The Securities and Exchange Commission entered a cease-and-desist order and Home Loan Servicing Solutions, Ltd. (“HLSS”) agreed to pay a penalty of $1.5 million for making material misstatements about its handling of related party transactions and the value of its primary asset (billions of dollars of rights to mortgage servicing rights it had purchased from related party Ocwen Financial Corp.) and for lacking adequate internal controls.
The SEC investigation found that while HLSS claimed it had adequate policies and controls to avoid potential conflicts of interest, in fact, the Chairman of one of the related parties (Ocwen), who also served as HLSS’s Chairman, approved many of the transactions between HLSS and Ocwen. The SEC also found that HLSS misstated its net income in 2012, 2013, and the first quarter of 2014.
Our client submitted a tip to the SEC whistleblower program that led to this recovery. He filed it anonymously as allowed by the SEC. He was awarded 26% of the total settlement because his tip enabled the SEC to bring multiple enforcement actions against wrongdoers (see related settlement against Ocwen Financial Corp.) that were settled for a total of $3.5 million.