Ex-Countrywide executive added as defendant in BofA fraud lawsuit
NEW YORK (Reuters) - The Justice Department has added a former top executive at Countrywide Financial Corp as a defendant in a lawsuit accusing Bank of America Corp of causing taxpayers $1 billion in losses to Fannie Mae and Freddie Mac.
Rebecca Mairone was added as a defendant in an amended civil lawsuit dated January 11 and filed in U.S. District Court in New York. The filing was not made available in electronic court records until later in the month.
The complaint says it was at Mairone's direction that the bank implemented a program to speed up the processing of home loans and remove barriers intended to ensure loans are not tainted by fraud. The program was known internally at Countrywide as the "Hustle," the Justice Department said in the complaint.
Mairone is now a managing director at JPMorgan Chase & Co. In a statement on Thursday, her lawyer said the government "has trumped up a meritless civil case."
"Rebecca Mairone has always been a loud voice for ethics and integrity in the mortgage business and she will be vindicated because she never did anything improper," said Marc Mukasey, of law firm Bracewell & Giuliani.
A spokeswoman for U.S. Attorney Preet Bharara declined comment.
The new complaint was first reported by The Huffington Post.
The original complaint was filed in October. It accused Bank of America and Countrywide of engaging in a scheme to defraud Fannie and Freddie through its sale of toxic mortgage loans to the two mortgage financing entities. Both Fannie and Freddie were taken into government conservatorship in 2008.
Mairone was the chief operating officer for a Countrywide lending division from 2007 to 2008. She continued to be employed at Bank of America after it bought Countrywide in 2008, the complaint said.
Under her, Countrywide implemented the "Hustle" program, at a time when loan default rates nationally were climbing and Fannie and Freddie were tightening their standards for buying loans, according to the complaint.
Mairone and other Countrywide executives were "repeatedly warned" by employees that the program would generate excessive amounts of fraudulent or defective loans ineligible for sale to Fannie and Freddie, the complaint said.
The complaint seeks unspecified civil penalties against Mairone under the Financial Institutions Reform, Recovery, and Enforcement Act. The law was passed in the wake of the 1980s savings-and-loan scandals and covers fraud affecting federally insured financial institutions.
Lawrence Grayson, a spokesman for Bank of America, said the bank viewed the government's latest legal theories in the new complaint as "equally unfounded" as the original ones. Bank of America has sought to have the case against it dismissed.
Grayson said that "neither Bank of America nor Countrywide defrauded Fannie Mae or Freddie Mac."
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.
- Maine nurse defies state Ebola quarantine, leaves home |
- Clashes erupt as Israeli police kill Palestinian suspected of shooting Jewish far-rightist
- SoftBank's humanoid robot lands job as Nescafe salesman
- Ukraine gas supplies in doubt as Russia seeks EU payment deal
- Dollar surges as Fed ends QE on hawkish note