Daily Archives: May 8, 2014



NOTE: This interview was conducted in late February 2014, before a sentencing hearing that was eventually postponed.  Ms. McCulley was then sentenced to a year each of prison and probation on April 25, 2014.  She is now requesting a Reconsideration of her sentence, and this request will be heard on May 8, 2014.

Originally published: May 7, 2014

By Clinton Kirby and Glenn Augenstein

If you follow the news of foreclosure fraud and bad banks, you have certainly heard that on February 7, 2014, a Gallatin County, Montana jury awarded Ms. Mary McCulley an incredible $6 million verdict against US Bank of Montana, with $5 million of that figure being awarded for punitive damages.

It’s the kind of victory that foreclosure fighters have long dreamed of, yet rarely (if ever) seen:  a bank being found liable for actual fraud as well as constructive fraud. Indeed, the fact that banks have…

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Schumer, Warren, other key Democrats will not support Johnson-Crapo GSE reform bill

Schumer, Warren, other key Democrats will not support Johnson-Crapo GSE reform bill

For months, the GSE reform measure known as Johnson-Crapo has been under attack. The bipartisan bill would wind down Fannie Mae and Freddie Mac in the next five years and was set to be marked up by the Senate Banking, Housing and Urban Affairs committee late last month.

The markup was delayed to allow the bill’s authors Chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, to garner more support amongst the committee’s members.

The delay was only supposed to be for a week. But now it seems that the delay may be an indefinite one that eventually leads to the bill’s demise. That’s because six key Democrats whose support is crucial for the bill’s passage in Congress have decided that they will no longer support the bill as written.

According to Bloomberg, Charles Schumer of New York, Sherrod Brown of Ohio, Jeff Merkley of Oregon, Robert Menendez of New Jersey, Elizabeth Warren of Massachusetts, and Jack Reed of Rhode Island held a private meeting and agreed to pull their support for Johnson-Crapo.

When the bill’s markup was delayed on April 29, Crapo said that he was confident that bill would have passed through the committee with the minimum number of votes, but wanted to try to engender more support to send a stronger message.

“I look forward to working with my colleagues in the coming days, to listening to their questions or concerns to help us find a bipartisan consensus with even stronger votes,”Crapo said at the time.


Whistleblower Suit Alleges Corruption, Cronyism, and Affairs in NM Gov. Susana Martinez’s Administration

Whistleblower Suit Alleges Corruption, Cronyism, and Affairs in NM Gov. Susana Martinez’s Administration

recently unsealed whistleblower lawsuit filed in New Mexico state court makes a series of explosive allegations against appointees of rising GOP star Gov. Susana Martinez, accusing high-ranking officials in her administration of public corruption, mismanagement, and intimidation. It claims that officials at the state’s economic development agency engaged in extramarital affairs that could expose the state to sexual harassment charges and that officials tried to silence employees who reported contracting violations and other wrongdoing.

The 22-page complaint—filed February 10 on behalf of two former state employees—claims that a company co-founded by Martinez appointee Jon Barela, secretary of the New Mexico Economic Development Department, secretly benefited from a state tax credit program. The complaint also alleges that aides to Martinez instructed a state employee to use his personal email for sensitive government work to avoid being subject to public records requests; that Barela and his deputy, Barbara Brazil, ignored waste and mismanagement at the state’sSpaceport project in southern New Mexico; and that Brazil ran several Dairy Queen franchises she had an interest in “while simultaneously being paid by the State of New Mexico.”

The whistleblowers are Kurt Saenz, the former chief financial officer at the New Mexico Economic Development Department, and Brent Eastwood, a former Army infantry officer and RAND Corporation analyst who ran the department’s international trade and business advocacy divisions. Both men are Republicans and were appointed by Martinez. Eastwood’s wife, Melanie Sanchez-Eastwood, worked as a scheduler on Martinez’s 2010 gubernatorial campaign. A source familiar with the case says the FBI has interviewed Saenz and Eastwood about their allegations. Eastwood also anonymously reported his allegations to the state attorney general and the state auditor. (Saenz and Eastwood declined to comment for this story.)

In a response filed on March 14, an attorney for Barela, Brazil, and the Economic Development Department denied all the allegations contained in the whistleblower suit. Barela, Brazil, and spokespeople for Martinez and the Economic Development Department did not respond to requests for comment.

The lawsuit comes at an inopportune time for Martinez. For months, she and Barela have mounted a public campaign to encourage Tesla, the electric car company, to select New Mexico as the site for a new $5 billion car-battery factory. Tesla’s “gigafactory” would be the largest lithium-ion battery plant in the world, covering 10 million square feet and employing as many as 6,500 people.

In February, Tesla selected New Mexico as one of four finalists for the factory. Throughout this courtship, Barela has been front and center touting the benefits of doing business in New Mexico. While campaigning for governor in 2010, Martinez pledged to bring jobs to New Mexico by rooting out the kind of corruption in state government that the whistleblower suit alleges. “We must get rid of [corruption] completely,” she said then.


Is Obama Really Forcing Banks to Close Porn Stars’ Accounts? No, Says Chase Insider

Is Obama Really Forcing Banks to Close Porn Stars’ Accounts? No, Says Chase Insider

A JPMorgan Chase source says Obama’s “Operation Choke Point” has nothing to do with its recent account closures.

If this were a Hardy Boys book, it would be The Hardy Boys and the Mystery of the Porn Stars’ Disappearing Bank Accounts.

Last month, porn star Teagan Presley told Vice that JPMorgan Chase & Co. closed her account because the bank considered her “high-risk.” Then, on Wednesday, porn director David Lord told the Daily Beast that Chase sent him a letter notifying him that the bank was going to close his account on May 11. The Beast and Vice suggested that a secretive Justice Department program, “Operation Choke Point,” was behind the account closures. But a Chase insider familiar with the matter says that the initiative has nothing to do with the termination of these accounts.

“This has nothing to do with Operation Choke Point,” the source told Mother Jones. “There’s not a targeted effort to exit consumers’ accounts because of an affiliation with an industry [and] we have no policy that would prohibit a consumer from having a checking account because of an affiliation with this industry. We routinely exit consumers for a variety of reasons. For privacy reasons we can’t get into why.”

The porn stars’ allegations play into a narrative—pushed by banks and congressional Republicans—that the Obama administration is overstretching its authority by forcing banks to police the free market. Here’s the real story:

What is Operation Choke Point? Operation Choke Point is a federal initiative that aims to crack down on fraud by honing in on banks and payment processors—the companies that serve as middlemen between merchants and banks on credit card transactions. Financial institutions are not supposed to do business with companies they believe might be breaking the law. But Justice Department officials suspect that some payment processors ignore signs of fraud—like high percentages of transactions being rejected as unauthorized—in transactions they process, and banks go along for the ride, earning massive profits.

The Justice Department has already filed one lawsuit under the program. In January, the government sued Four Oaks Bank in North Carolina, charging that it “knew or was deliberately ignorant” that it was working with a company that processed payments for merchants who were breaking the law. According to the lawsuit, Four Oaks worked with a Texas-based payment processor that processed about $2.4 billion in transactions on behalf of fraudulent payday lenders, internet gambling entities, and a Ponzi fraud scheme. The processor then allegedly paid Four Oaks more than $850,000 in fees. (In April, Four Oaks reached a $1.2 million settlement with the government, but did not admit wrongdoing.)

President Obama’s Financial Fraud Enforcement Task Force, headed by the Department of Justice, is behind the program. Michael Bresnick, who runs the task force, made the program public last March. He says that the aim is to “close the access to the banking system that mass marketing fraudsters enjoy—effectively putting a chokehold on it.”

Is this the first time that feds have asked banks to keep an eye on their customers? No. The Bank Secrecy Act of 1970 requires financial institutions to assist the feds in preventing money laundering, which includes scrutinizing customers. However, banks argue that Operation Choke Point goes further than that law.


Who opposes the program? Banks, payday lenders, gun owners, conservatives, and some Democrats have expressed opposition to the program. Frank Keating, president and CEO of the American Bankers Association, wrote an op-ed in the Wall Street Journal last month accusing the Justice Department of “forcing banks to make judgments about criminal behavior and then holding them accountable for the possible wrongdoing of others.” Jason Oxman, chief executive of the Electronic Transaction Association, which recently released guidelines for payment processors, told the Washington Post that Operation Choke Point shouldn’t target entire industries, and should instead focus on specific bad actors. A new lobbying group, the Third Party Payment Processors Association, opposes Operation Choke Point, and an activist group called “StopTheChoke.com” is running an online campaign against the program. The NRA, after receiving concerns from gun owners that the DOJ is using the program to take away their guns, said last week that “it will continue to monitor developments concerning Operation Choke Point.”

On January 8, Reps. Darrell Issa (R-Calif.) and Jim Jordan (R-Ohio) sent a letter to the Justice Department arguing that “the extraordinary breadth of the Department’s dragnet prompts concerns that the true goal of Operation Choke Point is not to cut off actual fraudsters’ access to the financial system, but rather to eliminate legal financial services to which the Department objects.”


US Bank To Pay $2M To Exit Suitable Seating Class Action

US Bank To Pay $2M To Exit Suitable Seating Class Action

Law360, New York (May 08, 2014, 5:01 PM ET) — U.S. Bank NA is poised to exit a class action alleging that it failed to provide suitable seating arrangements to a group of nearly 2,700 bankers at its California locations, as the named plaintiffs pursuing the case asked the judge on Wednesday to sign off on a settlement agreement worth nearly $2 million.

In a 22-page motion, plaintiffs Cynthia Brooks and Jacob Swoyer asked U.S. District Judge Edward M. Chen to grant final approval to a $1.9 million deal that will end nearly two years of…


Fannie, Freddie Warn They Are Running ‘With No Cushion’

Fannie, Freddie Warn They Are Running ‘With No Cushion’

The government-sponsored enterprises remain profitable, but executives are raising fresh concerns about their ability to withstand a recession because of restrictions on raising capital.

National Mortgage News (sub. req)


Bank of America Shareholders Press Officials After $4 Billion Error

Bank of America Shareholders Press Officials After $4 Billion Error

CHARLOTTE, N.C. — This year’s annual meeting was supposed to be a victory lap for Bank of America, with many of its mortgage problems receding and its deposits and credit card business growing.

Instead, executives and board members faced pointed questions from shareholders on Wednesday about a costly error in the way the bank calculated its financial health. The $4 billion error forced Bank of America to suspend its planned dividend increase and raised broad issues about oversight inside the bank.

Speaking for the first time about the problem since it was disclosed last week, Charles O. Holliday Jr., the bank’s chairman, gave a full-throated defense of the way executives have responded to the $4 billion capital miscalculation.