Legal News

Bank of America’s Use of Fraud Statute Challenged
Download PDF
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

Thomson Reuters reported U.S. District Judge Jed Rakoff challenged a fraud statute the United States government applied against Bank of America Corp. in litigation involving the sale of mortgages that negatively affected Freddie Mac and Fannie Mae. The fraud statute at issue was a law not used too often. The statute was applied against Bank of America Corp. in a lawsuit involving transactions stemming from Countrywide Financial Corp., which Bank of America Corp. bought.

The Manhattan, NY judge was not sure if the statute should be used. The United States Department of Justice’s desired to bring fraud cases against well known banks such as Bank of America Corp. under a law that went into play after the savings and loan crises of the 1980s.

  
What
Where


Judge Rakoff did not rule on the request to use the law. He said he would issue a decision by May 13 of this year about whether to dismiss the lawsuit. For those involved in the lawsuit, they may feel comforted that the case is a civil dispute, rather than a crime. In a civil case, the most a party may lose is money, and usually such matters get settled outside of trial because the solutions to such problems are usually up to the parties themselves. The case alleges Bank of America is cause of more than $1 billion in losses incurred by Freddie Mac and Fannie Mae.

Bank of America Corp. acquired Countrywide in 2008. In the financial dispute, the federal government seized Fannie Mae and Freddie Mac in 2008. They placed them into a conservatorship. The lawsuit was filed in October 2012. The case claims Bank of America Corp. defrauded Fannie Mae and Freddie Mac through a program begun at Countrywide Financial Corp. In litigation there may be allegations of fraud when one party is missing information the other party does not have. Sometimes these concerns get flushed out in discovery, and the parties find out that each side has participated in some wrongdoing.

According to Thomson Reuters, “Hustle” was a program meant to hurry up mortgage processing. “Hustle†reduced fraud detections. The result was loans that had problems. The problems exceeded what the industry standard allowed, said the Justice Department.

Get JD Journal in Your Mail

Subscribe to our FREE daily news alerts and get the latest updates on the most happening events in the legal, business, and celebrity world. You also get your daily dose of humor and entertainment!!




The case may not have been something that could have been avoided. Sometimes when people intend to sue there is no stopping them. The defendant just has to accept the case and defend it vigorously. The case is based on the Financial Institutional Reform, Recovery and Enforcement Act of 1989 (FIRREA). According to Thomson Reuters, FIRREA lets the government to go after civil penalties against anyone who commits a fraud “affecting a federally insured financial institution.” The fraud law has a burden of proof that is not high. The statute provides subpoena power and a statute of limitations of 10-years.

There are three banks involved in similar lawsuits. Besides Bank of America Corp., Bank of New York Mellon Corp and Wells Fargo & Co. are in cases against the government. The banks argue the fraud law cannot apply, but this may not be a sure argument. The judge in this case will soon let each side know if the law applies or not.





 

RELEVANT JOBS

Associate Attorney

USA-PA-Exton

ASSOCIATE ATTORNEY McKenna Snyder LLC, a law firm in Exton, PA has an immediate opening for an ex...

Apply now

Attorney

USA-MI-Sturgis

Qualifications: HaasCaywood is seeking associate attorneys for our Coldwater and Sturgis, Michiga...

Apply now

Attorney

USA-MI-Coldwater

Qualifications: HaasCaywood is seeking associate attorneys for our Coldwater and Sturgis, Michiga...

Apply now

Insurance Defense Trial Attorney/ Senior Counsel

USA-CA-San Francisco

Job description Trial Attorney - Personal Injury Defense Full Job Description Hickey Smith ...

Apply now

BCG FEATURED JOB

Locations:

Keyword:



Search Now

Education Law Attorney

USA-CA-El Segundo

El Segundo office of a BCG Attorney Search Top Ranked Law Firm seeks an education law attorney with ...

Apply Now

Education Law Attorney

USA-CA-Carlsbad

Carlsbad office of a BCG Attorney Search Top Ranked Law Firm seeks an education law attorney with 4-...

Apply Now

Education Law and Public Entity Attorney

USA-CA-El Segundo

El Segundo office of a BCG Attorney Search Top Ranked Law Firm seeks an education law and public ent...

Apply Now

Most Popular

SEARCH IN ARCHIVE

To Top