Jury awards record $93 million verdict against Allied Capital for mortgage lending False Claims in its “shadow branches”

A federal court jury rendered a $100 million verdict against Allied Capital and bank principal Jim Hodge for violating U.S. laws in its mortgage lending operations. The federal Housing and Urban Development agency requires banks, mortgage companies, lenders…to have licensed offices,  in the form of salaries, offices rents and other overhead as a government approved loan originator and therefore a motivator for good business practices. Allied opened Shadow Branches, by have an unrelated party open an office at their own expense with no risk to the lender.

The individual offices that were unknown to HUD although principals reportedly used Allied business cards and signage, succumbed to business pressures and greed and wrote FHA and other government backed or insured mortgage loans with little or false underlying documentation in flagrant violation of HUD underwriting requirements of their lender originators.The jury found  that Allied Capital violated the False Claims Act by knowingly representing to HUD that certain FHA insured loans were originated from HUD approved Allied Capital branches and were therefore eligible for FHA insurance when in fact they were not.

The jury found against Allied for $85,612.643 and Hodge for $7,370,132. This was a whistleblower case brought on behalf of the United States. The whistleblower’s counsel is Brian Mahany.

Jeffrey Newman represents whistleblowers but did not represent anyone in this case.