A former executive of Countrywide Financial will receive a whistleblower reward of over $57 million for his role in bringing a lawsuit against Bank of America Corp.
Edward O’Donnell is receiving the award due to a federal civil lawsuit he filed under the False Claims Act which the federal government joined and used as the basis for forcing Bank of America into a settlement.
Countrywide Financial whistleblower lawsuit
Former Countrywide employee O’Donnell filed a lawsuit in June accusing a Countrywide unit of defrauding Fannie Mae / Federal National Mortgage Association and Freddie Mac / Federal Home Loan Mortgage Corp through home loans it sold them, for which Bank of America agreed to pay $350 million to settle.
This deal is part of a broader $17 billion accord the bank reached in August to resolve claims about mortgages it bundled and sold in the run-up to the financial crisis.
Bank of America Corporation acquired Countrywide for $4 billion in 2008, but has spent tens of billions of dollars in litigation, loan buybacks and write-downs related to the purchase.
The former Countrywide employee is receiving the award because a federal civil lawsuit he filed under the False Claims Act and was used to force Bank of America into a settlement. Under the False Claims Act, whistleblowers can collect between 15% and 25% of any recoveries.
The court ruled that the former employee was entitled to a 16% share of the $350 million settlement. He will also collect an additional and separate $1.6 million from the Bank of America.
Also involved in “Hustle” program
O’Donnell was also instrumental in the October 2013 settlement of government claims against Bank of America for the so-called “hustle” program in which Countrywide loan officers were rewarded for the number of loans they produced regardless of their quality. The case became known as the “Hustle” case due to the Countrywide process through which the loans were sold, which was technically referred to as HSSL.
Though Bank of America Corp was ordered to pay $1.27 billion in that case, it is appealing that verdict and O’Donnell has yet to collect any money from it.
Interestingly, in another case, a former Vanguard Group employee sued the largest U.S. mutual fund company, accusing it of operating an illegal tax shelter for around 40 years by providing services at prices designed to avoid federal and state income tax. He filed the complaint in July under the False Claims Act, which is a whistleblower law in New York State.