Bank of America Corp (BAC.N) said it does not owe the U.S. government the $2.1 billion it is seeking in penalties after a jury found the bank liable for fraud over defective mortgages sold by its Countrywide unit, according to a court filing made on Wednesday.
Lawyers for the bank said the government’s request “contradicts every pertinent legal principle” and called it a “dramatic departure from reality,” the filing stated. Bank of America said in the filing that it should only have to pay the amount it made in profit from selling the loans, which it contended was zero.
A spokesman for the U.S. attorney’s office in Manhattan declined to comment. A spokesperson for Bank of America could not be reached for comment Wednesday evening.
A federal jury in New York in October found Bank of America and Rebecca Mairone, a former mid-level executive at Countrywide, each liable for fraud in the civil lawsuit.
The case focused on a mortgage lending process at Countrywide, which Bank of America acquired in July 2008, called the “High Speed Swim Lane,” or alternatively “HSSL” or “Hustle.”
The government contended that Countrywide’s program emphasized and rewarded employees for the quantity rather than the quality of loans produced and eliminated checklists designed to ensure that loans were sound.
Bank of America and Mairone denied wrongdoing. Bank of America has said it was evaluating options for an appeal.
Any penalty would be assessed by U.S. District Judge Jed Rakoff.
Prosecutors initially asked for $863.6 million, but later raised the amount to $2.1 billion.
In its response on Wednesday, Bank of America said that the U.S. government erred by basing the proposed penalty on its gross “gain” from the loans. Instead, the law requires the penalty amount to be calculated by measuring the bank’s “pecuniary gain,” or amount of profit that it made from selling the materially defective HSSL loans, the bank said. It estimated that amount to be zero, according to the filing.
Oral arguments have been set for March 13.
Source : Reuters