The U.S. Court of Appeals for the Second Circuit recently concluded that the government did not prove that a Bank of America unit had committed fraud when it sold packages of mortgage loans to Fannie Mae and Freddie Mac in the wake of the financial crisis. The court of appeals threw out a $1.27 billion penalty that a New York district court had levied against Bank of America after a jury verdict in favor of the government.
The Second Circuit ruled that, in order to prove a fraud claim, the government was required to present evidence of “contemporaneous fraudulent intent necessary to prove a scheme to defraud through contractual promises.” Because the government had failed to do so, it failed to prove that the Bank of America unit had committed mail or wire fraud, the predicates for the government’s claim for penalties under the Financial Institutions Reform, Recovery, and Enforcement Act of 1990. The court remanded the case with an order to enter judgment in favor of the Bank.
The team representing Bank of America included Brendan Sullivan, Enu Mainigi, Ken Smurzynski, Craig Singer, and Kannon Shanmugam.