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Rewind 2008: When You Blow the Whistle On Wall Street Banks, You Take On The Government in America

In 2013, Bank of America’s lawyers somehow convinced a higher appellate court to review Michael Winston’s $3.8 Million dollar verdict.

A Whistleblower’s Horror Story

Years after blowing the whistle on Countrywide, Michael Winston is bogged down in the courts, and fighting for his life

FEB 18, 2015 | REPUBLISHED BY LIT: JUL 22, 2021

This is the age of the whistleblower. From Chelsea Manning to Edward Snowden to the latest cloak-and-dagger lifter of files, ex-HSBC employee Hervé Falciani, whistleblowers are becoming to this decade what rock stars were to the Sixties — pop culture icons, global countercultural heroes.

But one of America’s ugliest secrets is that our own whistleblowers often don’t do so well after the headlines fade and cameras recede. The ones who don’t end up in jail like Manning, or in exile like Snowden, often still go through years of harassment and financial hardship. And while we wait to see if Loretta Lynch is confirmed as the next Attorney General, it’s worth taking a look at how whistleblowers in America fared under the last regime.

One man’s story in particular highlights just about everything that can go wrong when you give evidence against your bosses in America: former Countrywide/Bank of America whistleblower Michael Winston.

I visited with Michael in California last year and spoke with him over the phone several times in recent weeks. If you think you’ve had a tough year, wait until you hear his story.

Two years ago this month, Winston was being celebrated in the news as a hero. He’d blown the whistle on Countrywide Financial, the bent mortgage lender that one could plausibly argue nearly blew up the global economy in the last decade with its reckless subprime lending practices.

He described Countrywide’s crazy plan to give anyone who could breathe a mortgage in a memorable January, 2013 episode of Frontline called “The Untouchables,” a show that caught the eyes of several influential politicians in Washington. The documentary inspired Senate hearings and even the crafting of new legislation to combat too-big-to-jail corruption in the financial world.

Winston was later featured in the New York Times as the man who “conquered Countrywide.” David Dayen of Salon described Winston as “Wall Street’s greatest enemy.”

But today, Winston is tasting the sometimes-extreme downside of being a whistleblower in modern America.

“Anyone thinking about becoming a whistleblower looks at what happened to whistleblowers before,” says Fleischmann.

He says he’s spent over a million dollars fighting Countrywide (and the firm that acquired it, Bank of America) in court. At first, that fight proved a good gamble, as a jury granted him a multi-million-dollar award for retaliation and wrongful termination.

But after Winston won that case, an appellate judge not only wiped out that jury verdict, but allowed Bank of America to counterattack him with a vengeance.

Last summer, the bank vindictively put a lien on Winston’s house (one he’d bought, ironically, with a Countrywide mortgage). The bank eventually beat him for nearly $98,000 in court costs.

That single transaction means a good guy in the crisis drama, Winston, had by the end of 2014 paid a larger individual penalty than virtually every wrongdoer connected with the financial collapse of 2008.

When Winston protested his preposterous punishment on the grounds that a trillion-dollar company recouping legal fees from an unemployed whistleblower was unreasonable and unnecessary, a California Superior Court judge denied his argument — get this — on the grounds that Winston failed to prove a disparity in resources between himself and Bank of America!

This is from the court’s ruling:

Plaintiff argues that the disparity in the resources between the individual plaintiff and the defendant Bank of America make it unfair to place the cost of the premium on plaintiff. Plaintiff offered no evidence in support of this argument; it is rejected.

“I mean, Carlos Slim, the world’s richest individual, is nothing next to Bank of America,”

says Winston today.

“I just have to shake my head at all of it.”

An articulate, well-educated family man who speaks with great pride about his two grown children, who’ve stood by him throughout his troubles, Winston’s life has been turned upside down by his experience.

“I’ve never in my life not worked, but I’m unemployable now,” says Winston, a longtime high-level executive at blue-chip corporations like McDonnell-Douglas and Lockheed Martin. Although he spent most of a lifetime scrupulously saving, he says he’s “worried now that there will be a time when I won’t be able to support my family.”

Even worse, while the bank was going after his savings, Winston was diagnosed with laryngeal cancer. He has been undergoing painful treatment ever since and is literally fighting for his life now, on top of everything else.

“It’s been a very difficult year,” he says.

Yet Winston would likely bear all of this more easily were it not for bitterness over the fact that the sacrifices of whistleblowers like himself have too often resulted in dead ends or worse in recent years.

In the finance sector, many of the biggest cooperators have seen their evidence disappeared into cushy settlement deals that let corporate wrongdoers off the hook with negligible fines.

In fact, many of the companies mentioned in that once-damaging Frontline report have since been allowed to painlessly pay their way out of trouble. The whistleblowers featured back then have been vindicated factually, but many are still waiting for action.

Cozy deals with firms like Citigroup (read on to see who negotiated that deal) and JP Morgan Chase have threatened to reduce the gutsy actions of whistleblowers like Richard Bowen and Alayne Fleischmann to footnotes in an increasingly corrupt grand scheme of things.

This is a serious problem, given that anyone considering coming forward is usually paying at least some attention to how the government has dealt with other cooperators.

“Anyone thinking about becoming a whistleblower looks at what happened to whistleblowers before,”

says Fleischmann.

“What I worry about,” says Winston today, “is that someone is going to see wrongdoing, and then see what’s happened to people like me, and decide it’s not worth it.”

Winston joined Countrywide, which was booming financially at the time, in 2005.

Unbeknownst to him, his new firm was at the forefront of a mass movement to pump the global economy full of fraudulent, born-to-lose subprime loans, a movement destined to rapidly overinflate the global economy with debt and cause a catastrophic recession.

In essence, his firm was mass-producing and then selling financial snake oil. Countrywide, Winston says, would give home loans to anyone who could “fog a mirror.”

The firm didn’t really bother to hide what it was up to.

“In most places, trying to find evidence of fraud is like looking for a needle in a haystack,” says Winston. “At Countrywide, it was like finding a haystack on a pile of needles. It was impossible to miss.”

He told Frontline a story about seeing a personalized license plate in the company parking lot. It read, “FUND ‘EM.” Alarmed, he asked a fellow executive what the plate meant.

He was told that “FUND ‘EM” was “[CEO] Angelo Mozilo’s growth strategy” and that the company had “a loan for every customer.”

A fiscal (and, at the time, political) conservative who had been raised in staid, risk-averse corporations like Lockheed and Motorola, Winston flipped. There was no way handing out loans to everyone was good business. As he explained to Frontline, he tried to get an explanation from his new bosses, asking:

“What if the person doesn‘t have a job?

“Fund ’em,” the guy said.

And I said, “What if he has no income?”

“Fund ’em.”

“What if he has no assets?”

And he said, “Fund ’em.”

Winston tried to sound the alarm within the company. He thought he was doing the firm a favor, that the bosses somehow just didn’t realize their mistake.

As it turned out, Countrywide execs knew exactly what they were doing, and Winston quickly went the way of most whistleblowers, losing his job when Bank of America acquired the firm in 2008.

He sued for improper retaliation and wrongful termination, and in 2011, after a month of testimony, a jury voted to award him $3.8 million. He’d declined a hefty settlement offer in order to get his day in court.

“I was offered a lot of money to make it all go away, quietly, but I thought to myself, do I want to be that person?” he said. “And I realized that I couldn’t take it. I needed to see someone held accountable.”

After his 2011 jury win, that seemed like not only the right move, but a smart one.

Eventually, reporters latched on to his story. The Frontline documentary so angered a group of Senators that it led directly to one of Eric Holder’s most embarrassing moments as Attorney General — the infamous (I’m paraphrasing) Yes, Senators, some banks are too big to prosecute testimony before the Senate Judiciary Committee.

But four years later, we’re still waiting for the first criminal conviction against any individual for crisis-era corruption. And while politicians like Ohio’s Sherrod Brown have spent upwards of half a decade now fighting to bring the “Too Big to Jail” issue to a vote, there’s been no significant reform there, either.

What we’ve seen instead is a series of cash deals with the most corrupt companies. Curiously, the most egregious deals seemingly all involved companies whose secrets had been exposed by a whistleblower.

Winston’s old company got one of the best deals.

Last summer, Bank of America — now responsible for all of Countrywide’s liability — was allowed to buy its way out of years of fraud and other abuses with a “historic” $17 billion settlement.

Crucially, the deal left many of the facts of the company’s years of misconduct hidden, as the government never submitted any part of the deal to a judge to review.

I visited with Winston in California this past summer right after that Bank of America deal had been announced. He was in a highly stressed state, because of what he was going through with his own battles with the bank. Since winning his $3.8 million award, Winston’s case had taken one nightmare turn after another.

In 2013, Bank of America’s lawyers somehow convinced a higher appellate court to review the verdict. A panel of judges, eschewing the usual appellate mission of focusing on errors of law, then tossed his case out on evidentiary grounds.

The case was so bizarre that it led to an investigation by the Government Accountability Project, which called the case “vitally important” and worried about the precedent of a jury verdict being “nullified” by an appellate judge.

In the context of all of this, Winston was almost too angry to speak about Holder’s sweetheart deal with Bank of America.

“I just can’t believe, after all of this, that it all gets swept under the rug,” he said, shaking his head.

The BOA deal came after Holder had already orchestrated a similar deal with J.P. Morgan Chase, which was allowed to pay $13 billion (really, $9 billion, after a closer look) to get out from a similar litany of abuses, including a seemingly airtight case of fraud reported by Alayne Fleischmann, the Canadian attorney profiled in Rolling Stone last fall.

Citigroup’s 60% of It’s Loan Book is Predatory Lending on Steriods

Then there was Citigroup, which paid $7 billion to get out from under basically identical charges that it knowingly packaged and resold massive amounts of defective home loans to sucker customers around the world.

In Citi’s case, the loans were so bad that its own internal analyst wrote that “we should start praying,” and “I would not be surprised if half these loans went down.”

Richard Bowen, at the time the bank’s chief underwriter, wrote a memo to senior bank executives (including board chairman, key Obama advisor, and former Clinton Treasury Secretary Bob Rubin), issuing a stark warning.

He said that as much as 60 percent of the mortgages the bank was acquiring and packaging did not meet the company’s credit guidelines.

Bowen noted the urgency of the situation and even gave company bigwigs like Rubin his cell number, so that they could call him over the weekend. “Please contact me. You need to know the details behind this,” he said. “There are risks to the company.”

Of course, those risks were ignored, and Citi ended up broke and throwing itself at the taxpayer’s ankles. It ended up receiving the single largest federal bailout, around $476 billion in cash and federal guarantees.

Why bring this up now? Because like Winston’s tale, the Citigroup story has a shocker punch line.

The investigation into that bank, and the subsequent whitewashing deal, was led by the U.S. Attorney for the Eastern District of New York, a prosecutor with a reputation for being a highly professional, old-school law-and-order type: Loretta Lynch.

Many lawyers who’ve dealt with Lynch describe being impressed by her professionalism and her fairness (“Solid. Not an ideologue. Much less of a dope than Holder,” was one interesting comment by a New York lawyer who has opposed her in court) and the story is not meant to disparage her.

But it’s important to understand, as Lynch staggers toward approval for Holder’s old job, that she was part of a Justice Department enforcement policy that for years dealt out soft landings for the very companies that have harassed cooperators and made the term “Too Big to Jail” famous.

The Snowden and Manning cases are extreme examples of a phenomenon that’s been raising eyebrows in and around American law enforcement for years, one where whistleblowers are themselves treated as problems, or even targeted for investigations themselves.

Gary Aguirre

Gary Aguirre is a onetime SEC investigator who famously won a $755,000 wrongful termination award after blowing the whistle on the SEC, which had improperly quashed his investigation into an insider trading case involving an influential Wall Street figure.

He now represents whistleblowers in private practice and says senior government investigators are sometimes wary of wrapping their arms too tightly around such cooperators, since doing so might queer their inevitable returns to the corporate defense community.

“I would say the people who head government,”

says Aguirre,

“are always thinking about their return to the private sector, where whistleblowers are perceived as a threat, something to be exterminated.”

Even the government’s attempts to encourage whistleblowers were misguided. Eric Holder talked extensively about aiding cooperators by making more resources available to them — essentially, offering them higher monetary rewards for coming forward.

But nobody in the financial services industry comes forward just for the money. The easy money is already there to be had, just by keeping your mouth shut. What Wall Street whistleblowers really need, above all else, is to see real cases made using their evidence, which is exactly what we haven’t seen in recent years. Otherwise, the sacrifices — which range from merely miserable to life-altering and catastrophic — aren’t worth it.

The newest scandal involving HSBC and its global tax-evasion scheme provides an example of how things are broken.

That, too is a whistleblower case, one in which the French-Italian cooperator Falciani delivered a cache of secret tax files to French authorities close to seven years ago.

According to multiple reports, the United States gained access to Falciani’s information as far back as 2010, yet the state still went on in 2012 to give HSBC a cushy deferred prosecution deal on money laundering charges.

The nominee Lynch also handled that settlement, which involved no criminal charges and not even any individual fines for executives who’d admitted to laundering over $800 million for Mexican and South American drug cartels.

Winston points to HSBC as another example of mishandled evidence.

“It’s yet another instance of a big bank engaged in illicit activities and being aided and abetted by the government,”

he says.

“I can hear Roger Daltrey singing it now: ‘Meet the new boss, same as the old boss.’”

Aguirre is equally skeptical that anything will change.

“The Lynch thing is a cross-section of government corruption put under an electron microscope showing the same DNA everywhere present,”

he says.

The pattern of whistleblowers coming forward and seeing their information either misused or absorbed into pain-free cash settlements may push the next generation of potential witnesses in a more cynical direction.

“The number one concern is that it incentivizes people to do nothing,” Fleischmann says. “The likely thing people will do in the future is just quit.”

Winston today insists he would do the same thing, if he had to do it all over again.

But unless the next Attorney General radically changes the policy toward whistleblowers, the future might see even fewer people come forward.

“People won’t worry about it now,”

says Winston.

“But one day they’ll wonder why their air is polluted or their drinking water isn’t safe. And this will be the reason why.”

Cook County Judge Prevents Child Visitation as Mother is Not Vaccinated

Cook County Judge James Shapiro asked the mother if she was vaccinated. When she said no, the judge withdrew her rights to see her son.

The Big Question is Asked of The Court of Appeals for the Eleventh Circuit

The scope of judicial immunity in the Eleventh Circuit is now made clear. Judicial immunity is complete, unqualified, and without exception.

Rent-a-Robe Ends Tragically as Attorney Involved in Judicial Misconduct Commits Suicide

Cook County Circuit Court Judge Valarie Turner let law clerk Rhonda Crawford preside over at least two cases on the bench.

Wall Street’s Greatest Enemy: The Man Who Knows Too Much

August 30, 2013

You may know Michael Winston’s story from a series of articles by Gretchen Morgenson in The New York Times, or from a celebrated Frontline episode, “The Untouchables,” about the lack of prosecutions on Wall Street. He was a Ph.D. who rose to the corporate elite, with stints at Lockheed Martin, McDonnell Douglas, Motorola and Merrill Lynch. He was recruited to mortgage originator Countrywide Financial with the promise that it wanted to become the “Goldman Sachs of the Pacific,” a full-service global financial corporation.

In this June 23, 2011 photo, a Bank of America booth is shown at the Pacific Coast Builders Conference in San Francisco. (AP Photo/Paul Sakuma)

“They talked about the importance of ethics and principles, and they said they heard I was a high-integrity guy,” Winston tells Salon, noting his father had a vanity plate that read “HONOR.” Winston initially succeeded as enterprise chief leadership officer at Countrywide, getting promoted twice in 14 months and building a team of 200 working on corporate strategy.

But he could not ignore the rot at the heart of the company’s profitmaking approach.

So now, a successful high-level executive for 30 years, he has been embroiled in seven years of lawsuits with Countrywide and the company that bought it, Bank of America. His determination to speak out against multiple violations of law at Countrywide earned him retaliation, and eventually, he was frozen out of corporate boardrooms, unable to find a new job. He won a jury verdict in his case, but after two and a half more years of fighting, an appellate court reversed the ruling in highly unusual circumstances.

“I keep hearing about whistleblower protections,” he tells Salon, exasperatedly. “It certainly didn’t happen for me.”

Now, Bank of America wants to gouge Michael Winston one last time, demanding an interest payment on money awarded to him that he never received.

“Thus far, the person who did the right thing got punished, and the person who did the wrong thing got rewarded,” Winston said. The chilling case shows that the greatest enemy for Wall Street is the man or woman who actually tries to expose its secrets.

* * *

The lesson is clear: If you object to the corrupt practices at financial giants like Countrywide and Bank of America, you will be marginalized and financially ruined. And even if you think you’ve won, over time you will lose.

“FUND-EM.” That’s what the license plate read when Winston pulled into Countrywide headquarters at the end of 2005. It was the car of CEO Angelo Mozilo. “What does that mean?” Winston asked a colleague.

“That’s Mozilo’s growth strategy for 2006,” his colleague replied. “We fund all loans.”“What if the borrower has no job?” Winston asked.

“Fund ‘em.”

“What if they have no assets?”

“Fund ‘em.”

“No income?”

“If they can fog a mirror, we’ll give them a loan.”

Winston relayed his fears about this doomed strategy to Drew Gissinger, head of Countrywide Home Loans, offering proposals on how to prioritize customer satisfaction and strong fundamentals over making dicey loans. “I was trying to save Countrywide from itself,” Winston said. These proposals were politely taken and discarded. Later Gissinger would say he never received them.

A separate triggering event had nothing to do with loans, but how Countrywide treated its employees. In addition to selling toxic mortgages, Countrywide also housed its staff in toxic buildings. One in particular, on Tapo Canyon Road in Simi Valley, California, was notorious for noxious air, exposed wiring and a generally hideous atmosphere.

Winston worked in this building, and he and his team experienced shortness of breath, dizziness and headaches. One female employee, 35 weeks pregnant, said she was afraid to work there. Michael himself was struck by a toxic substance coming from an overhead air vent. “I thought I was being poisoned,” he said. This is at a company that made $2.7 billion in net revenue in 2006.

Countrywide claimed that it did an investigation of the air quality and found nothing wrong, when Winston knew it was still taking air samples in his office. Winston confronted his boss over this, and she replied that she lied to “prevent a panic” at the company. That’s when Winston submitted a complaint to California’s Occupational Safety and Health Administration (Cal-OSHA).

The retaliation was swift. Winston’s team was assigned elsewhere, his budget was cut, and his responsibilities reduced. Winston stayed out of a sense of loyalty to the team he persuaded to join Countrywide. “Everyone I recruited sold their houses in New York and moved to California,” Winston told Salon. “If not for that, I would have been gone at the first sign of trouble. I felt an obligation to them.”

After months of hardship, the president of Countrywide, Dave Sambol, asked him to come to New York and basically lie to the credit rating agency Moody’s about its corporate governance practices. Countrywide had gone without a president and chief operating officer for five months without informing investors, and had delivered top executives outsize compensation. Countrywide wanted Winston to fabricate a story about these practices and deliver it to Moody’s.

Winston refused to lie.

Three weeks later, the CEO, Angelo Mozilo, demanded Winston’s termination because he wouldn’t break the law. (The termination would not come until 2008, by Bank of America when it bought the company.)

For the next several years, Winston pursued a series of court cases, first against Countrywide and then against its new corporate parent, Bank of America, over the illegal retaliation.

Winston and his lawyer, a former prosecutor at the Los Angeles district attorney’s office, saw so many lies from top Countrywide executives at their trial, that they wanted to get criminal charges instituted. Winston’s lawyer actually wrote to then-DA Steve Cooley, but nothing came of it (the DA’s office claimed it was never sent the material).

To use just one of a hundred examples, Mozilo claimed under oath he was “unimpressed” with Winston, despite a large documentary record of praise. “The assumption when someone raises their right hand, you see a check go off in the head of the jury, now we’ll hear the whole truth,” Winston said. “But no part of it was truthful.” In early 2011, after a month-long trial, the jury found in Winston’s favor, awarding him $3.8 million.

Sadly, the story doesn’t end there. First, Bank of America tried to get a “judgment notwithstanding the verdict” in its favor. When a judge tossed that out, the bank “went shopping for justice,” Winston said.

The company would eventually find an appellate court in California to conduct a 29-minute hearing with no transcript made of the proceedings, a highly unusual practice.

It didn’t bother to hear from Winston — he was 3,000 miles away at the time of the hearing.

The court heard no new information in the case, only the two-year-old trial record, filled with “perjurious content” from Countrywide executives, in Winston’s view.

Though legal precedent requires appellate courts to not reevaluate evidence heard by a jury, in this case they did, creating new evidence requirements that they said Winston did not meet. According to the Government Accountability Project, which presented an amicus brief to Winston in the case, “respect for the jury’s determinations is the rule in California and the federal system.”

Nonetheless, the appellate court reversed the jury verdict, rescinding the $3.8 million award.

The court claimed that Bank of America could not be held liable for Winston’s travails, despite clear legal precedent that it assumed those liabilities when it bought Countrywide. “They reversed my verdict and they broke the law to do it,” Winston said.

* * *

Despite Bank of America taking two years to delay and appeal the verdict, Winston has no right to appeal. He sought a rehearing and then an appeal to the California Supreme Court, to no avail. He’s working on an appeal to the US Supreme Court, arguing that his constitutional rights were violated. “The Constitution gives you the right to a trial by jury. It doesn’t say ‘only if the jury finds in favor of Bank of America,’” said Winston.

The insult on top of injury comes from Bank of America retributively seeking monetary damages from him.

It filed in Superior Court to recoup roughly $65,000, allegedly the cost of posting a bond that was ordered by the trial judge after the original $3.8 million jury award.

But Bank of America never paid the award to Michael Winston.

“I never saw a dime and paid $600,000 in legal fees,” Winston said.

The egregious demand for restitution — from a multibillion-dollar company — is a symbol of the vindictiveness of a corporate giant lashing out at someone who dared to expose them.

Winston, 62, has not been able to find work since this ordeal, despite a stellar record over three decades. Bank of America even tried to subpoena speaker’s bureaus Winston had signed up with to tell his story on the lecture circuit, causing those organizations to break ties with him.

So the $65,000 is not a trivial amount for him.

And the principle of having to pay Bank of America after it put him through hell for years is stinging.

The lesson is clear: If you object to the corrupt practices at financial giants like Countrywide and Bank of America, you will be marginalized and financially ruined. And even if you think you’ve won, over time you will lose.

“No one who receives a jury verdict can feel safe,” Winston said. His actions — filing a health and safety complaint and refusing to misrepresent material facts for the company — are supposed to be protected by law. None of that mattered. Says Winston, “If I can’t get this case heard, why would any whistleblower speak up?”

Rewind 2008: When You Blow the Whistle On Wall Street Banks, You Take On The Government in America
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Laws In Texas is a blog about the Financial Crisis and how the banks and government are colluding against the citizens and homeowners of the State of Texas and relying on a system of #FakeDocs and post-crisis legal precedents, specially created by the Court of Appeals for the Fifth Circuit to foreclose on homeowners around this great State. We are not lawyers. We do not offer legal advice. We are citizens of the State of Texas who have spent a decade in the court system in Texas and have been party to during this period to the good, the bad and the very ugly.

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