Wells Fargo will pay the federal government $108 million to settle a federal whisteblower case, leaving Bill Edwards and his St. Petersburg-based Mortgage Investors Corp.as the sole remaining defendants.
The nation's third largest bank agreed to the payment to avoid trial this month on allegations that it, Mortgage Investors Corp.(MIC) and other lenders cheated veterans and taxpayers out of millions of dollars by charging illegal fees and then seeking to collect on federal loan guarantees when borrowers defaulted.
"We're glad it's over, at least to Wells Fargo," said Victory Bibby, one of two mortgage brokers turned whistleblowers who filed the case in federal court in Atlanta 11 years ago. "We look forward to going to trial against Edwards and MIC."
Edwards, who owns the Tampa Bay Rowdies, developed St. Petersburg's Sundial entertainment center and runs the city's Mahaffey Theater, said he too is looking forward to a trial.
"The truth will set you free," he said Monday.
The lawsuit has been a minor issue in the St. Petersburg's mayor's race, which pits incumbent Rick Kriseman against former mayor Rick Baker
As president of the Edwards Group, Baker led the campaign for a referendum in May on Edwards' plan to expand St. Petersburg's Al Lang Stadium at private cost to accommodate a Major League Soccer team if one is awarded to the city. Some have questioned what would happen if Edwards were forced to pay a huge judgment in the whisteblower case and couldn't afford to finish construction.
Voters overwhelming approved the referendum although St. Petersburg is competing against 11 other cities for just four slots.
The whisteblowers initially sued eight lenders. After six settled in 2012 for a total of $161 million, U.S. District Judge Amy Totenberg ruled that the suit could proceed against Wells Fargo and Mortgage Investors Corp.
The lawsuit alleges that MIC 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 the loans. The suit says that "virtually all" of the 450,000 loans Edwards' company handled were VA-backed refinancings.
"If MIC cheated on all those loans, its profits were inflated by at least $180 million," the suit says.
Edwards abruptly closed the company in 2013 ,throwing 476 employees out of work. He blamed the shutdown on new federal regulations. The move raised eyebrows, though, because other lenders didn't note similar problems.
"There is only one explanation for Edwards' decision," the suit says. "He knew MIC could no longer operate on its predatory model, saw a looming judgment in this case and set about to take and then hide MIC's assets."
Last fall, the judge handed the whistleblowers a victory when she let them try to prove their argument that any judgment in the case should be entered against Edwards personally.
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"There is sufficient evidence in the record that supports (plaintiffs') allegation that Edwards exercised near total control over MIC," the judge wrote. "In other words, (that) Edwards was effectively MIC and vice versa."
The judge has yet to rule on a motion that she freeze Edwards' assets or require him to post a bond while the case proceeds.
In announcing its decision to settle, Wells Fargo said that it is committed to serving the "financial health and well-being of veterans."
The banking giant has been under fire for a variety of alleged consumer abuses, including setting up phony accounts and charging hundreds of thousands of borrowers for auto insurance they did not request and did not need.
Contact Susan Taylor Martin at firstname.lastname@example.org or (727) 893-8642. Follow @susanskate