United States ex rel. O'Donnell v. Bank of America

___ F.3d ___ (2016)

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United States ex rel. O'Donnell v. Bank of America

United States Court of Appeals for the Second Circuit
___ F.3d ___ (2016)

  • Written by Sharon Feldman, JD

Facts

The Full Spectrum Lending Division (FSL) of Countrywide Home Loans, Inc. (Countrywide) started a loan-origination process called High Speed Swim Lane (HSSL) with the goal of selling prime loans to the government-sponsored entities Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (the GSEs). Rebecca Mairone (defendant) was the chief operating officer of FSL and oversaw HSSL. FSL sold HSSL loans to the GSEs pursuant to purchase agreements that represented that the mortgages sold were investment-quality mortgages as of the date of delivery. The loans sold to the GSEs were not investment quality at the time of delivery. The United States (plaintiff) intervened in a False Claims Act qui tam suit brought by Edward O’Donnell and added claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). An amended complaint alleged only FIRREA claims against Countrywide, Countrywide Bank, FSB, Bank of America, N.A. (the banks) (defendants), and Mairone. The government alleged that Countrywide knew that the HSSL loans sold to the GSEs were not investment quality and intended to defraud the GSEs. The jury found Countrywide, Bank of America, and Mairone liable under FIRREA for mail or wire fraud affecting a federally insured financial institution. On appeal, Mairone and the banks argued that the evidence at trial showed at most an intentional breach of contract and did not establish fraud.

Rule of Law

Issue

Holding and Reasoning (Wesley, J.)

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