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Court Denies Countrywide’s Motion To Dismiss RICO Charges

The federal district court for the Southern District of California in San Diego has denied Countrywide Financial Corp.'s motion to dismiss a consolidated class action complaint against the lender, which challenges Countrywide's subprime mortgage marketing and lending practices.
Represented by the law firm of Whatley Drake & Kallas, LLC, the plaintiffs in the multi-district litigation have accused Countrywide of steering borrowers into risky and inappropriate subprime mortgages in order to maximize profits. The complaints against both Countrywide, and now its parent company Bank of America Corp., include violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), conspiracy to violate RICO, violation of California's unfair competition and false advertising statutes, and unjust enrichment.
Judge Dana M. Sabraw, who is overseeing the litigation, rejected Countrywide's argument that the alleged RICO enterprise among independent mortgage brokers and Countrywide was not valid because the plaintiffs had not demonstrated connections between the independent mortgage brokers. Countrywide argued that the so-called ""hub-and-spoke"" structure of that enterprise was invalid under RICO. Judge Sabraw denied the lender's motion to dismiss the charge, noting that the Ninth Circuit Court does not require a specific organizational structure for RICO enterprises.
Countrywide had also requested the court reconsider its decision on an earlier motion to dismiss, in which it sustained the plaintiffs' allegations of a second RICO enterprise they've labeled the ""Countrywide Enterprise,"" consisting solely of Countrywide and its subsidiaries. Countrywide argued that the court had previously misapplied the law concerning RICO enterprises among parents and subsidiaries, but Judge Sabraw stated that he found Countrywide's arguments ""unpersuasive."" Judge Sabraw also denied Countrywide's motion to strike an allegation of unfair conduct under California state law.
Joe R. Whatley of the firm Whatley Drake & Kallas, LLC co-lead interim class counsel in the multi-district litigation. Commenting on the court's recent decisions in the case, Whatley said, ""We are pleased that we are helping the ultimate victims of the mortgage scheme that has nearly destroyed our economy. We intend to continue to prosecute this action until those who obtained subprime mortgages from Countrywide are adequately compensated.""

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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