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How Bank of America Covered Up Fraud by Silencing Whistleblowers

Countrywide made life hard for an internal investigator, and a court ruled that when BofA took over, she was illegally fired in retaliation.

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In government records and in interviews with  iWatch News , 30 former employees charge that Countrywide executives encouraged or condoned fraud. The misconduct, they say, included falsified income documentation and other tactics that helped steer borrowers into bad mortgages.

Eighteen of these ex-employees, including Foster, claim they were demoted or fired for questioning fraud. They say sales managers, personnel executives and other company officials used intimidation and firings to silence whistleblowers.

A former loan-underwriting manager in northern California, for example, claimed Countrywide retaliated against her after she sent an email to the company’s founder and chief executive, Angelo Mozilo, about questionable lending practices. The ex-manager, Enid Thompson, warned Mozilo in March 2007 that “greedy unethical people” were pressuring workers to approve loans without regard for borrowers’ ability to pay, according to a  lawsuit [3] in Contra Costa Superior Court.

Within 12 hours, Thompson claimed, Countrywide executives began a campaign of reprisal, reducing her duties and transferring staffers off her team. Corporate minions, she charged, ransacked her desk, broke her computer and removed her printer and personal things.

Soon after, she said, she was fired. Her lawsuit was resolved last year. The terms were not disclosed.

Bank of America officials deny Countrywide or Bank of America retaliated against Foster, Thompson or others who reported fraud. The bank says Foster’s firing was based only on her “management style.” It says it takes fraud seriously and never punishes workers who report wrongdoing up the corporate ladder.

When fraud happens, Bank of America spokesman Rick Simon says, “the lender is almost always a victim, even if the fraud is perpetrated by individual employees. Fraud is costly, so lenders necessarily invest heavily in both preventing and investigating it.”

When it uncovers fraud, Simon says, the bank takes “appropriate actions,” including firing the employees involved and cooperating with law-enforcement authorities in criminal investigations.

Mozilo’s attorney, David Siegel, told  iWatch News it was “unlikely that Mr. Mozilo either would have had a direct role with, or would recall, specific employee grievances, and it would be inappropriate for him to comment on individual employment issues in any event.” Siegel added that “any implication that he ever would have tolerated much less condoned to any extent misconduct or fraudulent activity in loan production and underwriting … is utterly baseless.”

In

closed-door testimony a year ago, the ex-CEO defended his company, telling the federal Financial Crisis Inquiry Commission that Countrywide “probably made more difference in society, in the integrity of our society, than any company in the history of America.”

Foster says that, in her experience, Mozilo urged managers to crack down on fraud. If he saw an email about a fraudster within the ranks, she says, he would hit “reply all” and type, “Track the bastard down and fire him.”

She says, though, that others within the company often screened his emails, and it’s likely Mozilo never saw Thompson’s email or many other messages about fraud.

“My sense is they kept things from Angelo,” she says.

‘An old matter’

When Bank of America announced in January 2008 that it was going to buy Countrywide at a fire-sale price, some analysts thought it was a great move, one that would leave the bank well positioned once the home-loan market recovered.

Almost three years later, defaults on loans originated by Countrywide have soared and Bank of America’s stock price has plunged as investors and government agencies have pursued mortgage-related claims totaling tens of billions of dollars.

Federal and state officials are pressing Bank of America and other big players to settle charges they used falsified documents to speed homeowners through foreclosure. Lawsuits filed on behalf of investors claim Countrywide lied about the quality of the pools of mortgages that the lender sold them during the home-loan boom.

 
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