Wells Fargo-JP Morgan Chase-kickback scheme
Wells Fargo and JP Morgan loan officers accused of taking kickbacks
January 23, 2015  //  By:   //  Legal, US News  //  No Comment

by Carol Thompson

The Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General took action against Wells Fargo and JPMorgan Chase for an illegal marketing-services-kickback scheme they participated in with Genuine Title, a now-defunct title company. The Bureau and Maryland also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement. Genuine Title gave the banks’ loan officers cash, marketing materials and consumer information in exchange for business referrals. The proposed consent orders, filed in federal court, would require $24 million in civil penalties from Wells Fargo, $600,000 in civil penalties from JPMorgan Chase, and $11.1 million in redress to consumers whose loans were involved in this scheme. Cohen and Oliphant Cohen also will pay a $30,000 penalty, the CFPB announced today.

“Today we took action against two of the nation’s largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks,” said CFPB Director Richard Cordray. “These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market.”

“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”

Genuine Title was a Maryland-based title company that offered real-estate-closing services from 2005 until it went out of business in April 2014. As part of the marketing-services-kickback scheme, Genuine Title offered loan officers valuable services to increase the amount of loan business generated. Genuine Title conducted this scheme at several financial institutions. The services the company offered included purchasing, analyzing, and providing data on consumers and creating letters with the banks’ logos that the company had printed, folded, stuffed into envelopes, and mailed. In return, the banks’ loan officers would increase Genuine Title’s profits by referring homebuyers to the company for closing services. This scheme was especially profitable for the loan officers, who generally are paid by commission.

Wells Fargo

According to the press release, the Bureau’s investigation identified more than 100 Wells Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, who participated in the scheme. The Bureau alleges that these loan officers referred thousands of loans to Genuine Title over the course of the scheme. The Bureau alleges that, despite the fact that Wells Fargo had multiple warnings of the illegal arrangements between its loan officers and Genuine Title – including a federal lawsuit explicitly alleging the existence of such agreements – the bank failed to take action to stop the practices and did not have an adequate system in place to identify these violations. Under the proposed consent order filed today, Wells Fargo would be required to pay $10.8 million in redress and $24 million in civil penalties. The Bureau also filed an administrative consent order against Wells Fargo prohibiting future violations.

Wells Fargo employed Todd Cohen as a loan officer from April 2009 through August 2010. The Bureau alleges that, while at Wells Fargo, Cohen not only received marketing materials, he also took substantial cash payments in exchange for referrals. Rather than pay Cohen directly, Genuine Title made payments to Cohen’s then-girlfriend, now-wife, Elaine Oliphant Cohen, in an effort to disguise the kickback nature of the payment. She received tens of thousands of dollars in payments for loans Cohen referred to Genuine Title. Under the proposed consent order filed today, Cohen and Oliphant Cohen would be required to pay a civil penalty of $30,000, and Cohen would be banned from participation in the mortgage industry for two years.

JP Morgan Chase

The CFPB also found that loan officers at JPMorgan Chase participated in the marketing-services-kickback scheme with Genuine Title. The Bureau alleges that at least six Chase loan officers in three different branches in Maryland, Virginia, and New York were involved. These officers referred settlement business to Genuine Title on almost 200 loans. The Bureau also alleges that Chase did not have an adequate system in place to ensure that its loan officers were following the law. Under the proposed consent order filed today, Chase would pay approximately $300,000 in redress and $600,000 in civil penalties. The Bureau also filed an administrative consent order against Chase prohibiting future violations.

The  investigation was conducted by the CFPB, the State of Maryland, and the Maryland Insurance Administration, which regulates title insurance providers such as Genuine Title.

Image: Mike Mozart, Jeepers Media

About the Author :

Carol Thompson is a veteran investigative reporter residing in central New York. She spent 23 years with a local newspaper, The Valley News, before leaving for the Syracuse New Times, and now, VNN. Thompson has won dozens of first-place awards for investigative reporting and was the 2006 recipient of the Syracuse Press Club’s prestigious Selwyn Kershaw Professional Standards Award. Thompson’s reporting has resulted in the arrest of public officials and has prompted policy changes. She uncovered two money laundering schemes that traveled the globe and resulted in the indictments of several developers.