BofA employees could face charges in U.S. fraud case: prosecutor
By Grant McCool | October 26, 2012 9:28 AM EST
Bank of America Corp
The comments were made at a hearing in Manhattan federal court to set a timetable for the U.S. Department of Justice's first civil fraud lawsuit over mortgage loans sold to the two big mortgage financiers, which the government had announced on Wednesday. Fannie Mae and Freddie Mac were bailed out and put in government conservatorship in 2008.
"Potentially, the government may amend its complaint to include individuals, present or former employees of Bank of America," Assistant U.S. Attorney Pierre Armand told U.S. District Judge Jed Rakoff.
The judge asked the prosecutors to amend their complaint by year end. The case involves mortgage lender Countrywide Financial Corp, which Bank of America bought in July 2008.
Most lawsuits by federal and state investigators against major banks over matters related to the recent financial crisis name few or no individuals as defendants.
An exception is the 18 lawsuits filed last year by the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac, which named more than 130 individual defendants.
According to Wednesday's complaint, Countrywide in 2007 invented, and Bank of America continued, a scheme known as the "Hustle" to speed up processing of residential home loans.
Operating under the motto "Loans Move Forward, Never Backward," mortgage executives tried to eliminate "toll gates" designed to ensure that loans were sound and not tainted by fraud, the government said.
This led to defect rates that approached 40 percent, roughly nine times the industry norm, but Countrywide concealed this from Fannie Mae and Freddie Mac, and even awarded bonuses to staff to "rebut" the problems being found, it added.
In court on Thursday, Brendan Sullivan, a lawyer for Bank of America, said "fascinating issues arise here" and the complaint was "not like anything we have seen before."
The lawsuit seeks civil fines and triple damages under the federal False Claims Act, which the government has used several times in recent years against Wall Street.
Lawrence Grayson, a bank spokesman, on Wednesday said the bank has "acted responsibly" to resolve older mortgage matters, but that at some point could not be expected to compensate every entity claiming losses caused by the economic downturn.
In February, Bank of America agreed to a $1 billion settlement of False Claims Act allegations over home loans submitted for insurance provided by the Federal Housing Administration, in a case from the U.S. Attorney's office in Brooklyn, New York.
(Reporting By Grant McCool and Jonathan Stempel; Editing by Tim Dobbyn)
Most Popular Slideshows
- Still The World Champions: Team USA Overpowers Serbia, 129-92 To Win 2014 FIBA World Cup [PHOTOS]
- Pope Francis: World War III Has Started On Piecemeal
- After Win Over Maidana, Mayweather Says He Is Prepared To Negotiate A Fight With Pacquiao
- From Fat To Fit: Celebrities Who Were Overweight Before They Became The Beauties That They Are
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- iPhone 6 vs iPhone 6 Plus vs Galaxy S5 and HTC One M8: Performance, CPU and Health
- Google Release Roundup: Nexus 5 2014, Nexus 6, Nexus 8 and Android L Killer Features
- Samsung Attacks iPhone 6 Plus Through New Galaxy Note 4 Commercial: Apple Claims Imitating Galaxy Note Phablets
- iPhone 6 And IPhone 6 Plus Sold Out, New Stocks To Arrive In October
- Moto G (Gen 2) vs. Xiaomi Redmi 1S—Specifications, Features And Price Showdown
- Nexus 6, 8 Release Dates Imminent as Moto X Pre-Order Begins & Nexus 7 Deals Ramp Up
- iPhone 6 And iPhone 6 Plus Shipping Has Begun, Expected To Reach Customers’ Doorstep On Sept 19 Launch Date