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Excerpt: "Bank of America Corp was found liable for fraud on Wednesday over defective mortgages sold by its Countrywide unit, a major win for the U.S. government in one of the few trials stemming from the financial crisis."

(illustration: Occupy Our Homes)
(illustration: Occupy Our Homes)

Bank of America Found Guilty of Mortgage Fraud

By Reuters

24 October 13


  • Bank found liable on one civil fraud charge

  • Verdict seen as a major win for the U.S. govt

  • Former Countrywide exec found liable on one fraud charge

ank of America Corp was found liable for fraud on Wednesday over defective mortgages sold by its Countrywide unit, a major win for the U.S. government in one of the few trials stemming from the financial crisis.

After a four-week trial, a federal jury in New York found the bank liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called "Hustle" and sold them to government mortgage giants Fannie Mae and Freddie Mac, the government said.

The four men and six women on the jury also found former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced.

The U.S. Justice Department has said it would seek up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans. But it will be up to U.S. District Judge Jed Rakoff to decide on the penalty. Arguments on how the judge will assess penalties are set for Dec. 5.

Any penalty would add to the more than $40 billion Bank of America has spent on disputes stemming from the 2008 financial crisis.

"The jury's decision concerned a single Countrywide program that lasted several months and ended before Bank of America's acquisition of the company," Bank of America spokesman Lawrence Grayson said. "We will evaluate our options for appeal."

Marc Mukasey, a lawyer for Mairone, called his client a "woman of integrity, ethics and honesty," adding they would fight on. "She never engaged in fraud, because there was no fraud," he said.

Wednesday's verdict was a major victory for the Justice Department, which has been criticized for failing to hold banks and executives accountable for their roles in the events leading up to the financial crisis.

The government continues to investigate banks for conduct related to the financial crisis. The verdict comes as the government is negotiating a $13 billion settlement with JPMorgan Chase & Co to resolve a number of probes and claims arising from its mortgage business, including the sale of mortgage bonds.

Risky Loans

The lawsuit stemmed from a whistleblower case originally brought by Edward O'Donnell, a former Countrywide executive who stands to earn up to $1.6 million for his role.

The case centered on a program called the "High Speed Swim Lane" - also called "HSSL" or "Hustle" - that government lawyers said Countrywide started in 2007.

The Justice Department contended that fraud and other defects were rampant in HSSL loans because Countrywide eliminated loan-quality checkpoints and paid employees based on loan volume and speed.

The Justice Department said the process was overseen by Mairone, a former chief operating officer of Countrywide's Full Spectrum Lending division. Mairone is now a managing director at JPMorgan.

Amy Bonitatibus, a JPMorgan spokeswoman, said, "We are reviewing the decision."

About 43 percent of the loans sold to the mortgage giants were materially defective, the government said.

Bank of America bought Countrywide in July 2008. Two months later, the government took over Fannie and Freddie.

Bank of America and Mairone denied wrongdoing. Lawyers for the bank sought to show the jury that Countrywide had tried to ensure it was issuing quality loans and that no fraud occurred.

The lawsuit was the first financial crisis-related case against a bank by the Justice Department to go to trial under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).

The law, passed in the wake of the 1980s savings-and-loan scandals, covers fraud affecting federally insured financial institutions.

The Justice Department, and particularly lawyers in the office of U.S. Attorney Preet Bharara in the Southern District of New York, have sought to dust off the rarely used law and bring cases against banks accused of fraud.

Among its attractions, FIRREA provides a statute of limitations of 10 years and allows the government to bring civil cases for alleged criminal wrongdoing.

Virginia Gibson, a lawyer at the law firm Hogan Lovells, said the Bank of America verdict was a "big deal because it shows the scope of a tool the government has not used frequently since its inception."

Gibson and other lawyers say any appeal by Bank of America would likely focus on a ruling made by the judge before the trial that endorsed a government position that it can bring a FIRREA case against a bank when the bank itself was the financial institution affected by the fraud.

The case was one of three lawsuits in New York where judges had endorsed that interpretation. Banks have generally argued that the interpretation is contrary to the intent of Congress, which they said is more focused on others committing fraud on banks.

Bank of America's case was the first to go to trial, a rarity given that banks more typically choose to settle government claims instead of face a jury. But Bank of America had said that it "can't be expected to compensate every entity that claims losses that actually were caused by the economic downturn."

In a statement, Bharara said Bank of America "chose to defend Countrywide's conduct with all its might and money, claiming there was no case here."

"This office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public," Bharara said.

In late afternoon trading, Bank of America shares were down 27 cents at $14.25 on the New York Stock Exchange.

The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422. your social media marketing partner


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+56 # Barbara K 2013-10-24 09:08
I hope that people who lost their homes thru the schemes of these banks have the right to sue the banks to get their homes returned, or to be paid the value of the homes that these banks stole from their owners. The owners should be able to file charges of theft against these banks. The crooks involved should be jailed just like any other big-time thief, think the mafia, goes to prison.

+35 # warrior woman 2013-10-24 11:16
Not only that, but they should also have their credit ratings reinstored to rates prior to losing their homes. I'm sure that aside from the loss of their homes, there have been lasting credit issues.
+19 # 2013-10-24 11:35
Quoting Barbara K:
I hope that people who lost their homes thru the schemes of these banks have the right to sue the banks to get their homes returned, or to be paid the value of the homes that these banks stole from their owners. The owners should be able to file charges of theft against these banks. The crooks involved should be jailed just like any other big-time thief, think the mafia, goes to prison.


You got that right! Too big to jail, indeed.
-4 # Doubter 2013-10-24 11:48
"Lawyers for the bank sought to show the jury that Countrywide had tried to ensure it was issuing quality loans and that no fraud occurred."

Move on folks. Everything's all right. Nothing's wrong, nothing happened, nothing to see here.
0 # Doubter 2013-10-29 16:55
I must remember lots of you don't appreciate my apparently misconceived attempts at "irony," yet I don't see how you could possibly think my comment was for real!
+9 # joe_me 2013-10-24 12:26
Fraudclosed on owners have this right BUT need to hire attorney which costs $$, takes time.

Like 90% of fraudclosure cases are UNCONTESTED by the defendant and summary judgement awarded to the Plaintiff BANKSTERS by district court Judges in judicial states like Florida. I talk from personal experience/know ledge. If you get serve do yourself a HUGE favor & hire a reputable consumer defense lawyer you trust it will be the wisest decision you make in a long time.
-11 # HowardMH 2013-10-24 14:23
How is that Hopie Changie working out for you so far?
+5 # Billy Bob 2013-10-24 19:33
Do you just click "paste" on every article you read?
+22 # DaveM 2013-10-24 09:14
Will those who were ripped off, evicted, etc. as the result of these crimes be compensated? Will anyone get their house back?

One civil charge? All that can be done is to assess a financial penalty, most likely with no "teeth" which will allow anyone to collect it. If they don't pay, their credit rating might suffer. Honestly, that's about it. Has anyone else out there tried to collect a civil judgment? Fun, isn't it?
+13 # 2013-10-24 11:37
I agree. I just hope this opens the door to real (criminal)charg es now that the gilt has been established and that it includes a clause to allow those who have fraudulently lost their homes to sue. B of A makes obscene profits, so this is just a slap on the wrist for them.
+5 # Billy Bob 2013-10-24 09:23

I'm sorry to sound like a broken record, but every time I get an email from RSN, including a lead article about the class war of human beings vs. corporate/banki ng/big money interests, it's automatically delivered to my "TRASH" folder - not even "spam", but directly into "trash", where I assume they hope I'll never even notice it.
+6 # Akeel1701 2013-10-24 10:18
sounds like it might be an issue with your settings.... they have been a bit flaky at times. You've probably tried this already, but what about adding RSN to your address book or something
+13 # Billy Bob 2013-10-24 10:51
I deleted everyone off of my address book when very important contacts were getting spam "from me" about purchasing name-brand electronics at a low low cost.

Besides, this is NOT a settings issue. They ONLY do this to RSN, and they ONLY do this when the lead article is about things like bank fraud, bailouts, the 99%, etc.

It's a very obvious pattern and it's very obviously intentional. I've read comments from others complaining about the same problem with Yahoo.

Yahoo "news" has an incredibly right-wing agenda, when it comes to political issues and the person in charge of it was a McCain supporter in '08.
0 # Activista 2013-10-25 00:44
I am getting also similar attacks - key words: bank fraud, Israel etc. and my Laptop freezes. Another application of NSA surveillance?
+7 # Bezobrazie 2013-10-24 10:46
+4 # Billy Bob 2013-10-24 12:09
The problem with that is that I've used them for over a decade and I can't expect all of my contacts to immediately follow me. I also save old emails (now, in the thousands).

I wish it were that easy.

Also, it sounds like other people run into similar problems with other email companies. Do you suggest one that you think is squeaky clean?
0 # Activista 2013-10-25 00:47
It could be specific hack on the specific PC (PC is compromised). I use different computers for work and "politics" - would not access RSN from the machine I do not want to compromise.
+5 # ChefDave 2013-10-24 13:28
That's pretty funky. I must say, I have email from Google and do not experience this. Not that any of these services can be trusted.
+1 # Billy Bob 2013-10-24 19:36
The problem with Google is their reputation for spying on your your outgoing emails, I mean worse and as a more prevalent problem than with most of the other companies.

Of course this is just heresay, and/or something I read long ago. I don't even know anymore. I guess as long as they keep us all suspicious and afraid to trust anyone, it's a win-win for them.
0 # Activista 2013-10-25 00:54
Google is mining data for pushing targeted ads on you (Facebook, MS do the same). Just pick some esoteric topic and see in few days how adds change accordingly.
Think that Google was only one to refuse access to their client mail from "Patriot Act"? U.S. Government Requests For Google Users' Private Data Jump 37 ...‎
by Andy Greenberg
Jun 17, 2012 - The American government's appetite for Google's data is growing. ... And compared with the 3,580 requests for its data it received from U.S. agencies in ... are only one example of the requests Google receives, not the majority. ... The PATRIOT Act commands the release of data on websites you've visited, ...
+2 # Billy Bob 2013-10-24 19:38
By the way, you have an adorable toddler there. Cute picture. I have one too, and I'm hoping she stays this cute, right through her teen years. Wish me luck on that one!
0 # Texas Aggie 2013-10-25 11:29
I've found that when they reach their 13th birthday, you put them in liquid nitrogen. Then when they reach their 21st birthday, you thaw them out. It saves lots of problems.
+30 # bonbo 2013-10-24 09:53
Why not criminal, rather than just civil, cases against the bankster-gangst ers? A few years in a real (not country-club) prison for the likes of Mairone, Dimon, and the rest of them! These civil penalties are but chicken feed to these creeps.
+19 # Billy Bob 2013-10-24 10:52
Sounds great, but most of our laws, pertaining to the crimes they commit are pre-written by industry lawyers, intentionally trying to keep their loopholes huge enough to drive a monster truck through.
+2 # Activista 2013-10-25 00:56
"likes of Mairone, Dimon, and the rest of them!" funny - Marion is working for Dimon now ..Rebecca Mairone (now at JPMorgan Chase)
+17 # fredboy 2013-10-24 10:50
Guilty! Amazing how this bank was so honored and celebrated by the "church folks" in its home town of Charlotte, NC.
+14 # minggnim 2013-10-24 11:19
If a corporation has the same rights as a REAL human being, then the corporation should be accountable for its actions. A man gets sent to prison, everything he does is controlled by his jailers. Inmate Bank of America, your life (business transactions) are on hold for 10 to 20 years.
+8 # 2013-10-24 11:40
Right. If they are persons, they should be subject to the same laws and prisons we are subject to. But, as Billy Bob points out, lawyers on their payrolls wrote the laws. They are probably proud members of ALEC.
+1 # Activista 2013-10-25 00:58
"lawyers on their payrolls wrote the laws" and then become judges ..
+11 # joe_me 2013-10-24 11:55
I personally congratulate the lawyers in the office of U.S. Attorney Preet Bharara Southern District of New York for having the "COJONES" which our DOJ lacks typically since Eric Holder's job a total conflict of interest he will never ever prosecute "HIS OWN" Plaintiff BANKSTER buddies whom he defended while a partner @ D C law firm "COVINGTON"

This office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public," Bharara said.

US Attorney Preet Bharara should be the
US Attorney General immediately & NOT Eric Holder.
+7 # petevokos 2013-10-24 13:41
Before justice breaks their arm from patting them self on the back, consider the fact that they brought suit against a company that no longer exists. Also don't forget that Bank of America bought Countrywide after some arm twisting by the Feds. (even though they bought it for 10cents on the dollar).
For Marc Mukasey to claim there was no fraud involved on the part of Countrywide and their officers is ludicrous. Get your head out of the sand Marc and try and sell us some swamp land in Fla.
Countrywide like a lot of other banks bundled and sold mortgages on Wall Street, who's to say that their mortgage backed securities were any worse than a BofA or Wells Fargo.
The banks got caught with there pants down but all of this could have been prevented if there had been oversight by the Fed's. The most toxic loans were inserted in the middle of these bundles and sailed through Wall Street with out a hint of infraction. Bring the decision makers to justice!!
+3 # Walter J Smith 2013-10-24 21:04
It has only taken Eric Holder and his army of attorneys on the public dole five years to find BofA guilty of mortgage fraud!


What a coup!

I could find five thousand American patriotic citizens (not the empty headed flag-waving Wall Street true believers like Holder, et. al.,) who could each of them prove BofA was guilty of mortgage fraud in five minutes or less.

Pardon me if I am impressed, but only very unfavorably, Eric Holder.

Get a life, you sick loser.
+5 # EverythingSolidMeltsIntoAir 2013-10-24 22:52
AG and all activist attorneys - please chase them ALL down and stick them in front of juries - we NEED NEED NEED a criminal case to give those fine Wall Street gentlemen a deterrent by putting AS MANY of the country club members in federal prison as possible, right now!! B of A - JAIL!! Countrywide execs - JAIL!! These guys would not be able to deal with JAIL!! It works like a charm - remember the savings and loan scandal? Remember ICELAND? JAIL!! They have committed criminal financial acts and they should answer for them in front of a jury.
+2 # Activista 2013-10-25 00:35
"Bank of America’s mortgage servicing unit systematically lied to homeowners, fraudulently denied loan modifications, and paid their staff bonuses for deliberately pushing people into foreclosure: Yes, these allegations were suspected by any homeowner who ever had to deal with the bank to try to get a loan modification – but now they come from six former employees and one contractor .."
and the same sicko (greed ..) is going on in all Home ... banks RIGHT NOW.. read Salon article above ... employees were getting bonuses ..
"programs were methodically carried out under the overall direction of Patrick Kerry, a Vice President who oversaw the entire eastern region’s loan modification process,” wrote William Wilson. Other executives mentioned by name include John Berens, Patricia Feltch and Rebecca Mairone (now at JPMorgan Chase, and already named in a separate financial fraud case). These are senior executives who, if this alleged conduct is true, should face criminal liability.." there is enough evidence for criminal prosecution ... now will somebody dare?
+5 # wrknight 2013-10-25 08:45
The problem I have with this is that Bank of America bought out Countrywide in a fire sale that appeared to be too good to be true. (And like they say, if it's too good to be true, it probably isn't true.) And the criminal activity was done before the purchase. So who's going to go to jail? Probably not the real culprit Angelo Mozilo who sleeps like a baby on his mattress stuffed with cash.

Don't get me wrong. I don't claim Bank of America is innocent, they have committed their own share of sins. But they inherited the Countrywide Savings debacle, they didn't create it. Countrywide Savings was a swindle from its very beginning.
+6 # JSRaleigh 2013-10-25 09:12
This is NOT Bank of America's fraud. This is Countrywide Financial's fraud committed before Bank of America acquired them.

The government STILL has not prosecuted Bank of America for their own fraud.
+3 # Texas Aggie 2013-10-25 11:21
Marc Mukasey, a lawyer for Mairone, called his client a "woman of integrity, ethics and honesty," adding they would fight on. "She never engaged in fraud, because there was no fraud," he said.

If she was an employee in good standing with the grand poobahs at Countrywide, then she had no sense of integrity, ethics and honesty. They wouldn't have tolerated it if she did, and would have sent her to some office north of the Arctic Circle.
+3 # Activista 2013-10-25 14:31
Rebecca Mairone is now at JPMorgan Chase ... read
and again this is not ONLY Chase or BOF - this is new Bank ethics "standard"
+2 # fredboy 2013-10-25 12:24
Minggnim said it perfectly: If you plan to commit a crime, first form a corporation. Then no one goes to jail. Commit the same crime as an individual and you're going to prison.

Amazed that the public doesn't understand this. Maybe it's a good thing, as every criminal out there would form a corporation. Now just half of them do!
0 # abdullahiedward 2013-10-28 04:38
This sentence really intrigued me:- Mairone is now a managing director at JPMorgan.
Who was it who said "Birds of a feather"! And they want us to believe there's nothing to the us versus them argument.
You can be sure that had it been that Ms. Mairone was amongst the working class stiffs who punch a time card Ms. Mairone would be out on her high class ass!
+2 # lulusplaster 2014-04-14 10:09
What happens of someone was put under so much stress that they ended up in the hospital with a nervous breakdown due to the constant harassment of BOA. Then was admitted, and has ongoing treatments for the last few years, in the mean time..divorce, loss of a family home that had been in family for generations, and loss of "self" all due to the boa fraud that at the time was not apparent it was done to many not just a select few! I am more than out raged. and wondered if like the question above how long do home owners who lost their houses either to being forced to sell to beat the foreclosure and lose their house that way? or the physical and emotional infliction of pain for the last few years since BOA caused all of this to happen, and in a domino effect from BOA actions..that are now showing up in the news as FRAUD 2008-2009 time frame? What is the Sol in NY to be able to sue BOA for fraud re: home mod loans,get a reduced percentage on your mortgage, etc. SOL how long can a family have the right to sue for FRAUD or what ever these actions would of been called?

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