The Center for Public Integrity

After she lost her job in the fall of 2007, Cassandra Daniels had a word with a trio of her managers. As she recalls it, she told them she was praying that, someday, they’d learn to use their positions of power “to uplift your staff instead of destroying people.”

She cleaned out her desk and taped a handwritten sign to her computer screen, quoting one of her favorite gospel songs: “GIANTS DO FALL.”

That marked the end of Daniels’ tumultuous relationship with Countrywide Financial Corp., the nation’s largest home lender during the mortgage boom.

For Daniels, her four years as a loan underwriter inside Countrywide’s mortgage-production machine were a blur of 12- and 14-hour workdays and frequent clashes with managers and salespeople regarding loans she believed were tainted by fraud.

When she rejected loans that were based on inflated income statements or other questionable information, she says, management overruled her and pushed the deals through.

“The sad part is I lost hope in the integrity of any system,” Daniels recalled in an interview with iWatch News. “Because there were supposed to be checks and balances. But there weren’t. All these people were driven by pure greed. And they didn’t care that it was at the expense of other human beings.”

Bank of America Corp., which bought Countrywide in 2008, declined to comment on Daniels’ account of her time at the lender. However, a spokesman has dismissed the idea that Countrywide management encouraged fraud inside the company. When fraud happens, the spokesman said, “the lender is almost always a victim, even if the fraud is perpetrated by individual employees.”

‘Fast and sleazy’

Before she began working at a Countrywide branch in Chicago’s western suburbs in the summer of 2003, Daniels, a single mom, was working two jobs, as a manager at a local bank in Naperville, Ill., and as a night auditor at a Marriott hotel.

Editor's note 12/2/11: Eileen Foster, the fraud sleuth profiled in iWatch News' "Great Mortgage Cover-Up" series, appeared on CBS News' "60 Minutes" on Sunday night (12-4-11). In a two-part story published Sept. 22-23, iWatch News staff writer Michael Hudson reveals how Foster, Countrywide Financial Corp.'s fraud investigation chief, uncovered massive fraud within the company and, federal officials say, paid a price for doing so.

In the summer of 2007, a team of corporate investigators sifted through mounds of paper pulled from shred bins at Countrywide Financial Corp. mortgage shops in and around Boston.

By intercepting the documents before they were sliced by the shredder, the investigators were able to uncover what they believed was evidence that branch employees had used scissors, tape and Wite-Out to create fake bank statements, inflated property appraisals and other phony paperwork. Inside the heaps of paper, for example, they found mock-ups that indicated to investigators that workers had, as a matter of routine, literally cut and pasted the address for one home onto an appraisal for a completely different piece of property.

Eileen Foster, the company’s new fraud investigations chief, had seen a lot of slippery behavior in her two-plus decades in the banking business. But she’d never seen anything like this.

“You’re looking at it and you’re going, Oh my God, how did it get to this point?” Foster recalls. “How do you get people to go to work every day and do these things and think it’s okay?”

More surprises followed. She began to get pushback, she claims, from company officials who were unhappy with the investigation.

A high-level executive who reported corrupt lending practices at Countrywide Financial Corp. was improperly fired for leading internal investigations that “revealed widespread and pervasive wire, mail and bank fraud” at the lender, a federal agency ruled Wednesday.

The Labor Department ordered Bank of America Corp., which bought Countrywide, to pay the former executive roughly $930,000 and reinstate her.

Eileen Foster, who worked as a vice president at Countrywide and then at Bank of America after it acquired Countrywide in 2008, claimed that high-level executives at Countrywide covered up fraud within the company. She said whistleblowers who tried to report forged documents, faked data and other questionable activity inside the nation’s largest mortgage lender were fired.

Foster ran Countrywide’s mortgage fraud investigation unit at the time of the merger. In a series of interviews with iWatch News, Foster said Countrywide’s management protected sales staffers who inflated borrowers’ incomes on loan applications and falsified paperwork in order to push through a high volume of risky mortgages.

“The organization built its business to take advantage of the fraud,” Foster said. “It benefitted from the fraud. And it protected the fraud.”

Asked Wednesday about the labor agency’s decision, Foster said, “I don’t want to comment at this time, considering that I may be returning to Bank of America as an employee.”

Bank of America said it plans to appeal the ruling.

“This is an old matter dating from 2008,” bank spokeswoman Shirley Norton said. “We are disappointed with the ruling and plan to exercise our option to challenge the order.”

Under whistleblower-protection provisions of the 2002 Sarbanes-Oxley corporate reform law, Bank of America has 30 days to file an appeal with a Labor Department administrative law judge.