(Reuters) – Utah-based lender Academy Mortgage Corp will pay $38.5 million to resolve claims it improperly originated and underwrote mortgages as part of a settlement of a whistleblower lawsuit that proceeded over the U.S. Department of Justice’s objections.
The settlement was announced on Wednesday by the Justice Department, whose approval was necessary to finalize a deal that Academy Mortgage struck with a former employee who sued the company on the government’s behalf under the False Claims Act.
The lawsuit, brought by former Academy Mortgage underwriter Gwen Thrower, accused the company of falsely certifying loans for Federal Housing Administration insurance that did not meet government requirements. Academy did not admit wrongdoing as part of the settlement.
She pursued the case even after the Justice Department sought unsuccessfully to dismiss it over objections, a step the department has increasingly taken under a 2018 policy encouraging it to seek the dismissal of “meritless” cases.
“She is an incredible person who stayed the course even when the government did not believe in her case,” Joshua Russ, her lawyer at Reese Marketos, said in a statement. “We need more people like Gwen Thrower in this world.”
As an award, Thrower will receive $11.5 million as her share of the settlement, the department said.
Lawyers for Academy Mortgage did not respond to requests for comment.
The settlement was announced a week after the U.S. Supreme Court heard arguments over whether and how the Justice Department can dismiss lawsuits brought by whistleblowers on the government’s behalf under the False Claims Act.
That law allows whistleblowers like Thrower to sue companies on the government’s behalf to recover taxpayer funds paid out based on false claims.
The cases are filed initially under seal so the Justice Department can investigate and decide whether to take over those cases. It chose not to do so in Thrower’s 2016 lawsuit, allowing her initially to litigate it herself.
But in 2017, the department sought to exercise its right under the False Claims Act to dismiss Thrower’s case, saying it would overly burden the government with discovery requests.
U.S. District Judge Edward Chen in 2018 rejected its request, finding the government had not meaningfully assessed the costs and benefits of allowing it to move forward.
The 9th U.S. Circuit Court of Appeals in 2020 rejected the government’s bid to appeal that ruling.
An agreement in principle to settle the lawsuit was struck in August ahead of a trial scheduled for Oct, according to court papers.
The case is U.S. ex rel Thrower v. Academy Mortgage Corp, U.S. District Court for the Northern District of California, No. 3:16-cv-2120.
For Thrower: Pete Marketos and Joshua Russ of Reese Marketos
For Academy Mortgage: Mitchel Kider of Weiner Brodsky Kider
U.S. Supreme Court weighs Justice Dept.’s ability to toss whistleblower cases
DOJ can’t use pre-trial appeals to tamp down whistleblower cases: 9th Circuit
U.S. to seek dismissal of ‘meritless’ whistleblower cases – memo
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