Former Countrywide executive Edward O'Donnell will receive $57 million for his role in filing a whistle-blower lawsuit against Bank of America over the sale of faulty mortgage-backed securities, according to a report from Bloomberg News.
A second suit O'Donnell filed against Countrywide was partly responsible for a record $16.65 billion settlement that Bank of America reached with the government in August 2014. Bank of America acquired Countrywide for $4 billion in 2008. That acquisition has cost Bank of America many more billions in settlements, legal fees, and loan buybacks in the last six years.
The whistle-blower lawsuit, which was filed under the False Claims Act, accused Countrywide of misrepresenting the mortgage-backed securities it sold to GSEs Fannie Mae and Freddie Mac through a program known as the High Speed Swim Lane (HSSL, or “Hustle”). O'Donnell filed the suit in 2012 when he learned that Bank of America was in talks with the Justice Department over a possible settlement, according to the report.
A judge levied a $1.27 billion penalty against Bank of America in July for the “Hustle” case. The bank has been fighting to overturn that verdict in the months since, claiming that the program ended prior to its acquisition of Countrywide.
According to newly released documents, O'Donnell filed a second suit in June against a separate Countrywide division over the sales of toxic loans to the GSEs. Bank of America agreed to pay $350 million to settle that claim as part of a much larger settlement – a record $16.65 billion in August, according to the report.
Under the False Claims Act, whistle-blowers can collect between 15 and 25 percent of the money the government recovers.