NEW YORK, Sept 19 (Reuters) - A federal judge ordered two Texas-based mortgage companies and their chief executive to pay $296.3 million to the U.S. government after a jury found them liable for inducing the government into insuring risky home loans, the U.S. Department of Justice said on Tuesday.
The award was announced by acting U.S. Attorney in Manhattan Joon Kim, whose predecessor Preet Bharara had pursued the False Claims Act case against Allied Home Mortgage Corp, Allied Home Mortgage Capital Corp and Chief Executive Jim Hodge.
U.S. District Judge George Hanks in Houston ruled on Sept. 14 that the Allied entities were responsible for nearly the entire payout, and Hodge for $25.3 million of it.
The payout reflects a tripling of the nearly $93 million that jurors awarded last Nov. 30, plus other penalties.
“Jim Hodge and Allied defrauded a federal mortgage insurance program designed to help spread the dream of homeownership, and then lied about it repeatedly,” Kim said in a statement.
A lawyer for the defendants did not immediately respond to a request for comment.
Allied Home Mortgage has been renamed AllQuest Home Mortgage Corp, while Allied Home Mortgage Capital was renamed Americus Mortgage Corp.
The lawsuit became public in 2011, when Bharara joined a lawsuit brought by a whistleblower. It moved to Texas in 2012.
Allied and Hodge were accused of falsely certifying to the Federal Housing Administration that thousands of risky home loans were eligible for insurance and operating more than 100 “shadow” branch offices that issued FHA-insured mortgage loans without the necessary approval.
Triple damages are mandatory under the False Claims Act, but the defendants said there were no damages to triple because the government failed to show that violations of that law were the “proximate” cause of its losses.
The judge, however, found “significant and credible” evidence that the losses “were the foreseeable consequence of Allied’s misconduct.”
Whistleblowers sue under the False Claims Act when they believe the federal government has been defrauded and can collect percentages of any sums recovered.
The case is U.S. V. Americus Mortgage Corp et al, U.S. District Court, Southern District of Texas, No. 12-02676. (Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)
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