A federal judge has found an Aurora attorney liable for more than $10 million after previously finding he filed false documents with the government.
In a 12-page memorandum opinion, U.S. District Judge John J. Tharp Jr. ruled sole practitioner Robert S. Luce owes the government $3,452,499 in damages for 237 defaulted mortgage loans his mortgage company MDR Mortgage Corp. certified while it remained an approved correspondent for the Department of Housing and Urban Development and the Federal Housing Administration under false verification forms.
However, Tharp ruled that the total grow to $10,373,997 after damages are tripled as required by the federal False Claims Act and another $16,500 in fines are tacked on.
Michael S. Shapiro, an associate at Scandaglia Ryan LLP who represented Luce, said he and his client believe the judge’s ruling is incorrect, and they intend to appeal it.
The Luce-founded MDR served as an HUD loan correspondent from 1993 until 2008. While most of the loans it processed were already insured by the FHA and being refinanced for lower rates, about 5 percent of its business stemmed from originating new FHA-insured loans.
HUD requires loan correspondents to sign and submit annual verification forms that state no principal, owner, officer or employees within them are “currently involved a proceeding and/or investigation that could result, or has resulted in a criminal conviction, debarment, limited denial of participation, suspension or civil monetary penalty by a federal, state or local government.”
Despite a 2005 indictment on charges of wire fraud, mail fraud, obstruction of justice and false statements in matters unrelated to MDR operation, Luce continued to submit to HUD verification forms from 2006 through 2008.
Luce admitted in 2008 that he had obstructed justice in the unrelated matter, and since-retired district judge Blanche M. Manning imposed a $30,000 fine on him and sentenced him to three years of probation.
In 2010, Luce consented to a five-month suspension of his law license by the state supreme court for committing a criminal act that reflected adversely on his honesty, trustworthiness or fitness (M.R. 24074).
In September 2015, Tharp partially granted the federal government’s motion for summary judgment regarding Luce’s liability on all counts of its lawsuit, which alleges his false statements violated both the FCA and the Financial Institutions Reform, Recovery and Enforcement Act.
Tharp noted in that 24-page memorandum the FCA assigns liability to anyone who either knowingly presents a false or fraudulent claim for payment or approval, or knowingly makes, uses or causes to be used a false record or statement that is material to a false or fraudulent claim.
And because Luce personally signed the verifications forms that were submitted while he was under investigation, Tharp ruled, Luce “knowingly made a false claim by certifying that none of the principals of MDR were involved in a proceeding that could result in a criminal conviction.”
In granting the U.S.’s second motion for summary judgment on Nov. 23 — this time regarding damages — Tharp ruled Luce’s company would not have even been able to originate loans through the federal housing program had it not filed forms containing inaccurate claims in 2006, 2007 and 2008.
“This is sufficient under the FCA to permit the government to recover damages on the defaulted loans that MDR certified while approved as a HUD/FHA correspondent pursuant to the false V-forms,” he wrote. “Luce has not identified any disputed facts preventing summary judgment on the government’s request for damages under the FCA.”
The FCA also assigns mandatory penalties that can range from $5,500 to $11,000 per fraudulent claim. While the U.S. contended Luce should be penalized for each defaulted-loan claim filed while MDR was fraudulently verified, Tharp ruled Luce’s only fraudulent acts were to falsely certify three verification forms.
“… [T]hose three forms did not cause a particular number of defaulted loans,” he wrote.
However, Tharp erred on the lesser side of the penalty spectrum and awarded the U.S. a $5,500 penalty per verification form in an effort to balance Luce’s continuous false filings with the fact that the defaulted mortgages were not caused by the false certifications and the fact that he already owes more than he can pay in damages.
Assistant U.S. Attorney Kurt N. Lindland represented the government. A spokesperson from the U.S. Attorney’s office declined to comment.
The case is United States of America v. Robert S. Luce, 11 CV 5158.