Fifth Third Bancorp has sued appraisal firms, a title insurance company and alleged straw buyers it says defrauded the bank of more than $10.8 million in transactions involving suburban Detroit-area luxury homes.

Fifth Third is seeking damages from 44 people it says were involved in seven of at least 11 fraudulent real estate deals, the Detroit News reported today. The bank has also asked authorities to pursue a criminal investigation.

Defendants in the lawsuit include two former Fifth Third employees and Paul J. Nicoletti, the president of Continental Title Insurance Agency Inc. who is said to have had close ties to the bank.

Nicoletti denies wrongdoing, saying in a court filing that the bank profited from “a fraudulent scheme that was masterminded by (its own) high-ranking officers and employees,” the News reported.

Nicoletti said at least seven other Fifth Third employees not named in the lawsuit resigned or were fired over the scheme, a number described as “roughly accurate” by a Fifth Third official.

Jack Riley, vice president of marketing for Fifth Third Bank in eastern Michigan, told the News bank employees who “had not discovered this as part of their job” resigned or were asked to resign.

Fifth Third alleges that the scheme relied on flips of properties that were the subjects of inflated appraisals to straw buyers. The straw buyers in some cases allegedly obtained loans that exceeded the true value of the property securing them by more than $1 million. Although the alleged straw buyers had good credit ratings, the lawsuit claims fraudulent bank statements and other documents were used to increase their borrowing capacity.

The suit names appraisal companies including State Appraisals Inc. of Novi; The Appraisal Place, Inc. of Plymouth; Greyhound Appraisals and Investments LLC of Southfield; and CJ Appraisals Ltd. of Oxford.

Cincinnati-based Fifth Third Bankcorp has $106 billion in assets, and its 19 affiliates operate banks in Michigan, Ohio, Kentucky, Indiana, Illinois, Florida, Tennessee, West Virginia, Pennsylvania and Missouri, the Associated Press reported. The company has Michigan offices in the Detroit suburb of Southfield.

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