Department of Justice Contends Due Diligence Failures Can Be the Basis for False Claims Act Liability

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Department of Justice Contends Due Diligence Failures Can Be the Basis for False Claims Act Liability

In early May 2011, the U.S. Department of Justice sued Deutsche Bank and its subsidiary, Mortgage IT Inc., in the Southern District of New York for alleged violations of the False Claims Act, 31 U.S.C. §§3729, et seq. This civil suit is widely considered to signal a new wave of False Claims Act prosecutions to recover government funds expended in the recent mortgage crisis. Through this case and the other cases that are certain to follow, both in the mortage context and otherwise, the government is attempting to turn due diligence failures into actionable fraud.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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