Ninth Circuit Affirms FCA Liability Against Vendors for False Certifications Regarding the Creditworthiness of Home Buyers

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz

FCA liability will attach when a false statement is relevant to the government’s decision to confer a benefit, even if the false statement is made by an individual that is not a party to the claim submitted to the government for payment.  This is because the FCA contemplates liability for causing the government to approve a false claim, in addition to causing the government to pay a false claim.  Therefore, a vendor who falsely certifies the creditworthiness of a potential homebuyer for purposes of obtaining Department of Housing and Urban Development (HUD) insurance for mortgage-secured loans will be liable under the FCA if and when the homebuyer submits a claim to HUD after defaulting on the loan.  This is true despite the fact that the vendor is not a party to the claims submitted to HUD because the vendor’s false statements with regard to the creditworthiness of the purchasers induced the government to insure homes, approve claims, and confer a benefit of monetary payments to the homebuyers.  United States v. Eghbal, 548 F.3d 1281 (9th Cir. 2008).

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