9th Circ. Says Fannie, Freddie Not ‘Fed Agencies’ Under FCA
A Ninth Circuit panel has said a qui tam FCA case based on Fannie Mae and Freddie Mac loans doesn’t qualify, as Fannie Mae and Freddie Mac are not agents of the U.S. government, even though they are majority-owned by the Uncle Sam. (U.S. ex rel. Adams et al. v. Aurora Loan Services Inc. et al., case number 14-15031)
The relators in this case originally filed suit in April 2011, alleging banks and mortgage lenders failed to pay homeowner association fee assessments before assigning mortgages to Fannie and Freddie, and then falsely certified that they had paid these fees, knowing that the homeowner associations would demand payment from the government-sponsored entities, causing them liability.
At the District Court level, Judge Robert C. Jones had argued that Fannie and Freddie are private corporations, noting that if they were not, the U.S. Government would not have had to create the Federal Housing Finance Agency in 2008 in order to take conservatorship of them.
In an amicus brief filed with the 9th Circuit, the U.S. Department of Justice argued that Judge Jones had erred, noting that claims made to government-sponsored entities fall within the second definition of a claim under the FCA, which includes requests or demands made to private entities “under certain conditions”.
The 9th Circuit chose not to weigh in on the second definition of FCA claims eligibility because the relators didn’t rely on the FCA’s second definition in their appeal.
The relators in this case were represented by Sigal Chattah of the Chattah Law Group in Las Vegas.