0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 1 of 7

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION

United States of America ex rel. )

Lynn E. Syzmoniak, ) C/A No.: 0:10-cv-01465-JFA
)
Plaintiff, )
)
v. ) EX PARTE MOTION OF THE
) UNITED STATES FOR A PARTIAL
American Home Mortgage Servicing, ) LIFT OF THE QUI TAM SEAL.
Inc., et al., )
)
Defendants )
)

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

ATTORNEYS FOR THE UNITED STATES OF

AMERICA

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 0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 3 of 7

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION

United States of America ex rel. )

Lynn E. Syzmoniak, ) C/A No.: o:10-cv-01465-JFA
)
Plaintiff, )
)
v. ) MEMORANDUM IN SUPPORT OF
) EX PARTE MOTION OF THE
American Home Mortgage Servicing, ) UNITED STATES FOR A PARTIAL
Inc., et al., ) LIFT OF THE QUI TAM SEAL.
)
Defendants )
)

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
 0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 4 of 7

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

that defendants falsified documents, back-dated assignments, misrepresented their corporate

authority and forged signatures.

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

under the False Claims Act.

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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 0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 5 of 7

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:

(2) A copy of the complaint and written disclosure of

substantially all material evidence and information the person
possesses shall be served on the Government pursuant to Rule
4(d)(4) of the Federal Rules of Civil Procedure. The complaint
shall be filed in camera, shall remain under seal for at least 60
days, and shall not be served on the defendant until the court so
orders. The Government may elect to intervene and proceed with
the action within 60 days after it receives both the complaint and
the material evidence and information.

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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 0:10-cv-01465-JFA Date Filed 11/15/10 Entry Number 11 Page 6 of 7

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

ATTORNEYS FOR THE UNITED STATES OF

AMERICA

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