When Lynn E. Szymoniak appeared on 60 Minutes in 2011, she was on the verge of losing her home to a “robo-signing” fraud scam perpetuated by some of the nation’s largest banks. She blew the whistle on bank fraud, and she walked away with $18 million of a $95 million settlement.
Now, Szymoniak — a Florida lawyer and insurance fraud investigator — is suing other banks, including two foreign lenders, Deutsche Bank AG and HSBC Holding Plc, accusing them of foreclosure fraud. This time, however, the U.S. Justice Department hasn’t joined Szymoniak’s suit, leaving her to fight the banks alone. U.S. District Judge Joseph Anderson in Columbia, South Carolina, is set to consider this month whether to hear the case or throw it out.
“Robo-signing” is the illegal practice of forging mortgage documents. Szymoniak told 60 Minutes that the documents underpinning homeowners mortgages are sometimes missing or nonexistent. Banks need such documents to foreclose on a homeowner, so some banks have resorted to fraud: creating phony backdated, forged documents and records signed in bulk by people without knowledge of the facts, a practice known as robo-signing.
In her first lawsuit against the banks, Szymoniak alleged lenders collected millions in mortgage insurance claims from the Federal Housing Administration by using phony documents to show they “owned” the loans. Her investigation helped the Justice Department reach a $95 million settlement with Bank of America, JPMorgan Chase, Citigroup, Wells Fargo & Co. and Ally Financial Inc. The agreement was part of a $25 billion settlement the U.S. and states reached with five major banks in 2012 (Deutsche Bank, HSBC and Bank New York Mellon weren’t among them).
Other banks still accused on robo-signing mortgage documents include Frankfurt-based Deutsche Bank, London-based HSBC, Bank New York Mellon Corp. and Minneapolis-based US Bancorp.
If Szymoniak wins, she will get a bigger payout. Whistle-blowers like Szymoniak can receive a maximum of 25 percent of any recovery under the law. If the Justice Department declines to join the case, the West Palm Beach attorney can receive 30 percent of the settlement.