Richard Bowen

  • Home
  • About
  • Speaking
  • Videos
  • Media/Press
  • Testimonials
  • Blog
  • Contact
  • +1-214-604-5492

June 2, 2016 By Richard Bowen

Did the Federal Appeals Court Just Open Up the Floodgates to Fraud??

Credit: Billy Hathorn, CC BY-SA 3.0
Bank of America in Columbia, SC. Credit: Billy Hathorn, CC BY-SA 3.0

In a recent 3-0 ruling that has left many shocked and scratching their heads, a federal appeals court has reversed a $1.27 billion jury verdict against Bank of America (BofA). 

The federal  jury took only three hours in 2013 to find BofA guilty of civil fraud for deliberately selling defective mortgages through their Countrywide unit to Fannie Mae and Freddie Mac and marked one of the few times the Department of Justice has actually proceeded to trial in an attempt to hold large banks accountable for defrauding the U.S. government and the American public.

In the trial it was proven that employees of Countrywide knowingly and intentionally sold the toxic mortgages despite being warned repeatedly by Countrywide whistleblower Edward O’Donnell and other employees that the mortgages violated its contract with Fannie and Freddie. As journalist Jesse Eisinger notes in a ProPublica article “Bank of America’s Winning Excuse: We Didn’t Mean To.”

“The appellate court panel accepted the main facts as described by the government. It acknowledged that Countrywide intentionally breached its contract but ruled that it had not engaged in fraud.”

The reason the appeals court ruled that the circumstances did not constitute fraud under the Fannie Freddie contract, as Judge Richard Wesley wrote in the opinion, is that if the fraud is based on “promises made in a contract, a party claiming fraud must prove fraudulent intent at the time of contract execution: evidence of a subsequent, willful breach cannot sustain the claim.”

So even though Countrywide knowingly and intentionally violated the terms of its contract, because the Department of Justice did not prove that Countrywide had the intent to defraud Fannie and Freddie when it originally executed the contracts years before, then fraud was not committed.

This is insane, and opens up the floodgates to additional future fraud by the banks!

This reasoning allows banks to even change their minds to defraud under existing contracts to sell mortgage loans and it is therefore not considered to be fraud because they did not intend to commit fraud when they executed the contracts!!

As Michael Winston, another Countrywide whistleblower and fellow founder of Bank Whistleblowers United noted about Countrywide – “Angelo Mozilo’s growth strategy at Countrywide was FUND ’EM.” Winston further explains by saying “Even if the borrower had no cash, no assets, no potential, no prospects, if they could fog a mirror, then Countrywide would give them a loan. And the selling of the mortgage loans to Fannie Mae and Freddie Mac, even though they were violations of the contracts, are examples of the lengths the company would go.”

Needless to say, Winston is “shocked” by the appellate court decision that this did not constitute fraud.

In 2013, the federal jury also found Rebecca Mairone, a former Countrywide mid-level executive, liable for fraudulently shoddy loans originated through its “high speed swim lane” program called Hustle. The Justice Department thought the program emphasized speed over quality and that it rewarded staff for generating more mortgages, albeit not the best.

During the trial, federal prosecutors had accused Ms. Mairone of encouraging employees to push through loans to unqualified buyers, which caused more than $1 billion in losses. It seems that the faster employees hustled to originate loans, the more money they’d make in higher bonuses. Supposedly Countrywide did approve loans that were bad credit risks; yet the claim is they did so in part because Fannie and Freddie were in a rush to buy them.

The 3-0 decision in the 2nd U.S. circuit court of appeals in New York, Judge Richard Wesley’s court, claimed that at most Countrywide may have breached contracts to sell investment-quality loans. “The trial evidence fails to demonstrate the contemporaneous fraudulent intent necessary to prove a scheme to defraud through contractual promises,” Judge Wesley wrote in the 31-page ruling.

The three judge panel ruled the loan program was not part of a deliberate deception. And the WSJ concurs!

Albeit it is an editorial piece, WSJ Assistant Editorial Page Editor James Freeman even states that the three federal judges “ruled that the justice department didn’t go too easy on bankers; it went too far.”  Freeman goes on to say, “facts matter under the law even if they don’t in politics. The mortgages at issue were prime loans, and there’s a difference between failing to meet the terms of a contract and perpetrating a fraud. As the appeals court panel noted, “It is emphatically the case—and has been for more than a century—that a representation is fraudulent only if made with the contemporaneous intent to defraud—i.e., the statement was knowingly or recklessly false and made with the intent to induce harmful reliance.”

One of Ms. Mairone’s attorneys, Joshua Rosenkranz said the case, “was a massive government overreach” … “The message is that government should stop looking for fraud where it doesn’t exist.”

Actually the message sent is that the TBTF banks will not and can not be held accountable. It is sad; it is despicable to even consider that the big banks may in fact control our court system, our economy, and some politicians.

So my friends, when will we say enough is enough and raise our voices to stop this travesty of justice?

If you’re as concerned as I am, please reach out to Jeb Hensarling, Chairman of  of the House Financial Services Committee and to your own representatives and protest this parsing of the facts and the law.

Related Posts

The DOJ Lemon Award – Go Directly to Jail!
Whistleblowing Has a Price – Is It Worth It?
Whistleblowers: Inside the Mortgage Meltdown

"Take On Wall Street" - a Bold Agenda to Control the Large Banks!
Ethics is Just Good Business
Ethics on your mind? Subscribe to my ezine to get my latest article delivered right to your inbox. Click Here to Subscribe

Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

Related Posts

  • Why Is the Fed Ignoring What Goldman Sachs Is Up To Now?Why Is the Fed Ignoring What Goldman Sachs Is Up To Now?
  • The world is in crisisThe world is in crisis
  • Ethical Leadership- Culture is the Culprit!Ethical Leadership- Culture is the Culprit!
  • Too big to be held accountable?Too big to be held accountable?

Comments

  1. fred says

    November 1, 2016 at 12:15 pm

    Bank Robber –“You can’t pin a murder rap on me! I had no intention of robbing the bank and killing the guard, when I original bought the gun 10 years ago. My life just took an unfortunate turn for the worse and was forced to use it.”

What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59-05:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
https://richardmbowen.com/testimonials/2556/

Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19-06:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
https://richardmbowen.com/testimonials/711/

Ben Stein"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26-06:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
https://richardmbowen.com/testimonials/712/

Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17-06:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06-06:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50-06:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22-06:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

Want to Hire Richard?

Watch Richard

See What Clients are Saying

About Richard

Recent Posts

  • What should you do before you report wrongdoing?
  • Peace and happiness this holiday season
  • Wishing you a warm and happy Thanksgiving
  • Speaking at the University of North Texas
  • Resisting Corporate and Government Corruption

Categories

  • Business Ethics
  • Congress
  • Corporate Debt
  • Corruption
  • Ethical Leadership
  • Financial Crime
  • Financial Crisis
  • Financial Crisis of 2008
  • Fraud
  • Holiday
  • International
  • Mortgage Lending
  • Mortgage Meltdown
  • Relationships
  • Resources
  • Speaking
  • Texas Politics
  • The Fed
  • Too Big To Fail
  • Uncategorized
  • Updates
  • Wall Street
  • Whistle Blowers

About Richard

Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

Read more

Connect with Richard

  Facebook   Twitter   Linked   YouTube

Contact Us

Phone: +1-214-604-5492

Email: Richard@RichardMBowen.com

Contact Richard

Copyright 2021© 2023 · Richard M. Bowen | ALL RIGHTS RESERVED.

X
Sign up to receive my blog posts via email!
Subscribe >>