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
- Flight MH17 Attack: Russians Claim 'Putin A Terrorist,' Memorial at Dutch Embassy Overflows [PHOTOS]
- Typhoon Rammasun Claims 18 Lives in China, Incurs $4.32B Losses (PHOTOS)
- Ellen DeGeneres Caught Cheating with Mutual Friend Before Portia de Rossi’s Rehab – Reports [PHOTOS]
- Malaysia Airlines MH17: Vital Black Boxes Finally Land in Hands of Malaysian Authorities, Rebels Announce Ceasefire (PHOTOS/VIDEOS)
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
- Samsung Galaxy Note 4 Apps Leak Online, Five Fresh Features to Expect from the Android Smartphone
- Moto 360 Price Speculations, Key Features, Strategic Release Date, Design: A Watch That is More Than Just Time
- Windows Phone 8.1 Update Rollout: 20 Nokia Lumia Phones Eligible and 13 New Features to be Added
- Three New Moto G Successors Spotted in FCC Document Dubbed Moto G2, Moto M and More --Reports
- iPad Air 2 Release Date Will Skip IGZO Panel; To Rollout with Super-Slim iPad Mini Air
- Upcoming iPad Mini 3 Could be 30% Thinner and Likely be Called iPad Mini Air; Apple Q3 Results Show 9% Decrease in iPad Sales
- Sony Xperia M2 vs. Moto G – Specifications, Features and Price Showdown