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11 Second Ex Parte Motion To Partially Unseal Motion Extend Seal 12 Months, U.S. Ex Rel Szymoniak V American Home MTG 10-01465
11 Second Ex Parte Motion To Partially Unseal Motion Extend Seal 12 Months, U.S. Ex Rel Szymoniak V American Home MTG 10-01465
Pursuant to the False Claims Act, 31 U.S.C. § 3730(b)(2), and for the reasons set forth in
the accompanying Memorandum in Support, the United States of America respectfully requests
an order partially lifting the seal in this qui tam matter so the United States may, in its discretion,
share the existence and/or contents of the qui tam complaint, disclosure statement and associated
documents provided by relator with the Federal Reserve Bank of New York.
Relator, through counsel, has informed the Government that she concurs in this request.
Respectfully submitted,
TONY WEST
Assistant Attorney General
WILLIAM N. NETTLES
United States Attorney for the District of South Carolina
By: ___________________________________________
FRAN TRAPP
Assistant United States Attorney
U.S. Attorney’s Office for the District of South Carolina
1441 Main Street
0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 2 of 7
Suite 500
Columbia, South Carolina 29201
(803) 929-3000
JOYCE R. BRANDA
RENEE BROOKER
WILLIAM C. EDGAR
Attorneys, Civil Division Commercial Litigation Branch
U.S. Department of Justice
Post Office Box 261
Washington, D.C. 20044
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0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 3 of 7
The United States of America submits this memorandum in support of its application
under the False Claims Act, as amended, 31 U.S.C. § 3730(b)(2), to partially lift the seal in this
case for purposes of allowing the United States to disclose the existence and/or contents of the
qui tam complaint and associated documents to the Federal Reserve Bank of New York. The
United States further requests that except as previously otherwise ordered by the Court in its
Order of July 2, 2010 (Dkt. 6), and except as provided in the proposed order submitted with this
request, the Complaint and other related filings in this matter remain under seal until further
order of the Court. Relator, through her counsel, has informed the Government that she concurs
in this request.
BACKGROUND
This is an action brought by relator Lynn Syzmoniak under the qui tam provisions of the
False Claims Act ("FCA"), 31 U.S.C. § 3730. Relator alleges defendants, mortgage backed
security (MBS) trustees and mortgage servicers, failed to obtain, or forged mortgage
assignments, thus impairing the value of related securities. Relator explains that one of the
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responsibilities of an MBS trustee is to convey mortgages and notes from original lenders to
MBS trusts pursuant to binding assignments in a recordable form. Relator alleges that when
defendants formed the MBS pools at issue here, they failed to obtain the required assignments.
When loans included in the MBS pools defaulted, courts required evidence of assignments in
foreclosure proceedings. Relator alleges defendants, knowing that missing assignments would
draw court scrutiny or would not be accepted by courts, thus preventing or increasing the costs of
foreclosures, forged assignments to replace those that were missing. Specifically, relator alleges
Relator asserts that the U.S. Government purchased MBS with missing or forged
assignments when: (1) the Federal Reserve Bank of New York provided funding to limited
liability companies in connection with the restructuring of American International Group (AIG)
and the Bear Sterns Companies, Inc.; (2) the U.S. Treasury, in conjunction with the Federal
Deposit Insurance Corporation, and other agencies provided funding to purchase MBS through
public-private partnership investment funds; and (3) the Federal Reserve made direct purchases
of MBS securitized by Fannie Mae, Freddie Mac and Ginnie Mae. Relator alleges that because
of defendants’ fraud and misconduct, the MBS purchased by the United States were worth less
than was represented to the United States, and that defendants’ conduct amounts to a false claim
Relator’s complaint arises, in part, then, from certain transactions authorized by the
Federal Reserve Board and implemented by the Federal Reserve Bank of New York (FRBNY).
The complaint remains under seal, and the government’s investigation of the matters is
proceeding diligently. On July 6, 2010, the Court extended the deadline for the government to
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make an intervention decision until August 10, 2010, and partially lifted the seal allowing the
United States discretion to reveal the existence of, and details regarding, the case to certain
criminal Assistant United States Attorneys, to certain experts, agents, or consultants, and to
mediators.
DISCUSSION
The qui tam provisions of the False Claims Act provide in pertinent part that:
Based on consultations with representatives of the Federal Reserve Board, the United
States has determined that in order fully to investigate relator’s allegations, it will be necessary
for the United States to discuss relator’s qui tam complaint and associated disclosure statement
and documents provided by the relator, with personnel of the FRBNY. While the Federal
Reserve Board itself is clearly an instrumentality of the federal government, there is conflicting
authority among the courts – as to whether the various Federal Reserve Banks are
instrumentalities of the federal government for various purposes.1 Without waiving any position
it may take as to whether or not the FRBNY is a government instrumentality in this case, or as to
1
Contrast Federal Reserve Bank of Boston v. Commissioner of Corporations and Taxation of Massachusetts, 499
F.2d 60 (1st Cir. 1974); Jet Courier Service, Inc. v. Federal Reserve Bank of Atlanta, 713 F.2d 1221 (6th Cir. 1983);
Federal Reserve Bank of St. Louis v. Metrocentre Improvement Dist. No. 1, City of Little Rock, Arkansas, 657 F.2d
183 (8th Cir. 1981) , aff’d 455 U.S. 955 (1982); United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982); Berini v.
Federeal Reserve Banks of St. Louis, 420 F. Supp. 2d 1021 (E.D. Mo. 2005); Lee Construction Co.v. Federal
Reserve Bank of Richmond, 558 F.Supp. 165 (D. Md. 1982); Brinks v. Board of Governors of the Federal Reserve
System, 466 F. Supp. 116, 118 (D. D.C. 1979) with Lindsey v. Federal Reserve Bank of St. Louis, 42 F.3d 1389 (6th
Cir. 1994); Lewis v. United States, 680 F.2d 1239 (9th Cir. 1982); Sheehan v. Anderson, 2000 WL 288116 (E.D. Pa,
March 17, 2000) (unpublished).
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whether that issue is even relevant to the claims presented here, in an abundance of caution, the
United States is requesting that the Court enter the attached proposed order partially lifting the
seal solely for the purpose of allowing the United States, in its discretion, to share the existence
and/or contents of relator’s qui tam complaint, disclosure statement and documents provided by
relator with FRBNY personnel. Except as provided in the proposed order, or as otherwise
previously ordered by the Court in its Order of July 2, 2010 (Dkt. 6), the United States asks that
this Court keep the complaint and material evidence under seal until otherwise ordered by the
Court.
CONCLUSION
For the above reasons, the United States respectfully requests that this Court grant the
United States request that the qui tam seal be partially lifted in this matter to allow discussion
with the FRBNY as provided in the attached proposed order. The relator concurs in this request.
Respectfully submitted,
TONY WEST
Assistant Attorney General
WILLIAM N. NETTLES
United States Attorney for the District of South Carolina
By: ___________________________________________
FRAN TRAPP
Assistant United States Attorney
U.S. Attorney’s Office for the District of South Carolina
1441 Main Street
Suite 500
Columbia, South Carolina 29201
(803) 929-3000
JOYCE R. BRANDA
RENEE BROOKER
4
0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 7 of 7
WILLIAM C. EDGAR
Attorneys, Civil Division Commercial Litigation Branch
U.S. Department of Justice
Post Office Box 261
Washington, D.C. 20044
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