Racketeering Charge Against BofA and MERS

Believing that the activity did likely rise to a level of racketeering, I recommended that attorneys general should pursue institutions involved in these fraudulent and abusive practices with a RICO action.

Well, it appears that somebody is now doing just that with specific focus on  activities that transpired at Bank of America and MERS (Mortgage Electronic Registration System).

American Banker highlights this specific case and much more in writing, Will R-I-C-O Spell Relief for B Of A Mortgage Borrowers?,

So, how might B of A qualify as a likely target? It's definitely an “enterprise,” one of the criteria of a RICO prosecution. According to several lawyers, there's a pattern of activities, mainly surrounding B of A's 2008 acquisition of Angelo Mozilo's Frankenstein, a/k/a Countrywide Financial, that provide potential prosecutorial fodder insofar as securities fraud and consumer protection violations are concerned.

One crusader in this tight-knit group – Dave Angle, a consumer attorney formerly with the Missouri Attorney General's office – points specifically to the Federal Trade Commission's 2010 settlement with B of A, where the bank agreed to pay $108 million to settle claims that Countrywide had laid excessive servicing fees on cash-strapped homeowners.

The upshot, according to Angle, was, essentially, an upraised B of A middle finger as the company continued servicing practices as usual, until the FTC got wise and forced another settlement in February of this year, charging the bank with ignoring the initial settlement and demanding a return to homeowners of an additional $36 million, the ill-gotten gains accumulated in the interim.

The Inspector General at HUD also noted this blatant nose-thumbing in a report issued in March, which took B of A, along with four of its brethren, to task for “widespread questionable foreclosure practices involving the use of foreclosure ‘mills' and a practice known as ‘robosigning' of sworn documents in thousands of foreclosures throughout the United States.”

Every day seems to bring another horror story designed to fuel public rage against Bank of America, whether it's the case of Louise Davidson of Loma, Colorado (whom I wrote about in previous blogs), still sans home thanks to a B of A/Fannie Mae eviction; Los Angeles mother Dirma Rodriguez, fighting B of A to stay in her home with a severely disabled daughter; or a 74 year-old veteran, Larry Anderson, now on the verge of losing his family home to the relentless maws of the B of A foreclosure machine.

But, Mark Malone – a former U.S. and New Jersey prosecutor with RICO experience – firmly believes that the statute could prove a legal trumpet that could bring down the Jericho-style battlements of B of A.

Factually and legally, he claims, there's no impediment to using the RICO statute to prosecute current and former executives at Bank of America if a “pattern of racketeering activities” can be alleged, meaning people in the organization having committed two or more acts within a 10-year period that violate federal statutes prohibiting the use of the mail or the “wires” (defined as telephonic, and now Internet, communication) to carry out fraudulent schemes. (Malone, serving as a volunteer lawyer for South Jersey Legal Services, is fighting B of A in a client's foreclosure case.) He, Angle and others in the group believe that much of what went on during Countrywide's descent into infamy, and its acquisition by B of A, met the fraud criteria.

Malone and Angle doubt Eric Holder's Department of Justice will wield RICO as a weapon, pointing out that Holder and the DOJ's Criminal Division head, Lanny Breuer, are both former partners of the white shoe law firm Covington and Burling. That might pose a problem for the two if a RICO investigation were to move forward with alacrity. As Reuters reported on Jan. 20, the firm's connective tissue binds it to clients that have included Bank of America, Fannie Mae and Freddie Mac, and its lawyers wrote opinions supporting the legality of MERS' securitization activities.

So, is the use of RICO by DOJ just wishful thinking on the part of this group of legal crusaders? For now, maybe, but there is some action on the state level. Louisiana, for one, has just filed a RICO complaint against MERS and a whole host of megabanks, B of A included. The suit alleges that the defendants used the wires and the mails in a scheme to defraud parishes out of recording fees.

While the crowd in Washington have shown their crony capitalist fabric all too often, thankfully there are some leaders within our states who have the requisite courage to pursue meaningful justice on this front. No doubt many other states' attorneys general are watching this Louisiana case very closely. If in fact racketeering occurred, then appropriate measures of justice should be meted out accordingly.

Despite what some in Washington may feel, the country will not only survive BUT this path of truth and justice will make us far stronger.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.