The Whistleblower's Tale: Countrywide Investigator Fired for Doing Her Job While Rampant Fraud Was Concealed
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Foster moved to try to get the fraud reengineering plan, which had been shelved after intense pushback within the company, reinstated so that she could conduct a more thorough investigation. When the company decided to conduct an internal audit, she took that opportunity to tell auditors her suspicions about the rest of the subprime department. She'd found so much wrongdoing in the Boston division, she had a hard time believing that the few referrals she was getting each month were the only incidents happening across the company. “It seemed like there were two incidents of fraud taking place every five minutes in that Boston region,” she pointed out.
But the audit report was a disappointment. “The audit said that FSL has a reporting problem and they should prepare an action report,” she said. “Anybody reading it would've thought they said they needed to vacuum the carpets. It was just made to look like a total nonevent instead of the serious issue that it was.”
It was at this point that Foster started to wonder how much other executives within Countrywide actually knew and were covering up. “I stopped looking at some other executives as victims and considered whether they were actively colluding, or were the architects of the problem. That became very daunting.”
Things got even worse when, in 2008, Foster received a complaint from a Nashville, Tennessee consumer markets division branch—prime lending, not subprime. “It was a pretty shocking thing to read,” she said, with employees saying that the manager of that branch was out of control, that they'd been complaining for years and nothing had happened. “Essentially it contained the same allegations as did the branches in Boston.” (The Department of Labor report indicates “forgery, alteration and destruction of documents, loan manipulation, knowing submission of false documents, and conspiracy with outside business partners to obtain loans for their businesses.”)
Foster was also running into problems with Countrywide's Employee Relations department, which, according to the DOL findings, did not address complaints of retaliation against whistleblowers and compromised the anonymity of those who tried to report misconduct. Employee Relations was getting in between Foster and her investigations and interfering with the mechanisms in place at Countrywide for anonymous reporting of fraud. Foster noted, “There was very little that was anonymous at Countrywide, it was sometimes too easily used to identify the people and get rid of them.”
At the same time these internal investigations were going on, the broader mortgage market was melting down. By January 2008, when Bank of America reached a deal to buy the sinking Countrywide, it had lost some $1.6 billion over the previous six months. Bank of America may have thought it was getting a good deal—the original price was $2.5 billion—though it wound up costing, in one estimate, about $30 billion when the cost of legal settlements and mortgage writedowns was factored in.
But at the time, at Countrywide, Foster looked forward to Bank of America coming in. “I thought, the people who are doing what they are not supposed to be doing, they can be controlled now." She applied for a promotion at Bank of America, which only had a few mortgage fraud investigators.
At the same time, she continued to press Countrywide about its problems, going to the managing director of the internal audit department—which reports separately to the president of the company—with her allegations. Instead of looking into her reports, they authorized an investigation of Foster herself. “They did not ask me the details,” Foster said. “This was a notifications email; what should have happened is an investigative team should be assigned and at that point I would share the information that I had collected. Instead they tried to find a reason to get rid of me.”