dealbook.nytimes.com | December 12, 2014
By Matthew Goldstein
A former Countrywide Financial executive who became a whistle-blower is collecting more than $57 million for helping federal prosecutors force Bank of America to pay a record $16.65 billion penalty in connection with its role in churning out shoddy mortgage and related securities before the financial crisis.
Edward O’Donnell reached an agreement last week with the government that enables him to collect part of the settlement that Bank of America agreed to pay in August in a deal with federal prosecutors and a number of state attorneys general, according to a court filing.
The payment to Mr. O’Donnell arises from a federal lawsuit he filed under the False Claims Act earlier this year and which Preet Bharara, the United States attorney for the Southern District of New York, joined and used as the basis for pressing Bank of America to reach a deal.
“In my opinion, Edward O’Donnell is the person most responsible for bolstering the bank settlements and holding Wall Street accountable,” said David G. Wasinger, the lawyer for Mr. O’Donnell, who worked from 2003 to 2009 at Countrywide, the once-dominant mortgage lender that Bank of America acquired in early 2008.
The $57 million payout is one of the larger whistle-blower awards paid to an individual, but it is by no means the largest.
The amount is little more than half the $104 million the Internal Revenue Service paid in 2012 to a former UBS banker, Bradley Birkenfeld, who spent two and a half years in prison for helping his wealthy American client avoid paying taxes. Mr. Birkenfeld was rewarded by the I.R.S. for providing information about the inner workings of the bank’s tax avoidance scheme.
Mr. O’Donnell’s role in providing ammunition to the federal prosecutors who pursued the so-called global settlement with Bank of America was not previously known. It only became public in a court document filed on Monday. But this is not the first time Mr. O’Donnell has served as a critical whistle-blower in helping the government pursue claims against Bank of America and, more specifically, Countrywide.
An earlier false-claims lawsuit filed by Mr. O’Donnell was instrumental in Mr. Bharara’s pursuit of a civil fraud claim against Bank of America and a former Countrywide official for selling shoddy mortgages. The lawsuit centered on a program at Countrywide nicknamed the hustle, which rewarded employees for producing more loans regardless of the quality.
In July, a federal judge ordered Bank of America to pay a $1.27 billion penalty in that case. The former Countrywide executive who faced civil action in that lawsuit, Rebecca Mairone, was ordered to pay a $1 million fine for her role in directing the program.
Mr. Wasinger said a financial agreement with the federal government concerning Mr. O’Donnell’s whistle-blower role in the hustle case had yet to be decided. Federal law may limit his potential reward to a few million dollars.
Mr. O’Donnell was a key witness for the government at the hustle trial in 2013.
Marc L. Mukasey, a lawyer for Ms. Mairone, the lone Countrywide official to face civil accusations in the case, said he was surprised to learn about Mr. O’Donnell’s additional role as a whistle-blower. “It turns out that Ed O’Donnell had even more motivation to bend the facts, rewrite history and throw his colleagues under the bus,” Mr. Mukasey said.
Until a few weeks ago, Mr. O’Donnell had been a vice president at Fannie Mae, Mr. Wasinger said. At Countrywide, Mr. O’Donnell, who resides in Pennsylvania, had also been a vice president.
A recently unsealed copy of the civil lawsuit that Mr. O’Donnell filed in June said that he had provided “material information” to federal prosecutors before he filed his action.
The lawsuit provided information about activity in Countrywide’s consumer markets division that was similar to what he said had taken place in the hustle program. Mr. O’Donnell’s lawsuit said the division “continued to push loan production to record levels in spite of clear signals that there were problems with early loan repayment performance.”
Mr. O’Donnell may not be the only whistle-blower who stands to collect a percentage of Bank of America’s payout to the federal government. The United States settlement with Bank of America mentions three other false-claims lawsuits brought against the bank. The names of those whistle-blowers, like Mr. O’Donnell’s, were not identified in the settlement agreement.
The government’s agreement with Mr. O’Donnell arises from the portion of the global settlement that Bank of America reached with federal prosecutors and California, Delaware, Illinois, Kentucky, Maryland and New York. It values that portion of the settlement at $350 million and said Mr. O’Donnell was entitled to a 16 percent share of it.
In addition, Mr. O’Donnell is collecting a separate $1.6 million payment from Bank of America, according to the settlement.
“This matter has been fully resolved, and we won’t comment on unfounded assertions,” said Lawrence Grayson, a Bank of America spokesman, referring to Mr. O’Donnell’s lawsuit.
Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager
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