| NEW YORK, Sept 27
NEW YORK, Sept 27 The former executive who blew
the whistle on questionable mortgage lending at Countrywide
Financial Inc could reap up to $1.6 million under a law dating
from the 1980s savings-and-loan crisis.
Edward O'Donnell filed a whistleblower lawsuit last year,
the basis for a U.S. Justice Department case against
Countrywide's parent, Bank of America Corp, that went to
trial this week.
The Justice Department accuses Countrywide of fraudulently
selling thousands mortgages it knew were bad to Fannie Mae and
Freddie Mac, which suffered losses when the loans
The lawsuits say a Countrywide program called the "High
Speed Swim Lane," also called "HSSL" or "Hustle," starting in
2007 eliminated quality checkpoints and compensated employees
based on loan volume.
O'Donnell filed his lawsuit under the False Claims Act,
which allows whistleblowers to bring cases on behalf of the
government against companies that defraud the United States.
Before the trial, the judge dismissed the government's
claims under the False Claims Act, which eliminated O'Donnell's
ability to recoup 15 percent to 30 percent of the up to $848.2
million in penalties the Justice Department has said it would
But in court on Tuesday, a lawyer from the U.S. Attorney's
Office confirmed that O'Donnell also filed a whistleblower claim
directly with the Justice Department under the Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA).
FIRREA is a savings-and-loan-era law that has become a key
tool in efforts to pursue institutions over the financial
crisis. Among other provisions, the 1989 law has
a 10-year statute of limitations, longer than the limit of other
laws used in financial fraud cases.
Less publicized is the ability of whistleblowers to bring
claims asserting violations of FIRREA. Under a process set up in
a separate law in 1990, the Justice Department has a year to
investigate claims under FIRREA submitted by whistleblowers.
O'Donnell filed a FIRREA declaration in February 2012, the
same day as he filed his lawsuit in federal court in New York.
The Justice Department intervened in the case in October 2012.
In testimony Friday, O'Donnell said he filed the lawsuit
because he did not believe anyone in the government was aware of
Countrywide's "Hustle" program.
"Because they were not aware of it, no one was being held
accountable," O'Donnell said.
'GET RICH QUICK'
But in opening statements Tuesday, a lawyer for Bank of
America sought to cast O'Donnell in different light, saying he
entered, "into a little bit of a get-rich-quick scheme."
"He had read about the fact maybe as a whistleblower he
might collect some money by going back five or six years and
saying that, you know what, this is a fraud," said Brendan
Sullivan of the law firm Williams & Connolly.
With FIRREA complaints, whistleblowers such as O'Donnell are
entitled to a range of awards. But they are capped at $1.6
million, much less than the multimillion-dollar prizes
whistleblowers in False Claims Act cases have earned.
O'Donnell's potential recovery, for example, pales in
comparison to the $31 million earned by Sherry Hunt, a former
employee who filed a complaint against Citigroup Inc under
the False Claims Act. The Justice Department intervened in her
case and obtained a $158.3 million settlement in February 2012.
Plaintiffs lawyers say they have been giving more attention
lately to whistleblower awards under FIRREA. But the small size
of the potential award for FIRREA complaints makes it less
attractive for potential whistleblowers to step forward and risk
their careers and reputations on a case, some lawyers say.
"If it was a 15 to 30 percent bounty provision for
whistleblowers bringing claims under FIRREA, you'd see more,"
said Shayne Stevenson, a lawyer at Hagens Berman Sobol Shapiro,
who has brought other False Claims Act cases against Bank of
O'Donnell's strategy of filing both a False Claims Act case
and a FIRREA declaration might be becoming more common. Mark
Labaton, a lawyer at Motley Rice, said he was considering doing
the same for at least one purported whistleblower soon.
"Often it makes sense to do both because often you do not
know which is the more practical statute to use to get damages,"
A spokeswoman for the Justice Department could not
immediately provide statistics on how many FIRREA whistleblower
claims it had received. A lawyer for O'Donnell did not respond
to request for comment.
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.