NEW YORK (Reuters) — The United States
may add Wells Fargo & Co Vice President Kurt Lofrano as a defendant
in its year-old lawsuit accusing the country's largest mortgage
lender of fraud, a Manhattan federal judge said.
Lofrano would be the first individual targeted in the lawsuit, which
was originally brought in October 2012.
The U.S. Department of Justice accused Wells Fargo of misleading the
Department of Housing and Urban Development into believing many of
its loans qualified for federal insurance, costing taxpayers
hundreds of millions of dollars.
Wells Fargo had questioned why the government waited a year before
pursuing Lofrano, suggesting it might be in retaliation for the
bank's late October decision to end settlement talks.
U.S. District Judge Jesse Furman nonetheless concluded that the
government could add Lofrano and amend its complaint, substantially
for the reasons it cited.
The government said Lofrano played a "critical role" in Wells
Fargo's decision not to report to HUD more than 6,000 materially
defective loans that the San Francisco-based bank falsely certified
for Federal Housing Administration insurance.
It also said Lofrano, as vice president for quality control from
2002 to 2010, was responsible to ensure proper reporting but kept
many defective loans "secret," causing HUD to pay more than $189
million in insurance for loans that were not eligible.
The government seeks to hold Lofrano liable under the federal False
Claims Act and the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.
Wells Fargo spokesman Ancel Martinez said, "We are disappointed in
the ruling, but respect the court's decision, and we fully support
Mr. Lofrano."
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 with that bank was found
liable by a Manhattan federal jury in October for selling defective
home loans to Fannie Mae and Freddie Mac. Damages have not been set.
Furman said the government in the Wells Fargo case shall file its
second amended complaint by December 20.
The case is U.S. v. Wells Fargo Bank NA, U.S. District Court,
Southern District of New York, No. 12-07527.
(Reporting by Jonathan Stempel in New
York; editing by Lisa Shumaker)
