Whistleblower Profits From Employer Violations

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Just in case you missed it, Fifth Third Bancorp agreed to pay almost $85 million to settle charges brought about by a DOJ action brought under the False Claims Act. According to the charges, Fifth Third failed to report that more than 1,400 FHA insured loans were defective after they had certified them as being eligible for the FHA insurance (Whistleblower).

Just another case of an employee profiting from something the company was doing wrong, after the employee had tried to report and correct the problems in the company. They just wouldn’t listen.

This case was brought to the attention of the DOJ by George Mann, Fifth Third’s chief appraiser, along with John Ferguson, a self-described independent whistleblower. Most interesting is that Mr. Ferguson is, and was, not an employee of Fifth Third.  However, he assisted Mr. Mann in the process. In return, they will receive a share of the DOJ settlement to  the tune of $6.37 million. It looks like now we may have “Whistleblower Consultants”. Could this be a new cottage industry created by the recent DOJ actions?

This is another good reason why banks and lenders need to ensure that everyone in their organization is doing things the right way. Train, trust and verify. Ongoing and frequent audits are essential to this process. Such loan and operational audits will uncover defects and discrepancies which may identify much larger potential problems. These can then be addressed with action plans to correct the problems and keep the company on track, avoiding much bigger problems like FHA, DOJ, or CFPB actions and fines.

Remember, when it comes to operations – every employee is a potential partner, and could be a whistleblower if things aren’t being done correctly. Encourage employees to come forward in identifying potential problems and in recommending solutions. Reward them for doing so. It’s far better than paying huge fines to the DOJ, or others, brought about by the same employees you ignored when they tried to let you know of the problems or violations.

Don’t ignore your problems or your employees. That sound you hear may be that of a whistle blowing in the background.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.