Wells Fargo said the U.S. government’s move to add one of its executives as a defendant in a fraud lawsuit suggests retaliation after the bank said it was suspending settlement negotiations.

Naming Wells Vice President Kurt Lofrano as a defendant in an amended complaint is “suggestive of retaliation and improper motive” and should be rejected, the bank said yesterday in a filing in federal court in Manhattan.

The U.S. argued last month in its request to add Lofrano to the case that he played a “critical role” in helping the bank hide fraudulent home loans. In a complaint filed last year, the government said the San Francisco-based bank was reckless in underwriting mortgage loans and failed to report fraudulent and noncompliant loans to the U.S. Department of Housing and Urban Development. That forced the Federal Housing Administration to pay $189 million in insurance claims on defaulted loans, the U.S. said.

Wells said in yesterday’s filing that on Oct. 29 it told the U.S. that further settlement talks in the case wouldn’t be productive at that stage in the litigation. Three days later, the government said it intended to add Lofrano to the case, according to the bank’s filing.

“What possible justification does the United States have for waiting a year before taking this action?” Wells said in the filing. “Why, when it purportedly obtained authority to sue Mr. Lofrano in April 2013, did it not apprise the court or Wells Fargo or Mr. Lofrano of its intentions? Why is this delay not by definition undue?”

The press office of the Justice Department didn’t immediately respond after regular business hours yesterday to a phone call seeking comment on the bank’s filing.


The lawsuit is part of a larger effort by the U.S. government to recoup losses from defaulted mortgages insured by the FHA. Wells Fargo in April 2012 agreed to pay $5 billion as its share of a settlement of U.S. government abusive foreclosure practice claims. The reckless lending case, arising out of the bank’s participation in an FHA program enabling it to certify loans for government insurance without prior agency approval, was filed six months later.

In September, U.S. District Judge Jesse M. Furman in New York denied Wells Fargo’s bid to throw out the case entirely, instead ruling that while the federal government’s statutory claims against the lender could stand, any legal injury claims based on events that transpired before June 2009 were too late to be actionable. He also threw out mistake-of-fact and unjust enrichment claims.


When the U.S. moved Nov. 22 to add Lofrano as a defendant, a spokesman for the bank, Ancel Martinez, said Lofrano is a “well-respected team member” and that Wells Fargo stands by him “unequivocally.” He said the bank has denied all allegations of wrongdoing.

Lofrano worked as Wells Fargo’s vice president in charge of quality control from 2002 through 2010, according to the government. He is still with the bank, Martinez said Nov. 22.

The New York case is U.S. v. Wells Fargo Bank N.A., 12- cv-07527, U.S. District Court, Southern District of New York (Manhattan).

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access