JPMorgan whistleblower gets $63.9 million in mortgage fraud deal

Fri Mar 7, 2014 3:48pm EST

A sign is seen on the Canary Wharf offices of JP Morgan in London September 19, 2013. REUTERS/Neil Hall

A sign is seen on the Canary Wharf offices of JP Morgan in London September 19, 2013.

Credit: Reuters/Neil Hall

(Reuters) - 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 foreclosures nationwide.

"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.

(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz and Amanda Kwan)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (6)
Watchdog77 wrote:
I hope nobody goes to jail – I am sure they are very sorry, adn won’t do it again.

Mar 07, 2014 3:14pm EST  --  Report as abuse
SunnyDaySam wrote:
wow! We need to expand this – a percentage of the recovery of any fraud related fines and total protection of whistleblowers. This will have the corporatists reconsidering any unlawful conduct: one employee can bring them down. Actually, this and government regulations are the only things holding them back.

Mar 07, 2014 3:34pm EST  --  Report as abuse
nas10 wrote:
Edwards , they say is a whistle blower . He told on the people on Wall Street . Members of the House as well as the POTUS , probably lost a lot of $$$$$$$$ . BUT then there is Snowden , he told the world just how CORRUPT this administration is and he is labled a traitor .
It just does not make sense to me . Reward one and then punish another for basically doing the same thing .
SNITCHES get stitches and end up in ditches .

Mar 07, 2014 6:14pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

How to get out of debt

Financial adviser Eric Brotman offers strategies for cutting debt from student loans and elder care -- and how to avoid money woes in the first place.  Video