Timetable set in BOA mortgage fraud case

The federal government has filed a civil lawsuit alleging mortgage fraud on behalf of corporate entities and, potentially, individual employees of those businesses. The case underscores the criminal culpability that can attach to persons who were ordered by their supervisors to take various actions or, alternatively, were unaware they were breaking any laws in going about their duties.

The matter relates to the U.S. Department of Justice’s complaint alleging that Countrywide Financial Corp. and the Bank of America (BOA), which purchased Countrywide in 2008, engaged in massive fraud by hiding or minimizing the problems associated with “toxic mortgage loans” that were sold to the mortgage financiers Fannie Mae and Freddie Mac. The government contends that material information was hidden from Fannie Mae and Freddie Mac, with the end result being more than $1 billion in losses suffered by American taxpayers.

Litigation against major banks and Wall Street entities concerning the financial crisis of recent years has customarily named only corporate defendants, not individual employees of those firms. The BOA bank fraud case is different in that federal prosecutors state their intent to potentially include both current and former BOA employees as defendants. The government states that it might amend its complaint to add names.

An obvious concern for many is that employees who were merely performing their jobs in good faith and not actively involved at a high level in the alleged scheme that the government refers to as the “Hustle” could suddenly find themselves as defendants in the case.

Prosecutors have until the end of 2012 to amend their complaint.

Source: NBC News, “Bank of America employees could face fraud charges, prosecutor says,” Grant McCool and Jonathan Stempel, Oct. 25, 2012