ML-Implode News - Essence of BofA "Hustle" Ruling: Sign A Contract And LATER Decide To Commit Fraud, and It's Not Fraud

The judges based their ruling on the contractsÂ that Countrywide had reached with Fannie and Freddie, pledging to provide those government-sponsored firms with "investment quality"Â mortgages. There was no evidence, the appellate judges found, that the executives who signed those contracts intended at the time to stuff the pipeline with toxic junk. It just turned out that way. Because there was no intent to defraud when the contracts were signed, the judges ruled, this whole affair is merely a case of breach of contract, not fraud...
There are a few problems with this analysis. One was pointed out presciently by Judge Rakoff. In a 2013 ruling in the case, he observed that under the federal mail fraud statute, that limitation [of fraud needing to occur at the moment of contract signing] doesn't apply.Â In any event, the bank's misrepresentations were continuous and ongoing: every time it sold Fannie or FreddieÂ a substandard loan, it was arguablyÂ lying... Judge Rakoff anticipated and rejected [the Appeals Court's] argument, and even pointed out that Congress closed the loophole by amending the mail fraud statute -- in 1909. It's also likely that the government will appeal the latest ruling to the full 2nd circuit court, and thence, if necessary, to the Supreme Court.

Yes, this will likely get reversed again. The ruling simply seems to be in error, aside from leading to nonsensical conclusions (i.e., that anyone can now defraud the government with abandon as long as they don't show any evidence of intent to defraud at the time they sign a contract or make covenants).

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Essence of BofA "Hustle" Ruling: Sign A Contract And LATER Decide To Commit Fraud, and It's Not Fraud