The request in a court filing late on Wednesday was based on gross
revenue generated by the fraud, the government said. The Justice
Department had previously asked for $863.6 million.
The initial request was based on gross losses it said
government-sponsored mortgage finance companies Fannie Mae <FNMA.OB>
and Freddie Mac <FMCC.OB> incurred on loans purchased from
Countrywide Financial Corp in 2007 and 2008.
In a December hearing, a judge asked the bank and the Justice
Department to brief him on how he might base the penalties on
Countrywide's gains rather than losses resulting from the mortgage
A federal jury in New York in October had 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 check lists designed to ensure that loans
Bank of America and Mairone denied wrongdoing. Bank of America has
said it was evaluating options for an appeal.
"This claim bears no relation to the limited Countrywide program
that lasted several months and ended before Bank of America's
acquisition of the company," Lawrence Grayson, spokesman for the
bank, said on Thursday.
Any penalty would be assessed by U.S. District Judge Jed Rakoff. At
the December hearing, he asked for a "more full presentation" on how
to calculate the penalty on Countrywide's gains, calling it a
Evidence the government presented at trial indicated Countrywide
earned $165.2 million selling the loans.
[to top of second column]
But in its filing Wednesday, lawyers working in the office of
Manhattan U.S. Attorney Preet Bharara said the penalty should be
based on Countrywide's gross gain, rather than net gain.
The government urged the judge to set the maximum penalty to
"punish defendants for their culpability and bad faith, and to deter
financial institutions and their executives who would engage in
similar fraudulent mortgage schemes".
The potential penalties, if approved by Rakoff, would add to the
more than $45 billion Bank of America has already agreed to pay to
settle disputes stemming from the 2008 financial crisis.
Bank of America's litigation expenses jumped in the fourth quarter
of 2013 to $2.3 billion from $916 million a year earlier.
In its brief, the government said it continued to also seek a $1.1
million penalty from Mairone based on her ability to pay.
Marc Mukasey, a lawyer for Mairone, in an email on Thursday said the
government had made his client a "scapegoat" when her supervisors
and risk managers all approved the mortgage origination process at
Bank of America is scheduled to respond to the government's motion
on February 26. Oral argument before Rakoff is scheduled for March
The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al,
U.S. District Court, Southern District of New York, No. 12-01422.
(Reporting by Nate Raymond in New York;
editing by Lisa Von Ahn and Sophie Hares)
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