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Bank of America accused of racketeering in lawsuit

A lawsuit in federal court in Colorado accuses Charlotte-based Bank of America of racketeering, in what amounts to more fallout for the bank stemming from a federal mortgage-modification program.

The suit, filed Wednesday, claims violations of the federal Racketeer Influenced and Corrupt Organizations Act, also known as RICO. It cites statements that former Bank of America employees made last month in a separate, ongoing federal lawsuit in Massachusetts. Those former employees, including at least one who worked in Charlotte, claim the bank awarded cash and gift cards to them if they denied mortgage modifications to homeowners through the Home Affordable Modification Program.

Pointing to those statements, Wednesday’s lawsuit alleges that the bank and a contractor ran a “scheme” to deny the modifications. The Colorado lawsuit, brought by three homeowners who sought HAMP modifications from Bank of America, names as a co-defendant Urban Lending Solutions, a Broomfield, Colo., contractor to whom the bank sent HAMP work.

The lawsuit echoes claims made in the Massachusetts case, alleging that Bank of America pushed homeowners to accept costlier in-house modifications, because those were more profitable for the bank than HAMP modifications. The latest lawsuit claims those activities constituted racketeering, using “interstate mails and wire communications.”

Bank of America, in a statement, said Thursday that it intends “to provide conclusive evidence that these allegations are demonstrably false and devoid of any factual support. Our practice is to foreclose as a last resort when other available options to help keep people in their home have been exhausted.”

Urban Lending Solutions called the allegations untrue.

“Urban will vigorously defend itself and reserves the right to take appropriate legal action against those who are defaming its good name,” the company said.

Working ‘in concert’

The Colorado lawsuit paints a picture of the bank and Urban Lending Solutions working “in concert” to prevent “as many homeowners as possible from obtaining permanent loan modifications that complied with HAMP while allowing BOA to maintain the appearance to regulators and the public of trying to comply with its HAMP obligations.”

Bank of America and Urban Lending Solutions had a “scheme to defraud,” the suit says.

“To accomplish its objectives, BOA created a widespread RICO enterprise to defraud homeowners who sought modifications and then acted as the kingpin of that enterprise,” the suit says.

Bank of America enlisted Urban Lending Solutions “to act as a member of the RICO enterprise,” the suit says.

The suit also says that homeowners seeking HAMP trail plans were told by Bank of America to send financial information to Urban.

“Consumers were led to believe that they were dealing with BOA, when secretly they were communicating with Urban,” the lawsuit says. “As part of the loan-modification scheme and enterprise, Urban became a ‘black hole’ for documents sent by homeowners.”

As a result of the bank and Urban’s scheme, hundreds of thousands of homeowners were wrongfully denied a modification, the suit says.

Ex-employees’ claims cited

HAMP was designed to lower monthly mortgage payments for struggling borrowers suffering in the collapse of the housing market.

One of the employees who filed a statement in the Massachusetts lawsuit is William Wilson, who worked in Charlotte and described workers being made to participate in a “blitz.” In a blitz, he said, the bank would order case managers and underwriters to “clean out” a backlog of HAMP requests by denying all those whose financial documents were more than 60 days old.

“The purpose of the mass denials was to reduce the volume of pending modification requests as quickly as possible while extending as few permanent modifications as possible,” Wednesday’s lawsuit says.

The former employees’ claims have attracted the attention of Joseph Smith, who oversees the $25 billion settlement reached last year with 49 states and five major banks, including Bank of America. Smith said he’s examining the Massachusetts suit for any evidence that the bank violated the settlement.

The statements also have prompted California Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, to call for federal officials to investigate the bank.

Bank of America has denied the employees’ accusations, calling them “absurd” and “rife with inaccuracies.”

RICO was passed in 1970 to target organized crime. Peter Anderson, a Charlotte-based attorney for Beveridge & Diamond and a former federal prosecutor, said those alleging RICO have a high burden of proof. For one, they must show a pattern of racketeering activity.

RICO was originally designed to be used to combat organized crime, he said.

“Its use has expanded to encompass many complex business claims,” he said. “Just scan ‘civil RICO’ in Google.”

Roberts: 704-358-5248; Twitter: @DeonERoberts
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