Sadly… this comes as no surprise!

Lewis: Fired for doing his job, fraud finder sues

Posted: 01/02/2010 01:00:00

The HR lady pulled Michael Walker into a room and told him he was fired.The reason: Talking to the FBI. It was a violation of the company’s privacy policy.

"I was stunned," Walker told me. "I couldn’t believe it. But that’s what she said."  Walker, a "high-risk specialist," was then walked out of the
building as if he were the risk. His job at Aurora Loan Services LLC in
Littleton ended on Sept. 4, 2008.  Aurora was a subsidiary of Lehman Brothers, the big, failing Wall
Street investment bank that didn’t get a bailout. A week after Walker
was fired, Lehman filed history’s biggest bankruptcy.

The effects of its collapse are still rippling through the global economy. Much has been written as to whether allowing Lehman to fail was the Federal Reserve’s and Treasury’s one big mistake.  Walker doesn’t judge. He was just a guy who worked at its mortgage subsidiary, and this is his tale.

His job was to uncover mortgage fraud. But he claims he was fired
for doing it. In a lawsuit recently filed in Denver District Court, he
claims Lehman’s mortgage subsidiary wanted to remain profitably unaware
of fraud.  A company representative declined to comment on Walker’s allegations.

Aurora Loan Services is a subsidiary of Aurora Bank FSB, a $4.7
billion savings and loan based in Wilmington, Del., that used to be
called Lehman Brothers Bank. Aurora and its affiliates weren’t part of Lehman’s bankruptcy
filing. But Aurora Loan Services made all kinds of exotic loans —
Alt-A, Alt-B, subprime — for Lehman to wrap into securitized bundles.
This contributed not only to Lehman’s demise, but what almost became
the next Great Depression, the lawsuit alleges.

The case "is yet another example of a mortgage industry that
believes it is above the law," said Walker’s attorney, Mari Newman of
Killmer Lane & Newman LLP in Denver.  "Apparently, Aurora Loan Services was more interested in concealing
potentially fraudulent loans than it was in allowing an honest and
hardworking employee to respond to legitimate requests from federal law
enforcement," she said.

At 42, Walker has spent much of his career uncovering fraud. Before
joining Aurora in 2004, he did a similar job for a smaller bank. Before
that, he worked at Qwest, rooting out fraudulent telephone accounts. At Aurora, he went after schemers who would set up straw buyers,
finance home purchases for more than their selling prices, pocket the
differences, move on to more deals and leave nothing but foreclosed
homes in their wakes.

Aurora made its loans through independent mortgage brokers, who
often didn’t have to meet any criteria to be brokers, not even criminal
background checks in some cases. Inevitably, some percentage of the
mortgage applications they took would be laced with fraud. But like
everyone else, they got paid by loan volume, not by loan quality.  Consequently, Walker and his fraud-seeking colleagues were always busy.

"They just absolutely flooded us with work," he said. "There was no
way we could possibly keep up with it. And that’s what they wanted."

"They were putting the loans into an investment trust," he
explained. "When they became aware of fraud, they had to buy those
loans back out of the trust. So it ended up costing them money." What were the chances that Bob’s Fly-By-Night Mortgage Co. would be
able to return the funds it got from Aurora? What were the chances that
the losses could be recovered through foreclosure?  Better to let it
ride.  But Walker couldn’t play this game.

A "Suspicious Activity Report" that he filed in 2006 led to
interviews with the FBI and the IRS in 2008, and then ultimately to his
bizarre dismissal.  "At the time, Lehman was being investigated for fraud, and it was
imploding," he said. "The economy was so uncertain It was crazy."  I gathered that Walker is one of those by-the-book guys who isn’t
well-suited for the job description: Go look for fraud, just don’t find

He is now rooting out shady deals for a new employer, and says he
filed the lawsuit to make a point and perhaps secure his place in
financial history.  "It’s one of those events, like Kennedy or 911," he explained. "Everyone remembers where they were on those days." 

"If somebody asks me about the mortgage blowup of 2008, I can look
back and say, yeah, damn right I was involved with it, and here’s my

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