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Judge throws out fraud case against St. Petersburg entrepreneur Bill Edwards, blasts the VA

JAMES BORCHUCK  |   Times Bill Edwards works in the St. Petersburg office of his Mortgage Investors Corp. in 2011, then the largest refinancer of VA loans in the country.  [JAMES BORCHUCK, Times]
JAMES BORCHUCK | Times Bill Edwards works in the St. Petersburg office of his Mortgage Investors Corp. in 2011, then the largest refinancer of VA loans in the country. [JAMES BORCHUCK, Times]
Published Jul. 3

A federal judge in Atlanta has dismissed a years-long lawsuit that accused St. Petersburg entrepreneur Bill Edwards of defrauding veterans and the U.S. government through his now-defunct mortgage company.

In a granting a motion for summary judgment this week, Judge Amy Totenberg said two whistleblowers failed to present "material facts'' that would meet the strict U.S. Supreme Court standard for proceeding to trial. She acknowledged, however, that the case was "rife'' with disputes that generally would have necessitated a trial.

The standard "espoused by the Supreme Court chokes the life out of (plaintiffs') case and mandates the end of this action, despite the abundance of factual disputes,'' Totenberg wrote in a 42-page ruling that referred to the case as a "hot potato'' and cited the "intractability'' of both sides.

Totenberg also blasted the Veterans Administration for doing virtually nothing even though she said the agency's own audits of Edwards' company had "uncovered fees and charges violations.''

"While the cause of VA's paralysis is anyone's guess,'' she wrote, "its complete inaction ... dooms the (whistleblowers') claims.''

Edwards on Wednesday continued to deny any wrongdoing and called the road to dismissal a "very hard, long, drawn-out battle.''

"Keep in mind that we're the only people that didn't settle out of all the banks and everybody that got involved in this,'' he said. "Finally the truth will set you free.''

READ MORE: St. Pete entrepreneur Bill Edwards dogged by lawsuit seeking to freeze assets

In 2006, Edwards' Mortgage Investors Corp. was among eight lenders accused of illegal actions in refinancing VA loans. After six settled in 2012 for a total of $161 million, Totenberg ruled that the suit filed by whistleblowers Victor Bibby and Brian Donnelly could proceed against Wells Fargo and Mortgage Investors. Soon after the ruling, Edwards abruptly closed his St. Petersburg-based company, throwing 500 people out of work, but it became the sole defendant in the case when Wells Fargo settled two years ago for $106 million.

Bibby and Donnelly, Georgia mortgage brokers, claimed that Mortgage Investors violated the federal False Claims Act by over-charging veterans, charging unallowable fees and then concealing those fees from the VA to obtain taxpayer-backed guarantees for loans that defaulted. The suit said that "virtually all" of the 450,000 loans Edwards' company handled were VA-backed refinancings.

"If (Mortgage Investors) cheated on all those loans, its profits were inflated by at least $180 million," the suit said. It also accused Edwards of fraudulently transferring Mortgage Investors' assets to himself and his other companies to shield it from a huge potential judgment.

In dismissing the case, Totenberg made it clear that both sides had tested her patience.

"In the almost 13 years since this case was filed, it was assigned to multiple district court judges and amassed a dizzying array of docket entries, '' she wrote. "Moreover, in light of the litigation methods employed and intractability of the parties throughout the course of this action, the Court has had little choice but to take on the role of a hyper vigilant discovery referee.''

Totenberg's ruling further scolded the VA for failing to investigate the allegations of fraud.

"The VA, upon learning of the nature of the alleged fraudulent activity, could have pursued myriad avenues in order to attempt, on its, own, to establish whether such fraud was taking place and, if so, weed it out while taking appropriate actions against those entities responsible,'' she wrote. "However, neither the VA nor its (inspector general) appeared to take any interest in what (plaintiffs) had to say... and instead proceeded as if the noncompliance was nothing more than a parade of inadvertent errors.''

In her ruling, Totenberg ordered the unsealing of many of the documents in the case. Exceptions will include those containing personal information on mortgage documents and financial information related to Edwards individually.

"Any interest held by (Mortgage Investors Corp.) in the confidentiality of the documents ... are significantly outweighed by the public's interest in having unfettered access to this material,'' the judge wrote.

READ MORE: Sundial owner Bill Edwards puts Snell Isle house on market for $6.2 million

One of St. Petersburg's most prominent residents, Edwards, 74, owns the Sundial entertainment and shopping center and manages the The Mahaffey Theater – Duke Energy Center for the Performing Arts under a long-term contract with the city.

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.

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