Bank of America:
U.S. fraud case is 'Alice in Wonderland'
Reuters
By Nate Raymond
NEW YORK (Reuters) - The U.S. government has failed to
produce any evidence to show that Bank
of America Corp's (BAC) Countrywide unit
committed mortgage fraud in the run-up to the financial crisis, a lawyer for
the bank said on Tuesday.
The remarks came at the end of a four-week trial in which
the government said Countrywide lifted controls on mortgages in a process
called "Hustle," and then intentionally sold the resulting bad loans
to government-sponsored mortgage giants, the Federal National Mortgage
Association (Fannie Mae) (FNMA) and
the Federal Home Loan Mortgage Corp. (Freddie
Mac) (FMCC).
"We've been dragged down the rabbit hole into Alice in Wonderland," Bank of America lawyer
Brendan Sullivan said.
The lawsuit is the first government case to go to trial over
the faulty mortgage practices that led to the 2008 financial crisis.
It is also the first such case to go to trial asserting
claims under a 1980s law called the Financial Institutions Reform, Recovery and
Enforcement Act, which the government has recently begun using to bring cases
against banks.
Making a closing statement for the government, Assistant
U.S. Attorney Jaimie Nawaday that Countrywide put speed and volume ahead of
quality, which was reflected in employees' bonuses and the elimination of
underwriters who could assure loan quality.
"After four weeks of evidence and testimony, this is
still a case about greed and lies," she said.
Rebecca Mairone, the former chief operating officer of
Countrywide's Full Spectrum Lending division and a co-defendant with Bank of
America in the case, "didn't want to hear the process wasn't
working," Nawaday said.
Countrywide earned $165.2 million selling "Hustle"
loans to Fannie and Freddie, according to the government's evidence. But of the
mortgages Countrywide sold them, about 43 percent were materially defective,
Nawaday said.
"Quality had become a joke," Nawaday said.
Sullivan, a partner at the law firm Williams & Connolly,
questioned the quality of the government's own evidence as he launched into his
final attack of the government's case.
The Justice Department said that Countrywide sold about
28,000 such loans to Fannie and Freddie, Sullivan said. Yet the figure had
improperly included nearly 17,000 loans produced by Countrywide field offices
that weren't part of the "Hustle" program, he said.
Sullivan said the evidence showed that, contrary to
government assertions, Countrywide employees were focused on improving the
quality of the mortgages it produces and making corrections along the way as it
launched the "Hustle" program.
"I don't think a fraud case should be an Easter Egg
hunt," Sullivan said.
A lawyer for Mairone, Michael Hefter of Bracewell &
Giuliani, sought to call into question the credibility of a former Countrywide
executive who filed a whistleblower lawsuit that became the basis of the
Justice Department's case.
The former executive, Edward O'Donnell, stands to earn up to
$1.6 million if the Justice Department succeeds in the case. He also now works
at Fannie Mae, Hefter said.
But Hefter said O'Donnell had "had it out" for
Mairone, who today works at JPMorgan Chase & Co (JPM). O'Donnell blamed her
for minimizing his role in the company and for not landing a high-level
position following a division reorganization, Hefter said.
"Mr. O'Donnell came into this court with a grudge and a
mission," Hefter said.
Should the four men and six women on the jury find the
defendants liable, any penalty would be assessed by U.S. District Judge Jed
Rakoff, who is presiding over the case.
The Justice Department has said it would seek a penalty
equal to either Fannie and Freddie's losses or the defendants' gain, whichever
was greater.
The mortgage giants' estimated "gross loss" on the
"Hustle" loans was $848.2 million, the Justice Department has said.
The "net loss" - or the amount due to the portion of loans the
Justice Department says were materially defective - was $131.2 million.
Jurors are expected to begin deliberations Wednesday
morning.
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.
Bank of America Corp
Bank of
America Corp. (Bailout Company) acquired
the Countrywide Financial Corporation.
Note: A.W.
Clausen was the chairman & CEO for the Bank of America Corp. (Bailout Company), an honorary trustee at the
Brookings Institution (think tank).
Mayer
Brown was the lobby firm for the Bank
of America Corp. (Bailout Company).
Robert
A. Helman is a partner at Mayer
Brown, and was an honorary trustee at the Brookings Institution (think tank).
Donna
E. Shalala was a mortgage recipient from the Countrywide Financial Corporation, and a fellow at the Brookings Institution (think tank).
James A. Johnson received five
real-estate loans from the Countrywide
Financial Corporation, the chairman for Fannie Mae, is an honorary trustee at the Brookings Institution
(think tank), a friend of Angelo R.
Mozilo, a member of the American Friends of Bilderberg (think tank),
and a 2008 Bilderberg conference participant (think tank).
Angelo
R. Mozilo is a friend of James A.
Johnson, was the chairman & CEO for the Countrywide Financial Corporation, and the national adviser for Fannie Mae.
David
O. Maxwell was the chairman & CEO for Fannie Mae, and an honorary trustee at the Brookings Institution
(think tank).
Arthur B.
Culvahouse Jr. was a lobbyist for Fannie
Mae, and is a trustee at the Brookings Institution (think tank).
Thomas E. Donilon was a lobbyist &
EVP for Fannie Mae, the White House
national security adviser for the Barack
Obama administration, trustee at the Brookings Institution (think tank),
a member of the American Friends of Bilderberg (think tank), and a 2008 Bilderberg
conference participant (think tank).
Kenneth M.
Duberstein was a director at the Fannie
Mae, and is a trustee at the Brookings Institution (think tank).
Geoffrey
T. Boisi was a director at Freddie
Mac, and is an honorary trustee at the Brookings Institution (think
tank).
Foundation
to Promote Open Society was a funder for the Brookings Institution
(think tank).
George
Soros is the chairman for the Foundation
to Promote Open Society.
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