Bank of America Can't Wrestle With $1.27B Countrywide Verdict

 

Scott Flaherty, The Litigation Daily

February 3, 2015

Never one to mince words, U.S. District Judge Jed Rakoff in Manhattan had a few harsh ones for Bank of America Corp. on Tuesday, ruling that it "utterly failed" to offer a compelling reason to retry a mortgage fraud case that put the bank on the hook for $1.27 billion.

In a 15-page decision, Rakoff rejected a motion for judgment as a matter of law or a new trial lodged by Bank of America's lawyers at Williams & Connolly.

"The jury's conclusion that this was a massive and intentional fraud was amply supported by the evidence," Rakoff wrote.

The ruling marks the latest win for U.S. Department of Justice in the civil fraud case, which accuses the bank's Countrywide Financial unit and former Countrywide executive Rebecca Mairone of duping Fannie Mae and Freddie Mac into buying shoddy mortgages. The case was first brought in 2012 by whistleblower Edward O'Donnell, a former Countrywide Home Loans vice president.

A jury found against the bank in October 2013, determining that Countrywide misrepresented to Fannie and Freddie the quality of mortgages it originated through a program known internally as high-speed swim lane (HSSL), or "hustle." In July, Rakoff leveled a fine of $1.27 billion against BofA and hit Mairone with a $1 million penalty for her role in the scheme. (O'Donnell, a key witness in the government's case, eventually raked in a $57.7 million whistleblower award.)

In the wake of Rakoff's July decision, the bank asked for a new trial and asserted that there wasn't enough evidence of a "material misrepresentation" on Countrywide's part to support the jury's fraud findings. Rakoff sniped at that argument in Tuesday's ruling, writing that it "borders on the frivolous."

A BofA spokesman confirmed Tuesday that the company will appeal. The bank's legal team includes Williams & Connolly's Brendan Sullivan and Enu Maingini. Marc Mukasey of Bracewell & Giuliani, who represents Mairone, said he was "quite optimistic" about the prospects for a successful appeal.

"Remember, the government's case was built on the testimony of a witness who was a willing participant in the High Speed Swim Lane process and whom, unbeknownst to us during trial, will recover $58 million dollars for turning on his former colleagues," Mukasey said.

Source: http://www.litigationdaily.com/id=1202716946354/Bank-of-America-Cant-Dodge-127B-Countrywide-Verdict