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Justice Department Keeps its Distance From Szymoniak Mortgage Fraud Lawsuit

Financial Services Blog

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April 29, 2014

As detailed in an August 2013 Salon article by David Dayen and a September 2013 Bloomberg Businessweek article by Karen Weise, West Palm Beach, Florida homeowner and attorney Lynn Szymoniak helped blow the whistle on widespread fraud in the mortgage industry. Over the past few years, Szymoniak has helped the U.S. government recover millions of dollars from major banks that engaged in fraudulent practices such as “robo-signing,” and also won $18 million for herself under the False Claims Act when the U.S. Justice Department intervened in her foreclosure-fraud lawsuit and negotiated a $95 million settlement with Bank of America and other lenders to resolve a false claims case.

But Szymoniak, who is still suing other lenders accusing them of the same fraudulent behavior, is so far on her own in that lawsuit as the U.S. Justice Department has not joined the case. As Jef Feeley and David McLaughlin reported in a recent Bloomberg Businessweek article, while the government can intervene in the case at any time with court permission, Szymoniak’s attorneys have said that so far the Justice Department isn’t interested in getting involved. The Justice Department has not explained why it has so far refused to intervene in the lawsuit, although professor Joan Krause of the University of North Carolina says in the recent Bloomberg Businessweek article that there could be a variety of reasons, including lack of resources, or a determination that the case against the remaining lenders is not particularly strong.

Szymoniak and her attorneys maintain that the government is missing a golden opportunity to collect more money from these banks for the identical claims that were made against the banks that settled. Also, if the Justice Department were to join the suit, it would share the work and bring the government’s resources to the case, which would be helpful to Szymoniak considering the vast resources available to the banks. On the other hand, if Szymoniak can win the case without the government, she could get a bigger payout. Government intervention means a whistleblower can receive up to 25 percent of any recovery under the False Claims Act, otherwise, absent government intervention, a whistleblower may get as much as 30 percent of any jury award or settlement.

In the meantime, the case continues, although the U.S. District Court in Columbia, South Carolina hearing the case is considering a bid by the banks to dismiss the case, based on the banks’ argument that Szymoniak is not a true whistleblower.

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Philip R. Stein

Philip R. Stein

Partner, Litigation Practice Group Leader
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