CrossCountry seeks $2.1 million from LO accused of fraud

CrossCountry Mortgage is attempting to recoup $2.1 million from an ex-branch manager currently battling federal charges. 

Christopher J. Gallo was indicted last year for fraud for allegedly falsifying home loan documents over a five-year stretch while at a prior employer. The Cleveland-based retail giant hired the former top producer in September 2023 and fired him in April 2024 upon learning of his arrest.

The lender gave Gallo the seven-figure sign-on bonus, which was contingent upon his remaining with the company for three years, and immediately requested payback after his termination. Similar to its aggressive pursuit of clawbacks from its former loan officers, CrossCountry attempted to initiate arbitration proceedings against Gallo last month for breach of contract and unjust enrichment.

A federal judge halted arbitration two weeks ago, after prosecutors and Gallo's attorney suggested it would interfere with his criminal case. CrossCountry filed a motion to intervene last week, asking a federal judge to lift the stay he just granted.

Attorney Michael S. Weinstein of Cole Schotz, representing Gallo, called CrossCountry's intervention filing "unique, and disfavored" and said the lender's 18-month wait to pursue its claims makes little sense. 

"CCM also seems to suggest that a defendant's constitutional rights are not as important as the strictly financial claim they seek," wrote Weinstein in an email Monday. "I think they will find federal judges think quite differently."

The attorney added that Gallo will file an opposition this week, remains focused on challenging the pending charges and looks forward to a trial next year.

A spokesperson for CrossCountry said the company doesn't comment on legal matters, while attorneys for the lender and prosecutors didn't respond to requests for comment. 

What Christopher Gallo is accused of

The originator formerly worked at NJ Lenders Corp, where he originated billions of dollars in loans and was frequently among the industry's highest producers. He and his assistant, Mehmet A. Elmas were arrested last year for falsifying documents from 2018 through October 2023. During that time, feds say the pair originated more than $3 billion in loan volume. 

According to an indictment last November, the defendants misled lenders about the intended use of properties as primary residences to secure lower interest rates for rental or investment properties. Prosecutors also accused the originators of falsifying property records and borrowers' financial information to facilitate approvals. 

The charges include bank fraud and conspiracy to commit bank fraud, which carry maximum penalties of 30 years in prison, and aggravated identity theft, which the defendants unsuccessfully attempted to toss earlier this year. Gallo and Elmas were released on bond last year. 

CrossCountry's pursuit of clawbacks returns

In a letter to the court last month, Weinstein said a delay in arbitration proceedings wouldn't harm CrossCountry. The attorney also hinted that Gallo may file counterclaims related to unspecified wage and hour violations by the lender.

The company, in pursuing the bonus, cited Gallo's signature on the agreement in which the parties agreed to settle all bonus disputes to binding arbitration. According to documents filed by CrossCountry, Gallo was also paid an annual salary of $35,568, and received 75 basis points and 50 basis points for self-generated and branch-generated leads, respectively. 

While other mortgage players have sued over clawback requests, CrossCountry was one of the most litigious. Since 2020, the lender has sued dozens of former employees for portions of sign-on bonuses totaling millions of dollars, according to records in the Cuyahoga County Common Pleas Court in Cleveland. Many of those cases have been dismissed, and the lender reached settlements with more than a dozen other former LOs. 

The court also granted CrossCountry default judgment in other cases, and the company has garnished the wages of at least one of its former employees. After filing a spate of litigation during the refinance boom, the firm's last clawback suit in state court appears to have been filed in 2023. 

A federal judge also dismissed a budding class action Fair Labor Standards Act complaint against the lender in late 2023.