By Christina Rexrode
Bank of America Corp. appealed on Wednesday the ruling that it
would have to pay a $1.27 billion penalty over an old mortgage
program known as the Hustle, and added that it wants a different
judge if the case is retried.
In an appeal filed in the Second U.S. Circuit Court of Appeals,
the bank said that Judge Jed Rakoff, who presided over the case,
shouldn't be involved in the future.
Judge Rakoff has been critical of big banks and certain
settlements involving the financial-services industry in the past.
In its appeal, Bank of America noted how Judge Rakoff had publicly
called for individual bank executives to be prosecuted for
financial-crisis wrongdoing. The bank said that such comments
raised questions about the judge's impartiality.
"From beginning to end, what took place in this case was not
only unfair, but utterly unprecedented," the bank wrote.
A spokeswoman for the U.S. Attorney's Office of Manhattan
declined to comment, both on the bank's appeal and its comments
about Judge Rakoff.
The Hustle case revolves around a civil lawsuit that the U.S.
Attorney's Office of Manhattan filed against Bank of America in
2012. It alleged that a precrisis Countrywide Financial Corp.
program called Hustle had churned out shoddy mortgages with a focus
on quantity, not quality, and then misrepresented those loans when
selling them to Fannie Mae and Freddie Mac, which had to be propped
up by government money in the financial crisis.
Bank of America purchased Countrywide in 2008.
The bank and the Justice Department went to trial over the
Hustle allegations, rather than settling the case. A jury found the
bank liable for fraud in 2013. Judge Rakoff later set the
penalty.
The bank said Wednesday that it hadn't been allowed to present
key evidence in the Hustle trial, making it impossible "to offer a
meaningful defense."
For example, the bank said the court didn't allow it to present
evidence that the Hustle loans were of "at least as high quality as
other loans." The bank also said that the court had excluded
testimony from witnesses who believed that the loan program in
question "was proper and produced good-quality loans."
Bank of America has also contended that the Hustle program was
closed by the time it bought Countrywide. It has also said it lost
money on the loans in question. The Hustle program was named after
the acronym HSSL, which stood for "high-speed swim lane," and
featured loans that produced losses after the bank sold them to
investors.
Write to Christina Rexrode at christina.rexrode@wsj.com
Access Investor Kit for Bank of America Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0605051046
Subscribe to WSJ: http://online.wsj.com?mod=djnwires