By Jonathan Stempel and Peter Rudegeair
NEW YORK Nov 7 The U.S. government on Thursday
asked for permission to add a Wells Fargo & Co mortgage
executive as a defendant in its year-old lawsuit accusing the
country's largest mortgage lender of fraud.
In a letter to U.S. District Judge Jesse Furman in
Manhattan, who oversees the case, the Department of Justice said
the Wells Fargo Home Mortgage vice president it wants to add as
a defendant played a "pivotal role" in allegedly causing the
bank to not report defective home loans to the government.
Wells Fargo, which is also the fourth-largest U.S. bank, was
accused in the Oct. 2012 lawsuit of misleading the U.S.
Department of Housing and Urban Development into believing its
loans qualified for insurance from the agency's Federal Housing
Administration, costing hundreds of millions of dollars.
Furman on Sept. 24 rejected Wells Fargo's bid to dismiss the
lawsuit, which was brought by U.S. Attorney Preet Bharara in
No individuals were originally named as defendants. The
executive the government wants to add is identified in court
papers as a male vice president of decision quality management.
Neither the bank nor the Justice Department would
immediately confirm the name of the person who held that title
at the time of the alleged wrongdoing. No settlement talks are
scheduled, Thursday's letter said.
Federal investigators have received much criticism for
failing to hold enough individuals accountable for activities
contributing to the recent U.S. housing and financial crises.
One exception is Rebecca Mairone, a former midlevel
executive at Bank of America Corp's Countrywide unit,
who along with that bank was found liable by a Manhattan federal
jury last month for selling defective mortgages to Fannie Mae
and Freddie Mac. Penalties
have yet to be determined.
According to Thursday's letter, the government intends to
sue the individual Wells Fargo executive under the federal False
Claims Act and the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.
The bank called the effort "unwarranted" and said it would
disrupt the case. "Wells Fargo is unaware of any new facts or
circumstances warranting this action nor has the government
explained why it is necessary to target an individual more than
a year after first filing suit," spokesman Ancel Martinez said.
According to government court papers, the executive was in
2004 charged with ensuring the proper reporting of bad loans to
HUD, but "no self-reporting occurred."
The government also said the executive decided in 2005 that
fewer defective loans needed to be reported to HUD, but that the
bank "did not even comply with its own unilaterally narrowed
formulation of Wells Fargo's reporting obligation, and continued
not to self-report any loans."
The case is U.S. v. Wells Fargo Bank NA, U.S. District
Court, Southern District of New York, No. 12-07527.