widespread fraud within Countrywide. Her immediate manager agreed with her.
In December 2011 the TV programme 60 Minutes ran an excellent two-part report entitled “Prosecuting Wall Street”, exploring the lack of criminal prosecution related to
the bubble and crisis. In it, Foster is interviewed on camera by correspondent Steve Kroft. Here are excerpts:
STEVE KROFT: Do you believe that there are people at Countrywide who belong behind bars?
EILEEN FOSTER: Yes.
KROFT: Do you want to give me their names?
FOSTER: No.
KROFT: Would you give their names to a grand jury if you were asked?
FOSTER: Yes.
KROFT: How much fraud was there at Countrywide?
FOSTER: From what I saw, the types of things I saw, it was—it appeared systemic. It, it wasn’t just one individual or two
or three individuals, it was branches of individuals, it was regions of individuals.
KROFT: What you seem to be saying was it was just a way of doing business?
FOSTER: Yes.
KROFT: Do you think that this was just the Boston office?
FOSTER: No. No, I know it wasn’t just the Boston office. What was going on in Boston was also going on in Chicago, and Miami,
and Detroit, and Las Vegas and, you know—Phoenix and in all of the big markets all over Florida. I came to find out that there were—that there was many, many, many reports of fraud
as I had suspected. And those were never—they were never reported through my group, never reported to the board, never reported to the government while I was there.
KROFT: And you believe this was intentional?
FOSTER: Yes. Yes, absolutely.
Foster also began to see evidence that Countrywide’s corporate Employee Relations department was protecting fraudulent activity. It did this in several ways, including not reporting
it to Foster’s organization; reporting fraud allegations to the perpetrator; identifying informants and whistle-blowers to the perpetrators; failing to act on complaints of retaliation
against whistle-blowers; and by retaliating directly against them itself. (She told 60 Minutes that a senior Countrywide executive had ordered the ER to circumvent her
department. 26 ) Fostercomplained to the senior executives in charge of Employee Relations, at which point Countrywide’s ER
department began to investigate her . In May 2008 Foster spoke to the executives in charge of Countrywide’s Internal Affairs unit, describing both the pervasiveness of fraud and also
ER’s conduct. As we shall see shortly, this did not go well.
When the bubble peaked and everything at Countrywide started to go bad, Angelo Mozilo resorted to various forms of deception, both personal and corporate. First, he intensified efforts to get
rid of dubious loans fast, so that Countrywide wouldn’t be caught holding them when they failed. Throughout the e-mail trails, he crassly urges his subordinates to “comb the
assets” and sell off the riskiest ones while there is still time. As he well knew, however, the documentation of every loan sale or securitization states that the instruments being sold are
representative of all loans of that type in possession of the seller—that they have not been selectively chosen to off-load risk. So this remedial strategy was itself fraudulent.
Then Mozilo protected himself financially, as many executives did. As Countrywide started to fail, Mozilo used $2 billion of Countrywide’s borrowed money to repurchase its own stock, in
order to prop up the share price. Mozilo also repeatedly made representations to analysts and investors with respect to the high quality of Countrywide’s credit and control processes, the
good performance of its products, and the company’s financial soundness. One lawsuit lists some three dozen separate occasions in which Mozilo made or confirmed statements about the
company’s lending and credit oversight policies. Based on what we now know, all of them were false.
However, at the same time that Countrywide was buying back its shares and
In December 2011 the TV programme 60 Minutes ran an excellent two-part report entitled “Prosecuting Wall Street”, exploring the lack of criminal prosecution related to
the bubble and crisis. In it, Foster is interviewed on camera by correspondent Steve Kroft. Here are excerpts:
STEVE KROFT: Do you believe that there are people at Countrywide who belong behind bars?
EILEEN FOSTER: Yes.
KROFT: Do you want to give me their names?
FOSTER: No.
KROFT: Would you give their names to a grand jury if you were asked?
FOSTER: Yes.
KROFT: How much fraud was there at Countrywide?
FOSTER: From what I saw, the types of things I saw, it was—it appeared systemic. It, it wasn’t just one individual or two
or three individuals, it was branches of individuals, it was regions of individuals.
KROFT: What you seem to be saying was it was just a way of doing business?
FOSTER: Yes.
KROFT: Do you think that this was just the Boston office?
FOSTER: No. No, I know it wasn’t just the Boston office. What was going on in Boston was also going on in Chicago, and Miami,
and Detroit, and Las Vegas and, you know—Phoenix and in all of the big markets all over Florida. I came to find out that there were—that there was many, many, many reports of fraud
as I had suspected. And those were never—they were never reported through my group, never reported to the board, never reported to the government while I was there.
KROFT: And you believe this was intentional?
FOSTER: Yes. Yes, absolutely.
Foster also began to see evidence that Countrywide’s corporate Employee Relations department was protecting fraudulent activity. It did this in several ways, including not reporting
it to Foster’s organization; reporting fraud allegations to the perpetrator; identifying informants and whistle-blowers to the perpetrators; failing to act on complaints of retaliation
against whistle-blowers; and by retaliating directly against them itself. (She told 60 Minutes that a senior Countrywide executive had ordered the ER to circumvent her
department. 26 ) Fostercomplained to the senior executives in charge of Employee Relations, at which point Countrywide’s ER
department began to investigate her . In May 2008 Foster spoke to the executives in charge of Countrywide’s Internal Affairs unit, describing both the pervasiveness of fraud and also
ER’s conduct. As we shall see shortly, this did not go well.
When the bubble peaked and everything at Countrywide started to go bad, Angelo Mozilo resorted to various forms of deception, both personal and corporate. First, he intensified efforts to get
rid of dubious loans fast, so that Countrywide wouldn’t be caught holding them when they failed. Throughout the e-mail trails, he crassly urges his subordinates to “comb the
assets” and sell off the riskiest ones while there is still time. As he well knew, however, the documentation of every loan sale or securitization states that the instruments being sold are
representative of all loans of that type in possession of the seller—that they have not been selectively chosen to off-load risk. So this remedial strategy was itself fraudulent.
Then Mozilo protected himself financially, as many executives did. As Countrywide started to fail, Mozilo used $2 billion of Countrywide’s borrowed money to repurchase its own stock, in
order to prop up the share price. Mozilo also repeatedly made representations to analysts and investors with respect to the high quality of Countrywide’s credit and control processes, the
good performance of its products, and the company’s financial soundness. One lawsuit lists some three dozen separate occasions in which Mozilo made or confirmed statements about the
company’s lending and credit oversight policies. Based on what we now know, all of them were false.
However, at the same time that Countrywide was buying back its shares and
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