Tuesday, September 27, 2011

Mortgage industry tanks, fraud continues at Countrywide

The other problem was that the company’s fraud investigation resources were balkanized. In addition to the company-wide fraud unit that Foster had taken over, many of the operating divisions, such as Countrywide’s subprime unit, had their own smaller investigative teams.
This didn’t make sense to Foster. It meant the smaller investigative teams reported to divisional sales executives who might be tempted to discourage aggressive fraud investigations in order to protect the flow of loans into the company’s production pipeline.
One of her first tasks was to oversee a fraud mitigation “reengineering” that would consolidate all fraud investigation within her unit. In June 2007, she presented the plan in a series of meetings with divisional presidents. 
A few weeks later, she learned that the plan had been shelved. There was no explanation why, she says, only that it wasn’t the right time for a reorganization.
After finding evidence of “cut and paste” document forgery, the team did a full sweep of the offices in question. On top of workers’ desks, Foster says, they found an unusual number of Wite-Out dispensers. And inside their desk drawers, she says, they found folders holding blank templates for account statements from various banks and brokerage firms, such as Bank of America and Washington Mutual.
In some of the offices, investigators found more than one fax machine. During interviews with investigators, workers admitted that the extra fax machine was used to simulate faked documents being sent in by borrowers, Foster says. To eliminate a paper trail, she says, branch staffers had programmed the sending fax machine so there was no banner identifying the fax number from which the transmission originated.  
The fraud seemed routine and the investigation showed “that the phony activities of these employees were known … and tolerated by management,” Foster later said in a witness statement in a Countrywide shareholders lawsuit in federal court in Los Angeles. 
And the fate of the investigator at Country-wide when it merged with Bank of America
The phone rang at 8 a.m. It was a call she’d been expecting from a Bank of America human-resources official. She thought they would be discussing salary structure for her team members.
Instead, with the Bank of America official on the phone, two Countrywide officials walked into her office, turning it into a conference call. They presented her with a 16-page severance agreement. 
Bank of America offered her a buyout totaling almost one year’s salary, nearly $230,000. The catch was that, to get the money, she had to agree to a gag order that would prevent her from talking about what she knew about the company’s practices. “I was just furious,” she says. When she refused to sign, she says, the buyout offer turned into a straight-up firing.
They asked for her ID badge and keys. Then Bank of America security operatives escorted her out of the building. 
It was her 51st birthday
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