In the summer of 2007, a team of corporate investigators sifted through mounds of paper pulled from shred bins at Countrywide Financial Corp. mortgage shops in and around Boston.
By intercepting the documents before they were sliced by the shredder, the investigators were able to uncover what they believed was evidence that branch employees had used scissors, tape and Wite-Out to create fake bank statements, inflated property appraisals and other phony paperwork. Inside the heaps of paper, for example, they found mock-ups that indicated to investigators that workers had, as a matter of routine, literally cut and pasted the address for one home onto an appraisal for a completely different piece of property.
Eileen Foster, the company’s new fraud investigations chief, had seen a lot of slippery behavior in her two-plus decades in the banking business. But she’d never seen anything like this.
“You’re looking at it and you’re going, Oh my God, how did it get to this point?” Foster recalls. “How do you get people to go to work every day and do these things and think it’s okay?”
More surprises followed. She began to get pushback, she claims, from company officials who were unhappy with the investigation.
One executive, Foster says, sent an email to dozens of workers in the Boston region, warning them the fraud unit was on the case and not to put anything in their emails or instant messages that might be used against them. Another, she says, called her and growled into the phone: “I’m g--d---ed sick and tired of these witch hunts.”
Her team was not allowed to interview a senior manager who oversaw the branches. Instead, she says, Countrywide’s Employee Relations Department did the interview and then let the manager’s boss vet the transcript before it was provided to Foster and the fraud unit.
In the end, dozens of employees were let go and six branches were shut down. But Foster worried some of the worst actors had escaped unscathed. She suspected, she says, that something wasn’t right with Countrywide’s culture — and that it was going to be rough going for her as she and her team dug into the methods used by Countrywide’s sales machine.
By early 2008, she claims, she’d concluded that many in Countrywide’s chain of command were working to cover up massive fraud within the company — outing and then firing whistleblowers who tried to report forgery and other misconduct. People who spoke up, she says, were “taken out.”
By the fall of 2008, she was out of a job too. Countrywide’s new owner, Bank of America Corp., told her it was firing her for “unprofessional conduct.”
Foster began a three-year battle to clear her name and establish that she and other employees had been punished for doing the right thing. Last week, the U.S. Department of Labor ruled that Bank of America had illegally fired her as payback for exposing fraud and retaliation against whistleblowers. It ordered the bank to reinstate her and pay her some $930,000.
Bank of America denies Foster’s allegations and stands behind its decision to fire her. Foster sees the ruling as a vindication of her decision to keep fighting.
“I don’t let people bully me, intimidate me and coerce me,” Foster told iWatch News during a series of interviews. “And it’s just not right that people don’t know what happened here and how it happened.”
‘Greedy people’
This is the story of Eileen Foster’s fight against the nation’s largest bank and what was once the nation’s largest mortgage lender. It is also the story of other former Countrywide workers who claim they, too, fought against a culture of corruption that protected fraudsters, abused borrowers and helped land Bank of America in a quagmire of legal and financial woes.
In government records and in interviews with iWatch News , 30 former employees charge that Countrywide executives encouraged or condoned fraud. The misconduct, they say, included falsified income documentation and other tactics that helped steer borrowers into bad mortgages.
Eighteen of these ex-employees, including Foster, claim they were demoted or fired for questioning fraud. They say sales managers, personnel executives and other company officials used intimidation and firings to silence whistleblowers.
A former loan-underwriting manager in northern California, for example, claimed Countrywide retaliated against her after she sent an email to the company’s founder and chief executive, Angelo Mozilo, about questionable lending practices. The ex-manager, Enid Thompson, warned Mozilo in March 2007 that “greedy unethical people” were pressuring workers to approve loans without regard for borrowers’ ability to pay, according to a lawsuit in Contra Costa Superior Court.
Within 12 hours, Thompson claimed, Countrywide executives began a campaign of reprisal, reducing her duties and transferring staffers off her team. Corporate minions, she charged, ransacked her desk, broke her computer and removed her printer and personal things.
Soon after, she said, she was fired. Her lawsuit was resolved last year. The terms were not disclosed.
Bank of America officials deny Countrywide or Bank of America retaliated against Foster, Thompson or others who reported fraud. The bank says Foster’s firing was based only on her “management style.” It says it takes fraud seriously and never punishes workers who report wrongdoing up the corporate ladder.
When fraud happens, Bank of America spokesman Rick Simon says, “the lender is almost always a victim, even if the fraud is perpetrated by individual employees. Fraud is costly, so lenders necessarily invest heavily in both preventing and investigating it.”
When it uncovers fraud, Simon says, the bank takes “appropriate actions,” including firing the employees involved and cooperating with law-enforcement authorities in criminal investigations.
Mozilo’s attorney, David Siegel, told iWatch News it was “unlikely that Mr. Mozilo either would have had a direct role with, or would recall, specific employee grievances, and it would be inappropriate for him to comment on individual employment issues in any event.” Siegel added that “any implication that he ever would have tolerated much less condoned to any extent misconduct or fraudulent activity in loan production and underwriting … is utterly baseless.”
iWatch News tells the story of a pattern of fraud at Countrywide Financial Corp., once the nation’s largest mortgage lender, and a high-ranking executive who blew the whistle and, she claims, was fired for her trouble. The story is the product of a 10-month investigation that included review of thousands of pages of court documents and interviews with former company insiders.
Part 1: iWatch News staff writer Michael Hudson details the story of Eileen Foster, Countrywide Financial Corp. fraud investigation chief, who uncovered massive fraud within the company and, federal officials say, paid a price for doing so.
Part 2: The story continues, as the investigations overseen by Foster lead to conflict with senior Countrywide executives, her eventual firing by Bank of America—Countrywide’s new owner—and vindication from the U.S. Department of Labor.
Do you have experience working with the mortgage industry? Reporter Michael Hudson would like to hear from you. Click the "Insight" button below to share your insights.
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