Edward O’Donnell, the Countrywide whistleblower who tipped the government to the ‘Hustle’ program at the mortgage company, will receive a $58.6 million payout as a result of the historic $16.65 billion settlement between the U.S. Government and Bank of America in August.
The majority of the award, $57 million, is to be paid out under a False Claims Act lawsuit filed by O’Donnell in June. The June lawsuit was the second he filed against Bank of America, the successor to Countrywide. O’Donnell’s first lawsuit, filed in 2010, resulted in a $1.27 billion award now under appeal. However, his potential reward from the case is limited because the judge dismissed the False Claims Act allegations back in 2013. The jury trial proceeded on the allegations that Countrywide violated the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
There is still the potential for at least two more awards since the Justice Department announced in August that the settlement resolved three qui tam lawsuits.
Overshadowed by the large reward paid under the False Claims Act may be the first FIRREA whistleblower award. Although I haven’t seen a news report connect the dots yet, the additional $1.6 million to be paid to O’Donnell is the exact amount of the maximum reward under the law that has become the U.S. Government’s leading law against mortgage fraud. The BofA settlement included a $5 billion penalty under FIRREA, the largest of its kind so far.
There have been a few other large settlements under FIRREA this year but this is the first announcement of an award that I have seen. Earlier this year, I was unable to find a prior award announcement. The law has been on the books for more than 20 years, so it seems likely that there have been prior payments. But the law’s long history of disuse and recent revival suggest that even if there have been awards in the past, the number of people who have received them is still small.
In September, U.S. Attorney General Eric Holder proposed a modification of the payout calculation under the popular financial fraud law. He suggested that the amount should instead be modeled after the False Claims Act and not limited to a maximum of $1.6 million.