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. In some cases rewards are peace of mind for doing the right thing, although this one paid Keith Edwards.
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.
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
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."
About $56.5 million of Edwards' award concerns the FHA portion of the case, and $7.4 million concerns the VA portion.
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.
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.