U.S. v. Luce

Federal 7th Circuit Court
Civil Court
False Claims Act
Case Number: 
No. 16-4093
Decision Date: 
October 23, 2017
Federal District: 
N.D. Ill., E. Div.
Affirmed and reversed in part and remanded

In action alleging that defendant violated False Claims Act and Financial Institutions Reform, Recovery and Enforcement Act by making false statements in Yearly Verification Reports that (as owner of mortgage company submitting FHA loan applications on behalf of third-parties) he was not currently involved in any criminal proceeding, Dist. Ct. did not err by finding that defendant’s misrepresentations in said reports were “material,” where: (1) 24 CFR section 202.5(j)(2) affirmatively prohibits program participation by loan correspondents who have been indicted or convicted of criminal offense bearing on correspondent’s integrity; and (2) HUD’s action in debarring defendant upon learning of defendant’s indictment at time of submission of reports confirmed that defendant’s false statements were material. However, Ct., in overruling Cicero, 957 F.2d 1362, found that Dist. Ct. erred in using “but for” as opposed to proximate causation test when finding that defendant owed over $111 million in damages arising out of defaulted loans. As such, remand was required for determination as to whether defendant’s submission of false reports was legal cause for losses associated with defaulted loans.