Prosecuting Wall Street

Two high-ranking financial whistleblowers say they tried to warn their superiors about defective and even fraudulent mortgages. So why haven't the companies or their executives been prosecuted?

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Foster: The loan officers received bonuses, commissions. They were compensated regardless of the quality of the loan. There's no incentive for quality. The incentive was to fund the loan. And that's-- that's gonna drive that type of behavior.

Kroft: They were committing a crime?

Foster: Yes.

After Foster's investigation, Countrywide closed six of its eight branches in the Boston region and 44 out of 60 employees were fired or quit.

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.

After the Boston investigation, Foster says Countrywide's subprime division began systematically concealing evidence of fraud from her in violation of company policy, and Countrywide's internal financial controls system. Someone high up in the top levels of management - she won't say who - told employees to circumvent her office and instead report suspicious activity to the personnel department, which Foster says routinely punished other whistleblowers and protected Countrywide's highest earning loan officers.

Foster: 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, with the support of her boss, took the information up the corporate chain of command and to the audit department, which confirmed many of her suspicions, but no action was taken. In late 2008, with Countrywide sinking under the weight of its bad loans, it merged with Bank of America. Foster was promoted and not long afterwards was asked to speak with government regulators to discuss Countrywide's fraud reports. But she was fired before the meeting could take place.

Kroft: What would you have told 'em?

Foster: I would have told 'em exactly-- exactly what I've told you.

Kroft: Did you have any discussions with anybody at Countrywide or Bank of America about what you should say to the federal regulators when they came?

Foster: I got a call from an individual who, you know, suggested how-- how I should handle the questions that would be coming from the regulators, made some suggestions that downplayed the severity of the situation.

Kroft: They wanted you to spin it and you said you wouldn't?

Foster: Uh-huh (affirm).

Kroft: And the next day you were terminated?

Foster: Uh-huh (affirm).

Kroft: I mean, it seems like somebody at Countrywide or Bank of America did not want you to talk to federal regulators.

Foster: No, that was part of it, no, they absolutely did not.