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False Claims Act Lawsuit Settles for $3.9 Million Against Pennsylvania-Based Mortgage Lender

Fraud against the U.S. government can take many forms, and the False Claims Act is a powerful weapon for holding the wrongdoers accountable. In 2009, the Department of Justice filed a False Claims Act case in the Central District of California against Capmark Finance LLC of Horsham, Pennsylvania. Shortly after the case was filed, Capmark filed for bankruptcy protection.

The lawsuit alleged that the lender made false statements about two mortgages loans for nursing homes — Hudson Valley Care Center in Ghent, New York and Canoga Care Center in Canoga Park, California — to induce the U.S. Department of Housing and Urban Development (HUD) to insure them. According to the complaint, Capmark made material misrepresentations of fact that were crucial to the evaluation of the borrowers’ creditworthiness. Capmark acted to induce HUD to insure the loans, which it did. When both nursing homes defaulted on the loans, it cost the government, and the taxpayers, money.

When an individual — for example, an employee of the wrongdoer — knows of such fraud against the government, they have the right to file suit under the False Claims Act on behalf of the government and to share in any recovery. The False Claims Act also provides protections for whistleblowers who come forward with information of fraud against the government.

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