The Whistleblower's Tale: Countrywide Investigator Fired for Doing Her Job While Rampant Fraud Was Concealed
Photo Credit: David Neubert via Flickr
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Countrywide Financial was one of the subprime lenders at the heart of the financial crisis; its predatory lending practices resulted in disgustingly large payouts for executives while sticking low-income borrowers with explosive mortgages they hadn't a hope of paying back. The New York Times' Gretchen Morgenson called Countrywide, “Exhibit A for the lax and, until recently, highly lucrative lending that has turned a once-hot business ice cold and has touched off a housing crisis of historic proportions.”
Eileen Foster was an investigator in charge of Fraud Risk Management at Countrywide when the ticking time bomb of its bad loans detonated. The practices she discovered shocked her and have also shocked those who've heard her story—including the producers of “60 Minutes,” who asked her on the program last December to discuss the lack of prosecutions of any of the bankers responsible for the crisis. But instead of cleaning house and admitting guilt, Bank of America—which purchased Countrywide as the financial crisis grew, in what the Wall Street Journal calls “one of the worst deals ever struck in corporate America”--drove Foster out and tried to discredit her findings.
In 2011, the Department of Labor ruled that Foster had been illegally fired. It said that her firing was retaliation for her whistle-blowing and ordered that she be reinstated and paid compensation. There have still been no prosecutions, and no officials have asked to hear Foster's story—so she's taking it public. Earlier this year, she was honored with a Ridenhour prize for truth-telling from the Nation Institute and the Fertel Foundation, and this week she spoke with AlterNet in an exclusive interview discussing what she saw at Countrywide—and what happened to her as a result.
“This is a mountain that people think is a molehill,” Foster told AlterNet. “As far as this type of financial crime, things are far worse than I would have ever imagined. In my furthest imagination I would have been challenged to come up with the things I have seen play out.”
Foster applied for the job as the head of the internal investigations department after 18 months at Countrywide's corporate office. When she got in, in March 2007 she found a department in disarray, with multiple divisions responsible for investigation and little oversight—or worse, investigators reporting to the salespeople they were investigating. “That created quite a conflict, a general inability to do an effective job,” she said.
Despite the disarray, at first she was hopeful—the department had been working on a “fraud reengineering plan” that was supposed to reorganize investigations and provide better oversight. Yet that feeling didn't last. “Hair did start to stand up on the back of my neck when the reengineering plan was finalized on March 31,” she said. Before accepting her new position, she had not been aware she'd be expected to sell the new plan to the company executives—but one of the first things on her agenda was to get executives in each division to agree that there should be a single group that did investigations, with investigators reporting to Foster instead of to them. She said, “I kind of wondered, is this just a sham?”
Executives, somewhat predictably, were less than thrilled with the idea of more oversight, and the plan wound up being shelved. At about the same time, Foster got a call on her internal fraud hotline from a former employee of Countrywide's subprime division, Full Spectrum Lending (or FSL for short). This former employee described rampant fraud in FSL's Boston division.
“Normally this would be something that would get handed off to the fraud control unit in FSL,” Foster said. “It didn't feel right to hand off something of that level. One of the comments was 'This has been going on for years, nothing's ever done.'”