Today, the Second Circuit reversed Judge Rakoff’s $1.2 billion penalty against Bank of America/Countrywide for FIRREA violations (see our previous coverage here).  The case involved allegations that BoA/Countrywide had sold faulty mortgages to Fannie Mae and Freddie Mac, originally brought as a qui tam suit under the False Claims Act in which the government intervened.  The Second Circuit’s decision focused on whether the breach of a contractual promise, without further proof of fraudulent intent at the time of contracting, could sustain a claim for fraud.  The Second Circuit held that it court not:
Continue Reading Second Circuit Reverses Judge Rakoff’s $1.2 Billion Penalty in BOA-Countrywide FIRREA Litigation

In an opinion today, Judge Rakoff rejected motions to set aside a jury verdict in the so-called “Hustle” case, in which the government accused Countrywide (later acquired by Bank of America) and an officer named Rebecca Mairone of a scheme to defraud Fannie Mae and Freddie Mac into buying faulty mortgages.  The jury had ruled against the defendants and Judge Rakoff then ordered damages of $1.3 billion (see our prior posts on the case here). The defendants sought to set aside the verdict by arguing “that the Government’s evidence did not establish that the HSSL loans were of lower quality than Fannie and Freddie could have reasonably expected, and therefore that they made no misrepresentations that were material,” but Judge Rakoff rejected the argument as “border[ing] on the frivolous”:
Continue Reading Judge Rakoff: Challenge to Countrywide “Hustle” Jury Verdict “Borders on the Frivolous”

In an opinion today, Judge Rakoff ordered Bank of America to pay $1.3 billion in the so-called “Hustle” case, in which a jury found that Countrywide (later acquired by Bank of America) and an officer named Rebecca Mairone engaged in a scheme to defraud Fannie Mae and Freddie Mac into buying faulty mortgages. Judge Rakoff rejected Bank of America’s argument that the statute at issue, FIRREA, required the penalties to be calculated by reference to the “net” gains or loss resulting from the alleged conduct:
Continue Reading Judge Rakoff Orders Bank of America to Pay $1.3 Billion in “Hustle” Case

In an opinion posted online today, Judge Rakoff allowed the federal government to proceed with civil claims against Countrywide and Bank of America under the Financial Institutions Reform, Recovery, and Enforcement Act, or “FIRREA,” for having misrepresented the quality of home loans sold to Fannie Mae and Freddie Mac.  FIRREA applies only to conduct that “affects” a federally-insured financial institution, and Judge Rakoff, reaching the same conclusion as Judge Kaplan (see our prior post here), rejected the defendants’ argument that FIRREA could not be premised on a defendant allegedly “affecting” itself:
Continue Reading Judge Rakoff Rules that Bank Misconduct “Affects” the Bank Itself Under FIRREA