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United States ex rel. O'Donnell v. Countrywide Home Loans, Inc.

United States District Court, S.D. New York

July 30, 2014

UNITED STATES OF AMERICA ex rel. EDWARD O'DONNELL, Plaintiff,
v.
COUNTRYWIDE HOME LOANS, INC., COUNTRYWIDE BANK, FSB, BANK OF AMERICA, N.A., and REBECCA MAIRONE, Defendants

Page 495

For United States of America, Plaintiff: Carina Hyatt Schoenberger, Ellen Melissa London, Jaimie Leeser Nawaday, Joseph Nicholas Cordaro, U.S. Attorney's Office, SDNY, New York, NY; Jeannette Anne Vargas, U.S. Attorney's Office, SDNY (86 Chambers St.), New York, NY; Pierre G. Armand, United States Attorney Office, SDNY, New York, NY; Shane Patrick Cargo, U.S. Attorney Office SDNY, New York, NY.

For United States of America ex rel. Edward O'Donnell, Plaintiff: David Gerard Wasinger, The Wasinger Law Group, P.C., St. Louis, MO.

For Bank of America Corporation, successor to Countrywide Financial Corporation, Countrywide Home Loans, Inc., and Full Spectrum Lending, Defendant: Brendan V.. Sullivan, Jr., PRO HAC VICE, LEAD ATTORNEY, Williams & Connolly, Washington, DC; Adam Joshua Podoll, Amy Mason Saharia, Catherine Saudek Duval, Enu A. Mainigi, Eric G. Blankenstein, Jennifer L. Gibbons, Jennifer Nicole Wimsatt Pusateri, Katherine Carney Hayes, Kenneth Charles Smurzynski, Malachi Brown Jones, Jr., Matthew Blumenstein, Ryan T. Scarborough, Stephen L. Urbanczyk, Stewart Hill Ackerly, PRO HAC VICE, Kannon K. Shanmugam, Lauren Kristina Collogan, Steven M. Cady, Williams & Connolly LLP, Washington, DC.

For Countrywide Bank, FSB, Defendant: Derek M Adams, Ryan P Lirette, PRO HAC VICE, Kelly E Phipps, Tamara H Schulman, Gus P. Coldebella, Goodwin Procter, LLP (DC), Washington, DC; Meghan K. Spillane, Goodwin Procter LLP, New York, NY.

For Rebecca Mairone, Defendant: Daniel Seth Meyers, Konstantin Chelney, Marc Lee Mukasey, Marvin Robert Lange, Michael C. Hefter, Ryan Michael Philp, Seth Michael Cohen, LEAD ATTORNEYS, David Lawton, Bracewell & Giuliani, LLP, New York, NY.

For Countrywide Home Loans, Inc., Countrywide Financial Corporation, Intervenor Defendants: Derek M Adams, Kelly E Phipps, Ryan P Lirette, PRO HAC VICE, Tamara H Schulman, Gus P. Coldebella, Goodwin Procter, LLP (DC), Washington, DC; Meghan K. Spillane, Goodwin Procter LLP, New York, NY; Richard Mark Strassberg, William Joseph Harrington, Goodwin Procter, LLP(NYC), New York, NY.

For Bank of America, N.A., Intervenor Defendant: Brendan V.. Sullivan, Jr., PRO HAC VICE, LEAD ATTORNEY, Williams & Connolly, Washington, DC; Adam Joshua Podoll, Enu A. Mainigi, Jennifer Nicole Wimsatt Pusateri, Katherine Carney Hayes, Kenneth Charles Smurzynski, Malachi Brown Jones, Jr., Matthew Blumenstein, Ryan T. Scarborough, Stephen L. Urbanczyk, Stewart Hill Ackerly, PRO HAC VICE, Jennifer L. Gibbons, Kannon K. Shanmugam, Lauren Kristina Collogan, Steven M. Cady, Williams & Connolly LLP, Washington, DC.

For United States of America, Intervenor Plaintiff: Carina Hyatt Schoenberger, Joseph Nicholas Cordaro, U.S. Attorney's Office, SDNY, New York, NY; Jaimie Leeser Nawaday, U.S. Attorney Office SDNY, New York, NY; Pierre G. Armand, United States Attorney Office, SDNY, New York, NY.

Page 496

OPINION AND ORDER

JED S. RAKOFF, United States District Judge.

Early in the Great Recession, the Securities and Exchange Commission brought suit against the three most senior executives of Countrywide Financial Corporation,[1] alleging that the company, at their behest, had falsely assured investors that, in the period from 2005 to 2007, it was

Page 497

primarily a prime quality mortgage lender, when in fact, " Countrywide was writing riskier and risker loans." Compl. ¶ 4, SEC v. Mozilo, No. 09-cv-3994 (C.D. Cal. filed June 4, 2009). The case was settled without the defendants admitting or denying the allegations, and the Department of Justice chose not to bring any criminal charges. But in 2012, a " whistleblower," Edward O'Donnell, a former Countrywide Vice President, filed a qui tam action alleging that another Countrywide program, known as the " High Speed Swim Lane" (or " HSSL" or " Hustle" ), was the vehicle by which Countrywide had perpetrated a subsequent fraudulent scheme from August 2007 to May 2008.[2]

Eventually, the U.S. Attorney's Office took charge of the case, and proved, as the jury found, that Countrywide and one of its officers, Rebecca Mairone, had engaged in an intentional scheme to misrepresent the quality of the mortgage loans that it processed through the HSSL program and sold to Fannie Mae and Freddie Mac during the aforesaid nine-month period. As a result, the jury found Countrywide and its successor in interest, Bank of America, N.A. (collectively, the " Bank Defendants" ), along with Ms. Mairone, civilly liable for fraud in violation of the ...


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