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IberiaBank to Pay $11.7M to Settle False Claims Act Case

2 min read

A case originating from a whistleblower lawsuit filed in Arkansas has resulted in an $11.7 million settlement between IberiaBank Corp. and the U.S. Department of Justice, and two whistleblowers who worked for the bank in Little Rock will receive 20 percent of the recovery.

The original lawsuit was filed under the False Claims Act by Kelley R. Shackleford and Karen Mills. A 20 percent share of the settlement would be $2.34 million.

The Justice Department said Friday that IberiaBank Corp., IberiaBank and IberiaBank Mortgage Co. have agreed to pay the U.S. $11.7 million to resolve allegations that they violated the False Claims Act.

In a news release, the department said IberiaBank, headquartered in Lafayette, Louisiana, falsely certified it was complying with federal requirements in order to obtain insurance on mortgage loans from the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development.

“Mortgage lenders must follow FHA program rules designed to avoid putting federal funds at risk and increasing the chances that borrowers may lose their homes,” Principal Deputy Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division, said in the news release. “The Department will continue to hold accountable lenders that knowingly violate material program requirements that cause the government to guarantee ineligible loans.”

As part of the settlement, IberiaBank admitted that, between Jan. 1, 2005, and Dec. 31, 2014, it certified for FHA insurance mortgage loans that did not meet HUD underwriting and origination requirements, making them ineligible for FHA mortgage insurance. As a result, HUD incurred losses when it paid insurance claims on those loans, according to the Justice Department.

IberiaBank also admitted to not self-reporting material violations of HUD requirements in a timely manner. 

“Internal IberiaBank audits and reviews during this time period found that the Bank’s quality reviews were not being performed in a timely manner and did not comply with other HUD requirements,” the department said.

The settlement came after a joint investigation by HUD, HUD’s Office of Inspector General, the Civil Division and the U.S. attorney’s office for the Eastern District of Arkansas.

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