11-10-13 how bank of america covered up fraud by silencing whistle blowers _ _ alternet

8/3/2019 11-10-13 How Bank of America Covered Up Fraud by Silencing Whistle Blowers _ _ AlterNet

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Net!Watch News/ By Michael Hudson q 14CO_ENTS

How Bank of America Covered Up Fraud by A A ASilencing WhistleblowersCountrywide made lifehardfor an internal investigator, and acourt ruled that when BolA took over, she was illegallyftred inretaliation. 48tweets

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Corp. mortgage shops in and around Boston.

October 13,2011 I In the summer of 2 00 7, a team of corporate inwstigatorss il le d throu gh mou nd s o f p ape r p ul led f ro m s hred b ins at Count ryw id e F in anc ia l rffijUbmilto

redditBy interce pt ing the do cuments be fore they were s li ced by the s hredd er , the

inwst igators were ableto uncover what theybelie..ed was elidencethat branch employeeshad used sc is sor s,tape and WiteOut t ocreate fake bankstatements, inflatedproperty appraisalsand other phonypaperwork . Ins ide the

heaps of paper, for example , they found mock-ups that ind icated to in. .est igatorsthat wo rk ers h ad, as a ma tter of rou tine, l it eral ly c ut an d pa sted the a dd re ss foro ne ho me o nto an ap praisal for a c ompletel y d if fe re nt piece o f p rop er ty.

Ei lee n F os ter , the c ompa ny 's ne w f rau d in. .es tigat ion s c hief , ha d se en a lot ofs lipp ery b eh al ior in he r two -p lus de ca de s in the ba nk ing b us ine ss . Bu t she 'dne wr s ee n a ny thing l ik e thi s.

"You're looking at it and you're going, Oh my God, how did it get to t his point?"Fost er recalls. "How do you get people to go t o work e..ery day and do t hesethings an d think i t' s ok ay ?"

More su rpr ise s fol lowed . S he be ga n to ge t pu sh ba ck , sh e claims, f ro m c ompa nyoff ic ia ls who were unhappy with the inwst igat ion.

O ne e xe c ut iw , F o st er s a ys , s e nt a n em a il t odozens of workers in the Boston reg ion,waming them t he fr aud unit was on t he caseand not to put anyt hing in their emails orins tan t mes sag es that might be us ed a ga ins tthem. A nothe r, she sa ys, ca lled h er an d

g row ie d into the p ho ne : " I'm g-


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H e r t e am wa s no t a l lo w ed t o i nt er vi ew a s en io r m ana g er wh o m .e rs aw t hebranches. Ins tead, she says, Countrywide 's Employee Relat ions Department d idthe inte" ';ew a nd the n let the man age r' s bo ss let the t ra ns cr ip t be fo re i twa sprOl, ;ded to Foster and the fraud uni t.

In the end, dozens of employees were let go and six branches were shutd own. B ut Fo ster wor ried s ome of the wo rs t a ctors ha d es ca pe d un sca th ed . Sh es usp ec te d, s he s ay s, tha t s omething was n' t r ig ht wi th Co un trywide' s cul ture -and that it was going to be rough going f or her as she and her t eam dug int o themethods used by Countrywide 's sales machine.

By e ar ly 2 00 8, s he claims, s he 'd c on clude d tha t man y in Cou nt ryw ide 's c hain ofcommand were working to cOler up masslve fr aud within the company - outing

and then f ir ingTAKE ACTION whist leblowers who tried toreport forgery and othermisconduct. People whosp ok e u p, s he sa ys , we re"taken out:

Change.org I G e t W i dg e t I S ta rt a n O nl in e P et it io n.

By the f all of 2008, she wasout of a job too.Countrywide's new owner,Ba nk of A me rica Co rp ., told

her i t was f ir ing her for "unprofessional conduct."

F os ter b eg an a three -ye ar b al tl e to c lea r he r n ame an d es tab li sh tha t sh e an dother employees had been punished f or doi ng the r ight thi ng. Last week, the U. S. Dep ar tmen t o f L ab or ruled tha t Ba nk o fA mer ica h ad i ll eg al ly f ired h er as pa yb ac kfor exposing fraud and retaliation against whistleblowers. H ordered the b an k toreins ta te her and pay her some $930,000.

B an k of Amer ica de nies F os ter 's al leg at ion s a nd s tan ds b eh ind i ts de cision to f ireh er . Fo ster s ee s the rul in g a s a vindicat ion of h er de cision to k ee p f ig ht in g.

" Id on' t l et pe op le b ul ly me , int im id ate me an d coe rc e me ," F os ter told iWatchNews d ur ing a s er ies o f inte" ';ews. "And i t' s jus t n ot r igh t that p eo ple d on 't kn owwhat happened here and how it happened."

'Greedy people'Th is i s the story of Ei lee n F os ter 's f igh t ag ainst the na tion' s larges t ba nk an dwh at was o nc e the n at ion 's large st mor tga ge len de r. I t i s al so the s tory of otherforme r Cou nt ryw ide worke rs wh o claim the y, too, foug ht aga in st a cu lture ofcor ru pt io n that p rotec ted f rau ds ters, a bu se d b or rowers a nd h elped lan d B an k ofAmer ica in a qu ag mi re of leg al a nd f ina nc ial woes.

I n g Olemmen t rec ords a nd in inte" ';ews w ith iWatch News, 30 former employeescharge that Countrywide executi les encouraged or condoned fraud. Themisconduct, they say, inc luded falsi fied income documentation and other tac ticsthat helped steer borrowers into bad mortgages.

E ig hteen of the se ex . ..mploy ee s, inc lud ing F os ter , claim the y were d emoted o rf ired for quest ioning fraud. They say sales managers, personnel executlses andother company off ic ia ls used int imidat ion and f ir ings to s ilence whist leblowers.

A former loan-underwri ting manager in northern Cal ifornia, for example , c la imedCou nt ryw id e retal ia te d ag ainst h er af ter s he s en t an emai l to the c ompa ny 'sfounder and chief executhe, Angelo Moz ilo, about quest ionable lending pract ices .Th e e x-ma na ge r, E nid T ho mp so n, wa me d Mozi lo in March 20 07 tha t "gree dy

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u ne th ica l pe op le" were p res su ring wo rke rs to a pp ro" " loan s w itho ut rega rd forb or rowers' ab il it y to p ay , ac co rd ing to a lawsui t [3] i n Co nt ra Co sta Su pe rior Cou rt .

A L T U N E T S T O R IE S U P CO M IN G O N d igg _loading ...ithin 12 hours , Thompson c la imed, Countrywide executi ,. .. began a campaign

of reprisa l, reduc ing her dut ies and trans ferr ing s ta ffers off her team. Corporatem in ion s, s he c ha rge d, ran sa ck ed her d esk , b rok e h er co mp uter a nd removed herprinter and personal things.

~. . .- - - - - - ~ . ~ ~ ~0Craziest Things SaidAbout Occupy WallStreet POWERED BY DIGG'S USERS I ABOUT DIGG

I ~ y ou r a d h e re !Soon aft er, she said, she was fired. Her lawsuit was resohed l ast year. The terms .were not disclosed.Bank of America off ic ia ls deny Countrywide or Bank of America retaliated againstF os ter , Th ompson or o the rs wh o repo rted f ra ud . Th e ba nk sa ys Fo ster 's f ir in g wasb as ed o nly o n h er "ma na ge ment s tyle. " I t s ays i t ta ke s f ra ud s er iou sly an d ne "" rpun ishes workers who report wrongdoing up the corporate ladder.

Wh en f ra ud ha pp en s, Ba nk of A me rica s pok es man Rick Simo n sa ys , 'the lenderi s a lmos t alway s a "ct im , e ""n i f the f rau d is p erpet rated by indi "d ua l employe es .F ra ud is c ost ly, s o lend ers n ec ess ar il y in, .. .t h ea "l y in b oth pre" "n ting an din""s tiga ting i t. "

When it uncove rs f raud, Simon says, the bank takes "appropriate act ions ,"inc luding f ir ing the employees in\Olwd and cooperating with law-enforcementa u th o ri ti es i n c r im i na l i m .e s ti ga t io n s.

Mozi lo 's at torney , Da"d S ie ge l, told iWatch Ne..... i twa s "unl ike ly tha t Mr. Moz iloei th er wo uld h a" " h ad a di rec t role w ith, o r wou ld rec al l, s pe ci fi c e mploye egr iewnc es, a nd i t wo uld be inappropria te for h im to comment on ind i"dualemployment i ss ues in a ny e ""nt ." Sieg el a dd ed tha t "an y impl ica tion tha t he e" "rwo uld h a" " tolerated much les s co ndo ne d to an y ex ten t m isc on du ct o r f ra ud ulentact i" ty in loan produ ct ion an d un de rwri ti ng . .. i s u tter ly ba seles s. "

In

close d.


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S he c laims Co un trywide' s mana ge me nt protected big loan prod uc ers wh ous ed f rau d to p ut up big sa les n umbe rs . ff t hey were c au gh t, sh e sa ys,they frequently alOided termination.

Fo ster claims Co un trywide' s s ub pr ime len ding di ,, ;s ion co nce aled f rom h erthe le\el of "su spicious ac ti ,, ;t y rep or ts. "l hi s in tum redu ced the n umbe r off rau d repo rts Co un trywide ga le to the U .S . T re as ury' s F ina nc ial Cr ime sEnforcement Network.

Fo ster claims Co un trywide fai le d to n ot if y in\es tors whe n i t d isc o\eredf rau d o r o th er prob lems w ith loan s that i t ha d so ld a s the un de ~y ing a ss etsin "mor tgag e-ba ck ed " se cu ri ti es . Whe n s he c rea te d a rep or t des ig ne d todo cu men t the se loa ns o n a reg ular b as is g oing forward, sh e say s, sh e was"sh ut do wn " by c ompa ny o ff ic ial s an d told to s top d oing the repo rt .

set tl e ch arges they us ed falsi fi ed do cu me nts to s pe ed ho meo wn ers throug hforeclos ure. L awsu it s f il ed o n b eh al f of in\es tors claim Cou nt ryw id e l ied a bo ut thequ al it y o f th e p oo ls o f mor tgag es tha t the lend er s old them du ring the ho me -loanboom.

Bank of America says issues related t o Countrywi de are old news. Last year aspo ke sman d es cr ibe d f rau d c laims by state o ff icial s as ' 'water un de r the b ridge ,"n ot ing tha t the b an k set tl ed wi th do ze ns of states so on af ter b uy ing Co un trywide.

When federal o ff ic ia ls announced Foster's , ,;ctory las t week, Bank of Americadismisse d the c as e a s "an old mat te r da ting f ro m 20 08 ."

Ac co un ts f ro m Fo ster a nd o the r forme r e mp loy ee s, ho we \e r, p ut the b an k in anu nc omfo rtable p osi ti on. lhes e a cco un ts , a s we ll a s laws ui ts pu sh ed by in\eS tors,borrowers and gO\emment agenc ies, raise quest ions about how dil igently thebank has worked to clean up the mess caused by Countrywide - and whetherthe ba nk ha s t ried to cu rtai l i ts leg al l ia bi li ty by pa pe ring o\er the h istory ofcorrupt ionat i ts controwrsial acquisit ion.

I n F os ter 's c ase , the L ab or De pa rtmen t no tes [4[ th at two se nior Ba nk of A me ricaoff icials - not former Count rywide executil. 9s - made the decision t o fir e her .

l he a ge nc y s ay s the in\eSt iga tions led b y Fo ster foun d "wides pread and p arva si \ef ra ud " that , F os te r claimed , we nt be yo nd mis co nd uc t co mmit ted a t the bran chle\el and reached into Countrywide 's management ranks .

F os ter told the ag en cy that instea d o f d efend ing the r igh ts of ho ne st employ ee s,Countrywide 's employee relat ions uni t she ltered fraudsters ins ide thecompany. According to the Labor Department, Foster bel ie \ed EmployeeRelat ions ' 'was e ng ag ed in th e sys te ma ti c co se r-up o fv ar io us typ es of f ra udthrough terminating, harassing, and otherwise try ing to s ilence employees whoreported the unde~ying fraud and misconduct."

IngO\emment records and in interviews with iWatch NelMl , Foster describesother top-down misconduct:

In Foster's , , ;ew, Cou nt ryw ide lost i ts wa y as i t be ca me a p lac e whe re e \eryo newa s ex pe cted to b en d to the w il l o fs alesp eo ple d ri \en by a whate\er -i t- tak esethos.

lhe a tt it ud e, s he s ay s, wa s: "The rules d on 't mat ter . Reg ulat ion s do n' t ma tter . I t' sour game and we can play it t he way we want."

B an k of Amer ica de cl ine d to a ns we r de ta il ed q ue st ion s ab ou t Fo ster 'sal le ga tions . Simo n, the b an k spo ke sman , told iWatch Ne ws ' 'we are certa in" thatF os ter 's c laims "were p ro pe ~y an d ful ly in\eS tigated by Cou nt ryw id e andappropriate actions were taken."


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An d no t a ll forme r Cou nt ryw ide worke rs sa y that f ra ud wa s con do ne d b ymanagement .

F ra nk S an P ed ro , who wo rke d as a ma na ge r wi thin the inloe St iga tions u ni t f ro m20 04 to 20 08 , told the F in an cial C ri si s Inq ui ry Commis sion the co mp an y wo rk edhard 10 r oot out all the fraud t hat we could possibly f ind. We continued to getb et ter a nd b et ter a t i t. "

He said most of the f raud was "extemal " - outsider s trying to r ip of f the lender-an d in-hou se s ales staf fers who t ried to pu sh throu gh f rau du le nt loans "se ldo m go taway wi th i t. "

Gregory Lumsden, former head of Countrywide 's subprime di, ,;sion, Ful l SpectrumL en ding, s ay s the re are thou sa nd s o f e x-Cou nt ryw ide rs wh o ca n , ""uch for thecompan y' s ho ne sty. Wh en ba d ac tors we re ca ug ht , he s ay s, Co un trywide tookswift action.

" Id on' t ca re i f y ou' re M ic ros of t or y ou 're the Gol f Chan ne l o r Dup on t or MSNBC:compan ies a re g oing to make so me mistake s, " L umsd en told iWa tc h Ne ws.'Wh at y ou h op e is tha t co mp an ie s wi ll d eal w ith employ ee s tha t d o wrong . T ha t' swh at we d id. "

The Amer ican Dream

I n F eb rua ry 2 00 3, Co un trywide' s fou nd er a nd CEO, An ge lo Mozi lo, ga ve a lecturehosted by Harvard 's Joint Center for Housing Studies t it led '111eAmerican Dreamof Homeownersh ip : From Cliche to Mission."

Mozi lo , the B ro nx -bo rn s on o f a b utche r, ha d s tar ted Co un trywide w ith a p ar tne r in1 96 9 a nd b ui lt i t i nto a home- lo an empi re that wa s n ow on the v erge o f b ec omingthe nat ion's largest home lender.

B ut he sa w t rou ble on the ho ri zon . Be fo re his au dien ce o fa ca de mics an db us ine ss pe op le, he co mplaine d tha t a " re gu la tory mania" wa s hu rt ingCountrywide and other "reputable" mortgage lenders . Overreach ing predatorylen ding laws, he sa id , were threaten ing sh ut the d oo r to ho meo wn ers hip for ha rd -wo rk ing low-inc ome a nd mino ri ty fam il ies. Ind us try an d ci ti ze nry n ee de d to worktogether to

prevent government from strangl ing the mortgage market, he said.

~ wasn 't , Mozi lo ad ded , that h e wa s ag ainst c ra cking d own o n b ad app le s thattook ad",n tage ofwlnerab le bonowers.

"Th es e len de rs, " the CEO s aid, "des e" ., u nwav er ing s crut in y a nd , wh en foun dguilty, an unforgi,,;ng punishment."

Arou nd the t ime Moz ilo was g i, ,;ng h is s pe ec h b ack e as t, on e of h is e mploye eswa s f in ding wha t s he later c la ime d to be evidence of ser ious fraud atCountrywide's Rose,,;lIe, Calif., branch.

Employees were falsi fy ing loan applicants' salar ies in mortgage paperwork andforging the ir n ames on loa n d oc uments, ac co rd ing to a laws ui t [5[ f i led by M ich eleB ru ne ll i, who wa s a loa n p roc es so r an d later a b ran ch o pe ra tions man ag er forCou nt ryw id e. In March 2 00 3, B ru ne ll i rec al led , sh e us ed the c ompa ny 's "ethi cshot line" and lodged what she thought was a confident ia l complaint .

Immedia te ly a fter, Brune ll i c la imed, her reg iona l manager yel led at her for cal lingthe ho tl in e. Th en , sh e s aid, he r immed iate s up ervi so r c al le d h er in an dreprimanded her for mak ing the complaint .


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"No t e \e ryo ne 's ha nd s are clea n in thi s of fi ce ," the b ra nc h ma na ge r s aid,acc ording to B ru ne ll i. "Are y ou read y for tha t?"

B ru ne ll i didn 't b ac k do wn . S he c on tinu ed repor ti ng e ,, ;d en ce of f ra ud to theexe cu tb es a bo \e he r, h er lawsu it sa id. Th ey d is misse d he r c on cerns , she sa id,say in g sh e was h a, ,;ng "emot ion al ou tb ursts" an d ac cus in g h er of b eing "on awitch hunt."

In c ou rt pa pe rs, the co mp an y f la tl y d en ied he r a lleg at ion s, acc us ing Brun el li o fact ing in "bad fai th. " He r laws ui t was reso be d in 2 010 .

Two other former Countrywide workers , Sabrina Arroyo and Linda Court , c la imedthe y los t thei r j ob s in 20 04 af ter they c omplained su pe n, ;s ors we re di rec ting themto forge borrowers ' s ignatures on loan paperwork . After they informed EmployeeRelat ions about the forgeries , the company quick ly f ired them, they c la imed.

"Co rp orate came in. We told the m the s to ry. We told the m e \erything ," Ar roy otold i Watch News. "They said don't worry, whate\er you say, you'r e going to becO\er ed. A month or so later , I w as let go."

Ar roy o a nd Cou rt su ed [6]Co un trywide in state co ur t i n S acrame nto, b utCou nt ryw id e won an o rde r forcing the c as e into a rb it ra tion. T he y d ec ide d to dropthe ir claim b ec au se the od ds are s tac ke d a ga ins t worke rs in a rbi trat io n, thei ra ttomey, Wil liam Wright, said.

So me ex -e mp loy ee s sa y they wen t h igh up Cou nt ryw id e' s ch ain of comman d toraise red f la gs a bo ut f ra ud . Ma rk B on jea n, a forme r op erat ion s un it ma na ge r inAr izo na , co mp laine d to a di ll ision ai ll ice preside nt , a cco rd ing to a lawsu it [7] i nstate cour t i n Mar icopa Count y. Within t wo hours of sending t he VP an emailab ou t wh at he b el ie \e d we re l li olat io ns of the s tate' s o rga nize d c rime a nd f rau dstatutes , the su it sa id, he was place d on ad minist ra ti \e lea \e. T he n ex t da y,acc ording to the laws ui t, he was f ired.

An othe r e x-Cou nt ryw id er , Sh ah ima Sh ah ee m, claimed sh e took he r c omplaints tothe \ery top. L ik e E nid T ho mp so n b efore he r, sh e sa id sh e wrote a n e mai l d irect lyto Mo zi lo, the CEO, abo ut f ra ud an d retal ia ti on. Sh e ne \er he ard ba ck f romMozilo, according to her lawsuit [8] i n Cont ra Costa S up er ior Co ur t. Instea d, thesui t sa id, she wa s su bjected to a c ampa ign of ha ras smen t b y c ompa nyexe cu tb es a nd h uman -reso urces rep res en ta ti \e s that forced h er to lea\e h er job .

Sh ah ee m's c as e was set tl ed ou t o f co ur t, h er at tomey sa id.

A Ba nk of A me rica sp ok es ma n d ecl ine d to res po nd to q ue st ions ab ou ta llegat ions by Shaheem, Bonjean and other former Countrywide employees,n ot ing tha t thei r c laims "are related to s itua tions an d in\es tigat io ns that tookp la ce a t Co un trywide pr io r to B an k of Amer ica ac qu ir in g the compan y. "

'Fund the loans'

Cou nt ryw id e h ad be en slowe r than man y o the r mo rtgag e lend ers to ful ly embrac emaking s ub pr ime loan s to b or rowers w ith mod es t inc omes or wea k cred it . B y20 04 , thou gh , Cou nt ryw ide h ad b ec ome a p la ye r in the ma rke t for su bp rime de alsand many other nontrad it iona l mortgages, inc luding loans that d idn' t require muchdocumentation of borrowers' income and asset s .

Th ese loan s were p ar t o f th e p lan for mee ting i ts CEO's au da ciou s g oa l o fg row in ghis company from a giant to a col ossus. Mozilo had wwed that his companywo uld d ou ble i ts sh are o f th e h ome- loa n marke t to 30 pe rce nt by 2 00 8.

So me former Cou nt ryw id e e mploye es s ay the press ure to p us h throu gh mo re a nd


7/9

more lo ans encou ragea an anytn lng -goes atutuoe. wuestiOnaDle unoerwnunqp r ac ti ce s o f te n h e lp e d r is ky l oa n s s a il t hr o ugh t he l en d er 's l oa n -a ppr o va l p r oc e ss ,t he y s a y.

I n o n e e xam ple , C o un tr yw id e a pp lU \e d a lo an f or a b or ro w er w h os e a pp li ca ti onli ste d h im a s a d ai ry f or em an e am in g $ 12 6, 00 0 a y ea r, a cc or di ng to a le ga l c la imla te r f ile d b y M o rtg ag e G ua ra nty I ns ur an ce C o ., a m o rt ga ge i ns ur er . H t ur ne d o utth at t he b o rr ow e r a ct ua lly m ilk ed c ow s a t th e d ai ry a nd e ar ne d $ 13 ,2 00 a y ea r,t he l awsu i t a ll eged .T he b o rr o w er p r ol Ad e d th e c o rr e ct i n fo rm at io n , b u t t he l en d er b o o ke d t he l oa nb as ed o n d ata th at i nf la te d h is w a ge s b y m o re t ha n 8 00 p er ce nt, t he le ga l c la imsaid.

I n a n o th er i ns ta nc e, a cc or di ng to a f or m er m a na ge r c it ed a s a " co n fi de nt ia lw i tn e ss ' i n s h ar e ho ld e rs ' l it ig a ti o n [ 9] ag a in s t t he c ompan y, empl oy e es appe a re dto b e i m. ,l" "d i n a " lo an f li pp in g" s ch em e , p er su ad in g b or ro w er s to r ef in an ce a ga ina nd a ga in , g i" ,; ng t hem li tt le n ew m o ne y, b ut p ili ng o n m o re f ee s a n d r at ch et in g u pth ei r d eb t. T he w itn e ss r ec all ed th at w h en th e s ch em e w a s p oi nte d o u t toL umsd en , C o un tr yw id e 's s u bp r im e l oa n c h ie f, t he r e sp o n se f rom L umsden was" sh o rt a n d sw e et ": " Fu n d t he l oa n s. "

S uc h e pi so de s w e re n' t u n commo n , th e w i tn es s s ai d. I n e a r ly 2 00 4, h e c la im ed ,h e d is c ov e re d t ha t N i ck Ma r ko p o ul os , a h ig h -p r od u ci ng l oa n o f fi ce r i nM a ss ac hu se tts , h ad c ut a n d p as te d i nf or m ati on f ro m th e I nte rn et to c re ate a f ak e" "r if ic at io n o f e m plo ym e nt f or a lo an a pp li ca nt. M a rk op ou lo s le ft th e c om p an y o fh is o w n a cc or d, th e w itn es s s aid , b ut h e w a s s oo n r eh ir ed a s a b ra nc h m an ag er .

T he w itn e ss s ai d h e c on ta cte d a r eg io n al " ,; ce p r e si de nt t o o b je ct to r eh ir in g a ne mp lo ye e w ith a h is to ry o f f ra ud . B ut h e s a id th e r eg io na l V P - c itin gMa rk o po u lo s 's h ig h p r od u ct il At y - o " "r r ul ed h is o b je c ti o ns .

M a rk op o ulo s c ou ld n' t b e r ea ch ed f or a r es po n se . L um sd en s ay s h e d oe sn 't r ec allany i n c iden t im ., I "' ;ng " loan f li ppi ng " a ll ega t io ns .

Brushed off

E ile en F os te r k ne w li tt le a bo ut C o un tr yw id e' s f ra ud p ro ble m s w h en s he to o k a jo bw it h th e c om p an y i n S ep te mb er 2 00 5.

F o r F o ste r, th e

m o "" s eeme d li ke a n a tu ra l p ro g re ss io n . S he 'd a cc um u la te d 2 1 y ea rs ' e xp er ie nc ei n th e b an ki ng b us in es s, s ta rti ng o u t a s a te lle r a t G r ea t W e ste rn B an k a ndw o rk in g h er w a y u p t o " ,; ce p r e si de nt f or f ra ud p re "" nt io n a n d i n" ., .t ig ati on a t F ir stB an k I nc .

C o un tr yw id e b ro ug ht h er o n a s a f ir st lA ce p re si de nt a nd p ut h er i n c h a rg e o f ah ig h -p r io r it y p r oj ec t: A n o " "r h au l o f h ow t he c ompan y ha nd le d c u st ome rcomplaints.

T h e c ompan y' s s y st em s f o r h a nd li n g c ompl ai n ts , F o st er r e ca ll s, w e r e d is jo i nt eda n d i n ef fe c ti "" . V a ri o us d il As io n s had d if fe r in g p o li ci es a n d t he r e w a s n' t m u che ff or t t o e ns ur e t ha t c om pla in ts g o t a d d re ss ed . T hi ng s h ad g otte n s o b ad , s hes ay s, f ed er al b an ki ng r eg ula to rs o rd er ed th e c om pa n y to d o s om eth in g a bo ut th ep ro ble m. F os te r' s ta sk w a s to s ta nd ar di ze th e c om pa n y' s p ro ce du re s a nd e ns ur et ha t p e op le w i th c ompl ai n ts d id n 't g e t b r us h ed o f f.

A s s he s et a bo u t f ix in g th e p ro ble m s, s he s ay s, s he e nc ou nte re d th in gs th at g a" "he r pause .


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Th e c ompan y' s mor tga ge f ra ud imes tiga tion un it , Fo ster s ay s, refuse d to sh areda ta ab ou t the c omplaints i t rece iled. Ea ch t ime she req ue sted the s ta ts, s hesays, she hit a brick wal l.

F os ter say s sh e also ran into a hi tch whe n s he b ega n dist ri bu ting a mo nthlyrep or t tha t broke d own c omplaint da ta for e ac h o f th e co mp an ies ' op erat ingdi\1sions.

Cou nt ryw id e Home Lo an s S eNcing, wh ich c ol lec ted bo no we rs ' p ayments ea chmonth, was the su bject of c omplaints a bo ut i ts forec los ure p rac ti ces a nd o the ri ssu es . T he \Olume o fs er io us co mp la ints in\OhA ng the se Nc ing un it topp ed 1,000per month , dwarf ing the number for o ther d iloisions.

Th is u pse t of fi cial s w ith the s eNcing un it , Fo ster reca ll s. Th e c omplaints weren' t" rea l co mp la ints, " the s eNcing ex ecs argue d, an d Fo ster was mak in g the u ni tl oo k b ad b y includ ing the m in he r repo rts.

Th e u ps ho t: Fo ster was o rd ered, sh e sa ys , no t to inc lu de man y of the co mp laintsabout the seNcing unit i n her repor ts. She thought it was odd, she says, but shedidn't t hink it was e"dence of a lar ger patt em. She f igured it was mostly anexerc i se in backs ide- cmering.

'When we lost at the meeting, I was like, 'OK, t hey want to just cover this up, . ..Foster says. "But it wasn't anyt hing to the scale that I t hought it would causegreat harm."

Only later - after she took owr the mortgage fraud inwstigation unit - did sherea li ze , s he s ay s, that c ov er u ps we re pa rt of the cu lture of Co un trywide, a nd tha tef for ts to pa pe r o wr p rob le ms h ad less to do wi th bu rea uc ra ti c inf igh ting an d mo reto do w ith hiding something da rke r w ithin the c ompa ny 's cu lture.

'What I c ame to fi nd out," she says, "was that it was all by design."

Bouquets and handbags

State law enforcers would later charge that Countrywide executbes des ignedf ra ud into the lend er 's sys te ms as a way o f bo os ting loan produ ct ion . Du ring themor tg age bo om, cr it ics sa y, Co un trywide a nd othe r len de rs d id n' t wor ry ab ou t thequalit y of the loans they were making because t hey oft en sold the loans to Wal lSt ree t b an ks a nd inws to rs. So lon g a s b on owers mad e the ir f ir st fe w payments,the in\9S tors were u su al ly the on es who took the hi t i f h omeowne rs co uldn' t ke epup with payments.

Countrywide treated bonowers, Cal ifomia 's a ttomey general later c la imed, "asn othing more than the mean s for produ cing more loan s, " man ipu la ting them intosigning up for loan s w ith l it tl e reg ard for whe th er they c ou ld af ford the m.

Cou nt ryw id e' s d riw to b oo st loa n p ro du ct io n e nc ou ra ge d f ra ud , for ex ample, onloa ns tha t req ui red l it tl e or n o d oc umen tat ion o f b ono wers' f in an ce s, ac co rd ing toa lawsu it b y the I ll in ois a ttome y g en eral . One former e mp lo ye e, the su it sa id,est imated that b on owers' i nc omes we re e xag ge ra ted o n 9 0 p ercen t of thereduced-< locumentat ion loans sold out o f h is branch in Chicago.

One wa y tha t Cou nt ryw ide b oo ked loan s was by pa ying ge ne rou s fees toind epe nd en t mor tga ge broke rs who s tee re d cu stomers i ts wa y. Co un trywide ga wso l it tl e s crut in y to thes e d ea ls that b on owers o ften e nd ed up in loan s that the ycou ld n' t pa y, the state o f I ll ino is' s ui t s aid.

InChicago, the sui t said, Countrywide 's bus iness partners inc luded a mortgageb ro ker co nt rol led by a f il e- time co nvicted felon. One So urce Mo rtgag e Inc .' s


9/9

UWI I t: ll , vlli::Illt:lti IVli::IllijUIU, IltiU eereeu lllllt:l lUI vvt:I!tllJUllti I;lltllijt:lti i::IIlUUlIlt:l1 I;lllllt:lti,the sui t said.

One S ou rc e rec ei . .. .d a s muc h as $1 00 ,00 0 per mon th in fee s f rom Coun tryw id e,banking as much as $11,000 for each loan i t steer ed to the lender. Mangol d, intum, s ho we re d a Co un trywide branc h ma na ge r a nd other employ ee s wi thexpensi . .. . g if ts , inc luding f lowers and Coach handbags, the sui t said.

Countrywide in tum funded a stream 01 l oan s a rrang ed b y On e S ou rc e, the s ui tsaid, e .. ..n a s the broke r m isled bo rrowe rs ab ou t ho w muc h the y'd b e p ay ing onthe ir loans and falsi fied information on the ir loan applica tions. One borrowerprovided pay stubs and tax ret ums showing he eamed no more than $48,000 peryear, but One Source l isted hi s income as twice that much, according to t he suit.

Mango ld c ou ldn 't be reach ed for c omment . His at torne y sa id in 2 00 7 tha tMangold den ied a ll 01 the s ta te 's a llegat ions against h im.

Cou nt ryw id e, the s ta te' s s ui t said, k ep t up i ts pa rtnersh ip w ith One S ou rce formore than three ye ars. I td idn' t e nd the relat io ns hip un ti l t he s tate su ed On eSource for fraud and s lapped Countrywide with a subpoena seeking documentsrelat ing to the broker.

As quest ionable pract ices continued, Countrywide 's fraud in. .. .s tiga tion uni t hadtroub le keeping up, according to Larry Forwood, who worked as a Cal ifomia-basedf ra ud in. .. .. t ig ator for Cou nt ryw id e in 2 00 5 a nd 2 00 6, b efore F os ter too k o wr thefraud unit . His personal caseload totaled as many as 100 cases at a t ime, many01 them im,olving dozens or hundreds of loans each.

So me ca se s inw l . .. .d mo rtgag e b ro kers or in-ho us e s taf fers who pres sured real -estate ap praisers to inf la te prope rty va lue s. T he c ompa ny maintaine d a "do n otu se " l ist of crook ed ap praise rs wh o'd b ee n c au gh t fal si fying ho me v alues , bu t thesales force o ften igno red the l ist a nd u se d thes e a pp ra ise rs a ny wa y, F orwo odsays.

Cou nt ryw id e' s f ra ud in_t iga tion u ni t d id h a. .. . s ome s uc ce sse s d ur ing Fo rwoo d'stenur e. It shut down a br anch in the Chicago area, he said, aft er a rash 01 quick-defau lt ing loans sparked a rev iew that uncowred e lAdence 01 bogus appraisalsand

forge d s ig na tures o n loa n p ap erwork. One mana ge r, F orwoo d s ays , t ri ed torat iona li ze the f ra ud , tel li ng in. .. .s ti gators: Wha t wa s the big de al i I, s ay , f i.... out ofe....ry 30 loans was fraudulent?

Wh en the un it s hu t do wn a branc h in so uthe m Cal ifom ia a fter u nc o . .. .r in g s imi larevide nc e of f ra ud , Fo rwoo d rec al ls, i t go t s ome p us hb ack . ~ came al l the wayfrom the t op, he says, lAa a phone call t o the f raud unit from Mozilo.

"He go t . .. .r y u ps et : Fo rwoo d sa ys . "He ba sical ly go t o n the p ho ne a nd said:'Next time you need to do that, clear it wi th me.'"

Mozi lo 's at torney d id n' t resp on d to qu es tions f ro m iWa tc h Ne ws a bo ut F orwoo d'saccount.

For Part 2ofEileen Foster's story, go to lWatch News andread Mortgage iIU:lustrytanks.fraud continues at Countrywide

Michael Hudson, ajormer WaHStreet Journal reporter, is a s ta ffwr it er a t the Cent erfor Public Integrity (http://www.publicintegrity.org), a nonprofit journalistorgan izat ion. He is the author o f ""(2010, Times Books)

I r .....,

11-10-13 how bank of america covered up fraud by silencing whistle blowers _ _ alternet

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