Part 2: The story continues, as the investigations overseen by Foster lead to conflict with senior Countrywide executives, her eventual firing by Bank of America—Countrywide’s new owner—and vindication from the U.S. Department of Labor
The mortgage market was struggling in March 2007 when Countrywide promoted Eileen Foster to executive vice president and tapped her to take over the company’s mortgage fraud unit.
Home prices were sputtering, borrower defaults were climbing, and the industry leader, Countywide, would soon be forced to ask Bank of America for an infusion of capital to help it keep afloat.
The fraud investigation unit was also struggling. The company had laid off several experienced investigators, according to Foster. Those who remained were faced with an ever-growing number of fraud complaints.
Foster had roughly two dozen investigators working for her, but only four or five had real investigative chops, Foster says. Many of the rest had been brought over to the unit from clerical jobs, she says.
The other problem was that the company’s fraud investigation resources were balkanized. In addition to the company-wide fraud unit that Foster had taken over, many of the operating divisions, such as Countrywide’s subprime unit, had their own smaller investigative teams.
This didn’t make sense to Foster. It meant the smaller investigative teams reported to divisional sales executives who might be tempted to discourage aggressive fraud investigations in order to protect the flow of loans into the company’s production pipeline.
One of her first tasks was to oversee a fraud mitigation “reengineering” that would consolidate all fraud investigation within her unit. In June 2007, she presented the plan in a series of meetings with divisional presidents.
A few weeks later, she learned that the plan had been shelved. There was no explanation why, she says, only that it wasn’t the right time for a reorganization.
She didn’t have time to dwell on the setback. In July, her unit had fielded a call from an ex-employee who claimed he’d been fired because he’d objected to fraud at one of Countrywide’s subprime loan offices in the Boston area.
Foster arranged to have the contractor that handled the Boston branches’ shredding set aside the paperwork they hauled off site and hold it in a secure location. Then a team made up of her investigators and other company representatives headed to Boston to go through the piles of paper.
After finding evidence of “cut and paste” document forgery, the team did a full sweep of the offices in question. On top of workers’ desks, Foster says, they found an unusual number of Wite-Out dispensers. And inside their desk drawers, she says, they found folders holding blank templates for account statements from various banks and brokerage firms, such as Bank of America and Washington Mutual.
In some of the offices, investigators found more than one fax machine. During interviews with investigators, workers admitted that the extra fax machine was used to simulate faked documents being sent in by borrowers, Foster says. To eliminate a paper trail, she says, branch staffers had programmed the sending fax machine so there was no banner identifying the fax number from which the transmission originated.
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