A New York foreclosure law firm admitted to defrauding Fannie Mae and the Department of Veterans Affairs out of millions of dollars by using its affiliated companies to “systematically” overcharge the entities for foreclosure-related services as part of a settlement with the Department of Justice.
The U.S. Attorney’s Office for the Southern District of New York announced Tuesday that it reached a settlement with Rosicki, Rosicki & Associates, in which the law firm admitted to using its wholly owned affiliates, Enterprise Process Service and Paramount Land, to overcharge Fannie Mae and the VA for foreclosure and eviction-related expenses.
Back in March, the U.S. Attorney’s Office filed a lawsuit against the law firm, which specializes in foreclosures, acting as counsel to mortgage servicers that use the firm to execute foreclosures in New York, a judicial foreclosure state.
According to the complaint, the law firm appeared to only use its affiliated companies, a process server and a title search company, to serve process and perform title searches that were required to complete foreclosures on loans owned by Fannie Mae.
But instead of actually using its own companies, the law firm was accused of using third-party vendors to perform the majority of the work in question, applying “exponential” markups to the services performed, and billing Fannie Mae for the work, knowing that the government-sponsored enterprise would repay the firm for the services.
According to the complaint, the submission of those “fraudulently inflated expenses” caused Fannie Mae to pay out “millions of dollars” in falsely inflated foreclosure expenses.
This week, the firm admitted to the conduct as part of a $6.1 million settlement with the U.S. Attorney’s Office.
According to the settlement, Rosicki, Enterprise, and Paramount admitted that from 2009 through 2018, Enterprise (the process server) added “additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses.
Additionally, Paramount (the title search company) “added additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses.”
Rosicki then submitted those costs and expenses to Fannie Mae for reimbursement, with the understanding that Fannie Mae would pay the company back.
According to the U.S. Attorney’s Office, the settlement also resolves “identical misconduct in connection with eviction-related expenses that were submitted to and paid for by the VA.”
As part of the settlement approved by U.S. District Judge Jed Rakoff, Rosicki, Enterprise, and Paramount admitted and accepted responsibility for their conduct and must pay $4.6 million to the United States.
This lawsuit began as a lawsuit filed by a whistleblower under the False Claims Act. In a separate settlement agreement, Rosicki, Enterprise, and Paramount agreed to pay the U.S. an additional $1,518,000 to resolve separate False Claims Act claims pursued by the whistleblower.
The total payout for Rosicki and the associated companies will end up being more than $6.1 million.
In a statement provided to HousingWire, the firm said it chose to settle the lawsuit in the best interests of its clients. “Our practices and procedures adhere to the strictest principles and ethical standards of the legal profession, and we look forward to continuing to deliver the highest-caliber counsel that our clients have come to expect,” the firm said in its statement.
The settlement also requires the law firm to implement a compliance program with regular reporting over the next five years, and to disclose the nature of its affiliation with Enterprise and Paramount on its website.
“Lawyers are not above the law. For years, the Rosicki firm submitted bills to Fannie Mae and the VA that contained inflated and unnecessary charges,” Manhattan U.S. Attorney Geoffrey Berman said. “This Office will continue to hold accountable those who seek to achieve profits by fraudulent conduct.”
Joining the U.S. Attorney’s Office in pursuing the case were the Federal Housing Finance Agency Office of Inspector General and the Department of Veterans Affairs Office of Inspector General.
“This civil settlement should send a clear message to individuals and businesses that VA-OIG and its law enforcement partners will vigorously investigate and expose false claims that fraudulently impact programs designed to benefit our veterans and their families,” VA-OIG Inspector General Michael Missal said.
[Update: This article has been updated with a statement from the Rosicki firm.]
