Crown Management Blogs

Oct 28, 2013 at 16:01 o\clock

Blue Crown Capital | Bank of America liable for Countrywide mortgage fraud

(Reuters) - Bank of America Corp was found liable for fraud on Wednesday over defective mortgages sold by its Countrywide unit, a major win for the U.S. government in one of the few trials stemming from the financial crisis.


After a four-week trial, a federal jury in New York found the bank liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called "Hustle" and sold them to government mortgage giants Fannie Mae and Freddie Mac, the government said.


The four men and six women on the jury also found former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced.


The U.S. Justice Department has said it would seek up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans. But it will be up to U.S. District Judge Jed Rakoff to decide on the penalty. Arguments on how the judge will assess penalties are set for December 5.


Any penalty would add to the more than $40 billion Bank of America has spent on disputes stemming from the 2008 financial crisis.


"The jury's decision concerned a single Countrywide program that lasted several months and ended before Bank of America's acquisition of the company," Bank of America spokesman Lawrence Grayson said. "We will evaluate our options for appeal."


Marc Mukasey, a lawyer for Mairone, called his client a "woman of integrity, ethics and honesty," adding they would fight on. "She never engaged in fraud, because there was no fraud," he said.


Wednesday's verdict was a major victory for the Justice Department, which has been criticized for failing to hold banks and executives accountable for their roles in the events leading up to the financial crisis.


The government continues to investigate banks for conduct related to the financial crisis. The verdict comes as the government is negotiating a $13 billion settlement with JPMorgan Chase & Co to resolve a number of probes and claims arising from its mortgage business, including the sale of mortgage bonds.


blue crown capital mortgages





The lawsuit stemmed from a whistleblower case originally brought by Edward O'Donnell, a former Countrywide executive who stands to earn up to $1.6 million for his role.


The case centered on a program called the "High Speed Swim Lane" - also called "HSSL" or "Hustle" - that government lawyers said Countrywide started in 2007.


The Justice Department contended that fraud and other defects were rampant in HSSL loans because Countrywide eliminated loan-quality checkpoints and paid employees based on loan volume and speed.


The Justice Department said the process was overseen by Mairone, a former chief operating officer of Countrywide's Full Spectrum Lending division. Mairone is now a managing director at JPMorgan.


About 43 percent of the loans sold to the mortgage giants were materially defective, the government said.


Bank of America bought Countrywide in July 2008. Two months later, the government took over Fannie and Freddie.


Bank of America and Mairone denied wrongdoing. Lawyers for the bank sought to show the jury that Countrywide had tried to ensure it was issuing quality loans and that no fraud occurred.


The lawsuit was the first financial crisis-related case against a bank by the Justice Department to go to trial under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).


The law, passed in the wake of the 1980s savings-and-loan scandals, covers fraud affecting federally insured financial institutions.


The Justice Department, and particularly lawyers in the office of U.S. Attorney Preet Bharara in the Southern District of New York, have sought to dust off the rarely used law and bring cases against banks accused of fraud.


Among its attractions, FIRREA provides a statute of limitations of 10 years and allows the government to bring civil cases for alleged criminal wrongdoing.


Virginia Gibson, a lawyer at the law firm Hogan Lovells, said the Bank of America verdict was a "big deal because it shows the scope of a tool the government has not used frequently since its inception."


Gibson and other lawyers say any appeal by Bank of America would likely focus on a ruling made by the judge before the trial that endorsed a government position that it can bring a FIRREA case against a bank when the bank itself was the financial institution affected by the fraud.


The case was one of three lawsuits in New York where judges had endorsed that interpretation. Banks have generally argued that the interpretation is contrary to the intent of Congress, which they said is more focused on others committing fraud on banks.


Bank of America's case was the first to go to trial, a rarity given that banks more typically choose to settle government claims instead of face a jury. But Bank of America had said that it "can't be expected to compensate every entity that claims losses that actually were caused by the economic downturn."


In a statement, Bharara said Bank of America "chose to defend Countrywide's conduct with all its might and money, claiming there was no case here."


"This office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public," Bharara said.


In late afternoon trading, Bank of America shares were down 27 cents at $14.25 on the New York Stock Exchange.


The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.

Aug 22, 2013 at 08:36 o\clock

Crown Global Insurance Management - Life Insurance Benefits

Crown global | Insurance is contractually based and therefore has many inherent advantages for policyholders, beneficiaries and trustees. Life Insurance contracts remain one of the most efficient and compliant ways of growing, preserving and transferring wealth. Many advantages of life Insurance are associated with its favorable tax treatment, asset protection and flexible investment options.


In addition to life insurance protection, insurance products have offered tax-free or tax-deferred benefits for many years. Life and annuity policies can be tailored to meet the specific investment objectives of high net worth families through customized private placement products. Generally, this means that a policy can be designed for qualified investors so that the investment portion of the policy (the cash value or principal) can be managed by a manager selected by the policy owner or invested in a hedge fund designed for insurance company accounts. While the number of companies offering these policies is relatively small, the choice of managers is virtually unlimited and the number of insurance dedicated funds (hedge funds for insurance accounts called "IDFs") is growing rapidly. Private Placement policies now offer the same prospect of high returns through alternative investments with a managed account or hedge fund investment with one exception: the returns inside a policy are tax-free or tax deferred, while the returns of a direct investment are currently taxable, often at ordinary income rates.


Variable Life Insurance

o   Efficient, low cost structure

o   Option for significant death benefit in excess of policy account value

o   Wide range of investment options including qualified hedge funds

o   Investments compound tax free

o   Ability to access policy assets in a tax favorable method

o   Investor’s separate account is insulated from the financial/credit risk of the insurance carrier

o   If structured accordingly, policy death benefit proceeds can be transferred to beneficiaries in a tax efficient manner

o   Typically no surrender fees or cancellation penalties









Private Placement policies are only available through a private placement offering to accredited and/or qualified purchasers who must meet the suitability standards required under the applicable securities laws to the purchase of the policy. These rules are the same as the rules that apply to an investment in a particular hedge fund, and in each case, the beneficial owner of the policy must complete a questionnaire establishing suitability.

Private Placement policies are also “variable”, which means that the policy owner allocates the assets to one or more third-party asset manager or an IDF. The proceeds of the policy will be a combination of the return on these investments and, in the case of a life insurance policy, the amount of death benefit set forth in the contract. To qualify as life insurance, a certain amount of risk must be borne by the insurance company based on the insured’s age, health and sex.

Private Placement policies are also “universal” policies, meaning that after the first premium payment there are no mandatory payments required as long as there are sufficient assets to pay for the cost of insurance on the policy and other current charges. Private placement policies usually require minimum premium payments on the order of several million dollars, and premium payments can be stretched over several years. Once the insurance company receives the premium and the funds are allocated to one or several managers or IDFs, the policy owner is generally permitted to change managers or select new funds at periodic intervals. Such changes or reallocations are tax-free so that the gains derived on the sale of one fund are available in full for an allocation to a new fund. Moreover, there are generally no or minor administrative charges when funds or managers are changed.

Another important opportunity for Private Placement investors is the opportunity to access the funds within a policy by borrowing from the policy. If the policy is structured as a non-modified endowment policy the funds may be borrowed at market interest rates without any tax effects. The loans do not have to be repaid during the lifetime of the borrower and may be repaid tax-free out of the proceeds of the policy on the death of the insured.


Deferred Variable Annuities

o   Efficient, low cost structure

o   Wide range of investment options including qualified hedge funds

o   Investments compound tax deferred

o   Investor's separate account is insulated from the financial/credit risk of the insurance carrier

o   Typically no surender fees provided funds are accesed after age 59 and ½ of the annuitant






Deferred variable annuities operate in the same fashion as life insurance policies during the lifetime of the owner in that gains accrue tax-free. Distributions are taxable, however, at ordinary income rates and are apportioned between income and the return of capital. The period of deferral can be continued where the beneficiary of the policy is a spouse and taxes can be avoided if there is a charitable beneficiary. Gains distributed to an annuitant who has not attained age 59and ½ are subject to an additional 10 percent penalty tax. The advantage of an annuity is that it does not require underwriting - there is no life insurance component, which means that it can be issued quickly. Moreover, the cost of an annuity is less since there is no need to pay for the insurance risk.