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US sues Bank of America for $1 billion over bad mortgages

The US government charged Countrywide, the mortgage giant now owned by Bank of America for labelling defective mortgages as good-quality and selling it to state-controlled mortgage financers Fannie Mae and Freddie Mac


Washington: The United States sued Bank of America for more than $1 billion for allegedly having sold dodgy mortgages to state-controlled mortgage financers Fannie Mae and Freddie Mac, reports PTI.

 

The government charged that Countrywide -- the mortgage giant now owned by Bank of America -- labelled defective mortgages as good-quality and sold them to the two companies.

 

The suit says that between 2007 and 2009 Countrywide ran a mortgage origination program called "Hustle" which aimed to quickly process thousands of new mortgages without quality controls and then sell them to Fannie and Freddie.

 

Hustle caused "over $1 billion dollars in losses and countless foreclosures," Preet Bahara, the US attorney in New York City, said in a statement.

 

"The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope," Bahara said.

 

"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill."

 

"This lawsuit should send another clear message that reckless lending practices will not be tolerated."

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Rajat Gupta gets two years jail term for insider trading crimes

Rajat Gupta's sentencing comes exactly a year after he was charged with securities and conspiracy fraud and marks a stunning fall from grace for the Indian-American who rose through the ranks to become one of the most prominent titans on Wall Street


New York: Rajat Gupta, the fallen tycoon from Wall Street was on Thursday sentenced to two years in prison and ordered to pay a $5 million fine by a US judge who termed Indian-American's insider trading crimes as "disgusting" and a "terrible breach of trust", reports PTI.

 

Gupta, 63 was also ordered by US District Judge Jed Rakoff to serve a year of supervised release after the end of his prison term.

 

The IIT and Harvard-educated former Goldman Sachs director would have to surrender to a designated prison on 8 January 2013. Rakoff denied Gupta's request to remain free on bail while he appeals his case.

 

A court could have taken about two years or more to rule on Gupta's appeal.

 

While the judge agreed to a request from Gupta's lawyers that he be assigned to New York's medium-security prison in Otisville, the final decision rests with the Federal Bureau of Prisons.

 

Dressed in a dark blue suit, Gupta looked tensed and appeared to hold back tears as his sentencing proceedings began in Manhattan federal court here on Wednesday. He sat expressionless as Rakoff read the 15-page sentence at the end of the hearing which lasted over two and a half hours.

 

Gupta's sentencing comes exactly a year after he was charged with securities and conspiracy fraud, for which he had faced a maximum sentence of 25 years and marks a stunning fall from grace for the Indian-American who rose through the ranks to become one of the most prominent titans on Wall Street.

 

Rakoff, who on multiple occasions gave Gupta credit for his life of philanthropic works, said at the heart of Gupta's offenses is his "egregious breach of trust."

 

"He is a good man," Rakoff said. "But the history of this country and the history of the world is full of examples of good men who did bad things."

 

Rakoff said the evidence that Gupta passed illegal information about Goldman Sachs to now-jailed hedge fund founder Raj Rajaratnam was "not only overwhelming, it was disgusting in its implications... It was a terrible breach of trust."

 

Rakoff said the urgency and manner in which Gupta shared information about Warren Buffet's five billion dollar investment in Goldman Sachs with Rajaratnam "was the functional equivalent of stabbing Goldman in the back."

 

"In the eye of the law, Gupta's crime was to breach his fiduciary duty of confidentiality to Goldman Sachs; or to put it another way, Goldman Sachs, not the marketplace, was the victim of Gupta?s crimes as charged," the judge said.

 

Rakoff said he does not dispute Gupta's innumerable charitable works and his intentions to help out others selflessly but his personal history and characteristics "starkly contrast" with the nature and circumstances of his crimes.

 

Before Rakoff gave his judgement, Gupta made his first comments in court, reading from a prepared statement and expressing regret over letting his family and colleagues down.

 

Gupta's wife and four daughters sat right behind him in the spectators' gallery, holding each others' hands and often consoling each other as they wept through the hearing. Several of Gupta's close friends and other members of family were also present in the packed courtroom.

 

"The last 18 months have been the most challenging period of my life since I lost my parents as a teenager. I have lost my reputation that I have built over a lifetime. The verdict was devastating to my family, my friends and me," Gupta said.

 

At the end of the court's proceedings, Gupta smiled as he shook hands and hugged his team of defence lawyers.

 

Surrounded by his family, he said he had no comment on the sentence as he walked out of the courtroom.

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COMMENTS

Shadi Katyal

4 years ago

What a shame that a person of such name and repute should go so low for MONEY??? Are we genetically so deformed that such greed never ends.
The person of his caliber and repute cannot deny that he was not involved as court has proved of his guilt.
Looking at the all kinds of SCAMS in India ,people like him should have shown the right path and not followed the same.
What a shame

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