A West Virginia judge has slapped online mortgage giant Quicken Loans Inc. with more than $2.7 million in punitive damages and legal costs after finding the lender had defrauded a borrower by misleading her about her loan and using an inflated property appraisal.

Ohio County (W.Va.) Circuit Judge Arthur Recht awarded the borrower just under $2.17 million in punitive damages. He also ordered that Quicken pay her attorneys nearly $600,000 in legal fees and costs. In a ruling last year, Recht had called Quicken’s conduct “unconscionable.”

James Bordas, one of the attorneys who represented the borrower, said he hoped the award would send a message to struggling homeowners that “big companies can’t just come in and cheat them.”

Dan Gilbert, Quicken’s founder and chairman, told the Center for Public Integrity that the judge’s fraud finding and damages award were “irrational and incomprehensible.”

“If there was any injustice here,” Gilbert said, “it’s the other way around.” Quicken, he said, was the victim in this case rather than the borrower.

Detroit-based Quicken, the nation’s largest online home lender and fifth largest retail mortgage lender, has come under fire in a variety of legal forums. A Center investigation published earlier this month detailed claims from borrowers and ex-employees who accuse the company of taking advantage of vulnerable homeowners and using bogus appraisals and other falsified information to push through bad deals.

Quicken denies the allegations.

“We always try to do the right thing,” Gilbert said in a telephone interview. “If we truly make an honest mistake, it usually doesn’t even get to court—if we discover it, we make things right.”

In the West Virginia case, the judge last year found that Quicken had put 45-year-old Lourie Jefferson, a licensed practical nurse, into a complex mortgage product that would have required her to come up with a $107,000 “balloon payment” at the end of 30 years to finish paying off a loan of just under $145,000. Quicken misled Jefferson about the loan and used an appraisal that inflated the value of her home by nearly 300 percent, according to that decision.

The judge followed up that ruling last week with a Feb. 17 opinion ordering Quicken to pay punitive damages and legal fees in the case.

The company said there’s no evidence that Quicken colluded with the appraiser or “did anything usual or anything inconsistent with industry practice.” In court papers, Quicken described the problems with the loan as an “isolated incident” created by “mere excess of zeal by a poorly supervised, low level, former employee.”

In a separate written statement on Tuesday, Gilbert also said the mortgage had been a good deal for Jefferson because it reduced her interest rate and monthly payments and gave her more than $40,000 in cash.      
In his statement, Gilbert said the company would “be appealing this wanton injustice and is independently conducting its own investigation as well as be requesting that federal authorities also investigate the shocking and incomprehensible circumstances surrounding this scheme carried out by an unknown amount of people in West Virginia.” In the phone interview, Gilbert said he could not elaborate on the scheme against Quicken.

In another case, now being tried in federal court in Detroit, a group of former Quicken employees seeking overtime pay claim that company executives managed by bullying and intimidation, in some instances pushing them to exaggerate borrowers’ incomes on loan applications and sell overpriced deals to desperate or unwary homeowners.

The company argues that its “mortgage consultants” don’t qualify for overtime pay because they provide expert financial advice to borrowers in much the same way that stock brokers advise investors. In an effort to rebut this argument, the ex-employees’ attorneys contend that the company’s loan consultants aren’t trained to provide advice, but rather to manipulate and mislead.