Fraud and Folly: The Untold Story of General Electric's Subprime Debacle
Continued from previous page
He says a WMC official countered by telling the GE representative that Riedel didn’t know what he was talking about and that the company had already been planning to demote him.
Riedel was stripped of his title, he says, and idled for months with no assignments and no staff.
A former WMC executive, who spoke on the condition of anonymity, says the fact that GE knew about Riedel’s concerns about fraud may have prevented WMC officials from firing him, but it didn’t stop them from putting him into corporate limbo.
“He was kind of branded as a whistleblower and not a team player,” the former executive says. “They didn’t exactly fire him. They just marginalized him and he didn’t really have anything to do.”
‘Business as usual’
While Dave Riedel was fighting battles inside WMC’s California headquarters, Gail Roman was losing battles on the other side of the country.
Roman worked as a loan auditor at WMC’s regional offices in Orangeburg, N.Y. She and other colleagues in quality control, she says, dug up persuasive evidence of inflated borrower incomes and other deceptions on loan applications.
It did little good. Management ignored their reports and approved the loans anyway, she says.
“They didn’t want to hear what you found,” Roman told iWatch News. “Even if you had enough documentation to show that there was fraud or questionable activity.”
If GE made any progress against fraud at WMC, Roman says, she didn’t notice it. Fraud was as bad at WMC in 2006 as it was when she started at the lender in 2004, she says.
“I didn’t really see much of a change,” Roman says.
Victor Argueta, the former risk analyst, says he didn’t see much change either.
Meetings would be held. Executives from GE would agree fraud was a problem and something needed to be done. “But the next month it was business as usual,” Argueta says.
Argueta was barely a year out of college, with an undergraduate economics degree from the University of Southern California, when he started at the lender in 2004. What he encountered, he recalls, wasn’t what he had expected to find at a branch of a top-flight Fortune 500 corporation.
Twenty-something salespeople with little education or mortgage experience ran the show, he says. They pulled in $250,000 to $350,000 a year while sales managers made $1 million or $2 million, thanks to generous production bonuses and the network of independent mortgage brokers that fed the lender business.
“We had ex-strippers working there,” Argueta says. “The whole point was to have someone attractive to talk to the brokers. One of the salespeople did porn before she worked there. When someone told me that, I couldn’t believe it. Then I saw the video and I realized it was true.”
Argueta says one top sales staffer escaped punishment even though it was common knowledge he was using his computer to create fake documents to bolster applicants’ chances of getting approved.
“Bank statements, W-2s, you name it, pretty much anything that goes into a file,” Argueta says. “Anything to make the loan look better than what was the real story.”
In one instance, Argueta says, he sniffed out salespeople who were putting down fake jobs on borrowers’ loan applications — even listing their own cell phone numbers so they could pose as the borrowers’ supervisors and “confirm” that the borrowers were working at the made-up employers.
Management gave him a pat on the back for pointing out the problem, he says, but did nothing about the salespeople he accused of using devious methods to make borrowers appear gainfully employed.