(Updates with excerpt from filing in fourth paragraph.)
July 29 (Bloomberg) -- MDR Mortgage Corp.’s founder and president, Robert S. Luce, was sued by the U.S. Justice Department for alleged False Claims Act violations tied to defaulted loans insured by the Federal Housing Administration.
Luce was responsible for falsely representing to the Department of Housing and Urban Development that he wasn’t under criminal investigation or indictment while the company originated loans from April 2005 to October 2008, the Justice Department said in a complaint filed today in federal court in Chicago. Luce was under indictment for mail fraud, wire fraud and obstruction of justice in an unrelated matter at the time, the U.S. said.
MDR, based in Palatine, Illinois, was barred by FHA regulations from originating mortgage loans because of the indictment, the U.S. said. MDR originated more than 90 FHA- insured loans that later defaulted and HUD had to pay more than $1.6 million in insurance claims, the U.S. said.
“For the purpose of fraudulently obtaining HUD mortgage insurance for each of these loans, MDR knowingly created false records, made false statements, and submitted the false records and statements to HUD and FHA,” according to the complaint.
Luce pleaded guilty to obstruction of justice in the criminal case in July 2008 and MDR “voluntarily ceased” involvement in HUD loans two months later, the U.S. said.
Luce will “vigorously defend” the lawsuit, his lawyer, Kenneth Cunniff, said in a phone interview.
“Mr. Luce has been negotiating with the government for months,” Cunniff said. “It’s our position that there was no loss to the government as a result of the statements that were made.”
The civil lawsuit seeks recovery under the False Claims Act and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act.
“Mortgage lenders who lie in order to reap the benefits of these insurance programs, as is alleged here, undermine the integrity of these programs and misuse taxpayer funds that are meant to support single-family housing,” Tony West, assistant U.S. attorney general, said in a statement today.
The lawsuit is U.S. v. Luce, 11-cv-05158, U.S. District Court, Northern District of Illinois (Chicago).
--With assistance from Greg Chang in San Francisco. Editors: Fred Strasser, Charles Carter
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