Wikileaks has released the lawsuit filed by Nelnet former employee Rudy Vigil against Nelnet, JPMorgan and Citigroup, which alleges an extensive conspiracy between JPMorgan and Citi and the student servicer in order to steal millions of dollars from US taxpayers. In the lawsuit, Nelnet is accused of keeping "false records, statements and certifications of compliance with statutes, regulations and policies" as it was falsely stating the amount of US money Nelnet was entitled to receive from the US, on behalf of itself or the two other banks, it was administering FFELP loans not in compliance with HEA statutes, that it was providing wrong and misleading data, and other comparable reasons.
A good summary of the lawsuit is provided below. If this lawsuit is found to have merit, this could be one of the biggest student loan fraud/abuse scandals in the history of the US:
Beginning at the latest when Vigil began working for Nelnet, and continuing until present, JP Morgan, Citigroup and Nelnet entered into the servicing agreements and the credit agreement referred to above with the common objective of maximizing each Defendants' income through the presentment of and receipt of payment for as many FFELP claims to the U.S. as possible. Nelnet's over acts of presenting or causing to be pad claims while not in compliance with HEA statutes, regulations and DOEd policies, and while an EP, notwithstanding its certifications that its claims were in compliance with HEA statutes, regulations and policies, were intended to and caused the U.S. to make payments to Nelnet that were not otherwise due Nelnet, including the claims Nelnet made on JP Morgan's and Citigroup's behalf. The U.S. suffered damages as a result of this conspiracy between Nelnet, JP Morgan and Citigroup.
In essence the mortgage fraud that everyone knows was encouraged by each and every subprime (and otherwise) lender, in order to maximize the number of loans issued without regard for underlying credit quality of the debtor during the credit bubble, was taking place in the student loan arena, courtesy of Nelnet, JP Morgan and Citigroup.
Here is what Vigil estimates were the losses to the US taxpayer as a result of this alleged complicit conspiracy between the three defendants:
The U.S. government, unaware of the falsity of the claims and/or statements, in reliance on the accuracy thereof, and by virtue of and as a result of the false claims paid or approved ... the U.S. has suffered actual damages and is entitled to recover three times the amount by which it is damaged, plus civil money penalties of not less than $5,500 and not more than $11,000 for each false claims paid or approved or caused to be paid or approved, and other monetary relief as appropriate."
We present the full lawsuit for your consideration, courtesy of wikileaks. This will undoubtedly become a major topic in the coming weeks, especially with the student loan market still nowhere close to being rebubbled by Bernanke et al., and taxpayers starting to get very angry at big banks who have consistently taken advantage of their gullibility, even as they consider paying themselves record bonuses in 2009.