of America disputes $2.1 billion claim in U.S. fraud suit
Send a link to a friend
[February 27, 2014]
By Jessica Dye
NEW YORK (Reuters) - Bank of America
Corp <BAC.N> said it does not owe the U.S. government the $2.1
billion it is seeking in penalties after a jury found the bank
liable for fraud over defective mortgages sold by its Countrywide
unit, according to a court filing made on Wednesday.
Lawyers for the bank said the government's request "contradicts
every pertinent legal principle" and called it a "dramatic departure
from reality," the filing stated. Bank of America said in the filing
that it should only have to pay the amount it made in profit from
selling the loans, which it contended was zero.
A spokesman for the U.S. attorney's office in Manhattan declined to
comment. A spokesperson for Bank of America could not be reached for
comment Wednesday evening.
A federal jury in New York in October found Bank of America and
Rebecca Mairone, a former mid-level executive at Countrywide, each
liable for fraud in the civil lawsuit.
The case focused on a mortgage lending process at Countrywide, which
Bank of America acquired in July 2008, called the "High Speed Swim
Lane," or alternatively "HSSL" or "Hustle."
The government contended that Countrywide's program emphasized and
rewarded employees for the quantity rather than the quality of loans
produced and eliminated checklists designed to ensure that loans
Bank of America and Mairone denied wrongdoing. Bank of America has
said it was evaluating options for an appeal.
Any penalty would be assessed by U.S. District Judge Jed Rakoff.
Prosecutors initially asked for $863.6 million, but later raised the
amount to $2.1 billion.
[to top of second column]
In its response on Wednesday, Bank of America said that the U.S.
government erred by basing the proposed penalty on its gross "gain"
from the loans. Instead, the law requires the penalty amount to be
calculated by measuring the bank's "pecuniary gain," or amount of
profit that it made from selling the materially defective HSSL
loans, the bank said. It estimated that amount to be zero, according
to the filing.
Oral arguments have been set for March 13.
(Editing by Matt Driskill)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.