(Credit: Ildar Sagdejev via Flickr, Public Domain Pictures)
Wells Fargo is being investigated by the U.S. Department of Justice for allegedly colluding with affordable housing developers nationwide to drive down the prices of low-income tax credits – potentially defrauding hundreds of millions of dollars from the federal program.
Among the banks, Wells Fargo is the largest buyer of the tax credits. The San Francisco-based bank said last year that it had invested $9 billion into the program over the previous five years. Banks benefit by buying the tax credits through tax write-offs and credit under the Community Reinvestment Act.
The Justice department is looking into whether Wells Fargo offered developers more favorable loan terms or would fund other deals in exchange for making low bids on the tax credits. Former low-income housing developer Michael Cox of Miami-based Biscayne Housing Group, who was sentenced in 2016 for his role in a $36 million affordable scheme, said he was aware of Wells Fargo transferring tax-credit funds from one deal to another, according to Bloomberg.
The investigation began with the U.S. Attorney’s office in Miami, which has been looking into housing tax-credit fraud statewide, Bloomberg reported. Wells Fargo, the focus of the probe, disclosed last week that government agencies were looking into the pricing and sales of tax credits, according to a financial filing.
Earlier this month, Wells Fargo agreed to pay a $2.09 billion penalty for allegedly misrepresenting the quality of loans used for mortgage-backed securities between 2005 and 2007. [Bloomberg] – Katherine Kallergis
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