that settled False Claims Act mortgage cases in recent years.
The Justice Department in December said it had paid out roughly $1.98 billion
of whistleblower awards from 2009 to 2013.
The case is U.S. ex rel. Edwards v. JPMorgan Chase Bank NA et al, U.S.
District Court, Southern District of New York, No. 13-00220.
This article was originally reported by Jonathan Stempel in New York