Bank of America fraud trial spotlights whistleblower awards

Fri Sep 27, 2013 8:53pm EDT
 
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By Nate Raymond

NEW YORK (Reuters) - 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 defaulted.

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 ask for.

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.   Continued...

 
The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011. REUTERS/Fred Prouser