NEW YORK Bank of America (BAC), accused of lying about the quality of mortgages it passed along to financial firms Fannie Mae and Freddie Mac, was found liable for fraud on Wednesday in a civil case the government said captured the frenzied pursuit of profits at all costs just before the economy collapsed in 2008.
A Manhattan jury returned its verdict after several hours of deliberations following a monthlong trial that focused on prime mortgages that Bank of America's Countrywide Financial unit completed in late 2007 and 2008. U.S. District Judge Jed S. Rakoff said he would determine on Thursday when a penalty phase will begin.
The verdict was returned against Bank of America, Countrywide and a former executive, Rebecca Mairone.
Attorneys for the bank, which had denied there was any fraud, did not immediately respond to messages seeking comment on Wednesday.
Mairone's lawyer Marc Mukasey said he wouldn't stop fighting for her.
"She's a model of honesty, integrity and ethics," he said. "She never engaged in any fraud because there was no fraud. We'll fight on."
U.S. Attorney Preet Bharara in a statement praised the verdict.
"In a rush to feed at the trough of easy mortgage money on the eve of the financial crisis, Bank of America purchased Countrywide, thinking it had gobbled up a cash cow," he said. "That profit, however, was built on fraud, as the jury unanimously found."
He said Bank of America chose to defend Countrywide's conduct "with all its might and money, claiming there was no case here," but the jury disagreed.
The trial related to mortgages the government said were sold at break-neck speed without regard to quality as the economy headed into a tailspin.
The government had accused the financial institutions of urging workers to churn out loans, accept fudged applications and hide ballooning defaults.