The 2nd Circuit U.S. Court of Appeals in New York has denied the request of Manhattan U.S. Attorney Preet Bharara’s office for a new trial of Bank of America for alleged mortgage fraud just before the crisis in 2008, according to a report from Reuters.
In late May, a federal appeals court overturned a $1.27 billion penalty and a jury verdict against Bank of America which found the bank liable of mortgage fraud through Countrywide Loans’ High Speed Swim Lane (HSSL, or “Hustle”) program. Bank of America acquired Countrywide for $4 billion in 2008.
In early August, Bharara’s office asked a three-judge panel on the 2nd U.S. Circuit Court of Appeals in New York to grant a new trial in the case, arguing that the May decision that overturned the verdict “overlooked a wealth of evidence” which established that Bank of America committed fraud through the Hustle program.
According to Reuters, the 2nd Circuit Court gave no reason for denying the request from Bharara’s office for a new trial.
Bharara’s office originally filed suit against Bank of America in 2012 based on a complaint from whistleblower Edward O’Donnell. Late in 2013, a jury found Countrywide liable for selling toxic mortgage-backed securities to Fannie Mae and Freddie Mac through the Hustle program. In July 2014, a judge ordered Bank of America to pay a $1.27 billion civil penalty and also fined former Countrywide executive Rebecca Mairone $1 million for her alleged role.
From the time the verdict and the penalty were issued, Bank of America fought to have both dismissed, claiming not only that the Hustle program ended prior the bank's 2008 acquisition of Countrywide, but that the government's accusations in the case amounted only to breach of contract and not fraud. On May 23, 2016, the 2nd Circuit Court overturned both the jury’s verdict and the judge’s imposed penalty as well as the penalty against Mairone.
Bank of America had no comment on the 2nd Circuit Court’s decision not to grant a new trial; in May, at the time the Hustle verdict was dismissed, a bank spokesperson said, “We are pleased with the appellate court’s decision.” Mairone told MReport in May of the dismissal of the penalties, “I think it was a fair decision, and it was a long time coming. I'm relieved to finally be vindicated from the whole fraud issue. I couldn't be happier. It took a long time to get to this point, but you have to keep fighting for the right thing.”