Recently the Justice Department received some bad publicity when a government watchdog report claimed the government wasn’t doing much in its efforts to clean up the lending industry. There may be some truth to those reports but you wouldn’t know it from looking at the impressive list of convictions and civil victories coming from Preet Bharara, the United States Attorney for the Southern District of New York (Manhattan). Bharara’s office is just one of 93 US Attorneys offices nationwide but his district has collected billions from the banking industry.
With that introduction as a backdrop, we were not surprised last week when an assistant United States attorney in Manhattan said the government wanted a higher penalty from Rebecca Mairone, former Chief Operating Officer of Countrywide’s (later Bank of America) Full Spectrum Lending division. The government wants more money from the bank as well.
Last October, Bank of America took the unusual step of taking its case to a jury. Most banks settle in the hopes that early acceptance of responsibility will lower the penalties. Bank of America, however, “rolled the dice” and sought to prove their innocence. They lost. At a hearing last week, the Justice Department told the court it wants the bank to pay $2.1 billion and Ms. Mairone to personally pay as much as $1.6 billion. Previously, the government sought $864 million from the bank.
The $864 million dollar damage figure was calculated on the money the bank made from selling certain bad loans to Fannie Mae and Freddie Mac. (Both companies ran out of money during the mortgage crisis and had to receive TARP bailout monies to stay solvent.) Now the government says that the bank should pay a penalty based on the total gains the bank received from the faulty lending program.
In a filing with the court, the government said, “[The] defendants committed a massive fraud by originating thousands of toxic mortgage loans and selling them to Fannie Mae and Freddie Mac with lies… In an effort to not pay any penalty based on its gain, the bank contends that the Court must deduct all manner of expenses in order to reduce the maximum pecuniary gain to zero.”
The government has been equally assertive in its damage claims against Mairone. After learning that Mairone just received a $487,000 bonus from her current employer, the feds say she should also pay more. According to Assistant U.S. Attorney Pierre Armand, Marione’s penalty “needs to be severe enough to deter others.”
Marione’s lawyer disagrees. He believes that she should not have to pay any monetary penalty despite a jury having found her personally liable. According to a Wall Street Journal story, the lawyer questioned why any penalty should fall on a “single woman with two kids.”
Although we don’t know how much Mairone was paid at Bank of America, obviously she earns good money if just last year her current employer J.P. Morgan Chase paid her almost $500,000 in bonus money.
The case against Mairone and Bank of America was brought by a whistleblower under the Financial Institutions Reform Recovery and Enforcement Act. “FIRREA”, as the law is commonly called, and the federal False Claims Act have provisions that allow whistleblowers to be paid a percentage of whatever the government collects.
Taxpayers across the country are sick and tired of the abuses brought on by America’s “too big to fail” banks. We constantly get calls and emails from former bank employees, loan officers and even some customers with inside information about fraud and corruption within the banking industry.
Most folks that contact a whistleblower lawyer do so out of civic duty in a desire to stop fraud. Some call us because of the availability to receive millions in whistleblower awards. Whatever the motivation, there are plenty of other cases waiting to be discovered.
Whistleblower cases are not limited to big banks. Almost any fraud by a bank or mortgage company may be eligible as is Medicare fraud and fraud involving government construction projects, defense spending and government contracting. Many states have similar laws as well. (Presently we are also seeking cases involving mortgage servicers.)
If you believe you have a potential whistleblower claim, make sure that you first find a great whistleblower lawyer. The right attorney can often mean the difference between the government not taking your case and a multimillion dollar whistleblower award.
The whistleblower lawyers at Mahany & Ertl represent the whistleblower in one of the largest pending false claims act case in the nation, HUD’s $2.4 billion lawsuit against Allied Home Mortgage. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). Inquiries kept confidential.
(Whistleblower photo courtesy of Dave Winer – scriptingnews)