The New Untouchables: The Pecora Files
Episode 3 – If You Can Fog A Mirror
February 28, 2021

[00:00:00.940] – Steve Grumbine

All right, this is Steve Grumbine with Real Progressives, and we are in part three of our ongoing series, The New Untouchables. Folks, we have Lori Noble we’ll be starting with, who is an appraiser. And she is someone who can give us the inside machinations of the appraisal fraud and the predation within the appraisal community, within the way the structure of fraud took appraisals and elevated the assets and really, really created the environment, if you will, for fraud.

It created all the necessary conditions for fraud. And it was also the early distant warning that told us about fraud. Had we listened to the appraisals, appraisers, this would have never happened. And part two of this episode will also be Michael Winston is a Countrywide executive whistleblower who saw things ground level and blew the whistle on it. And we’ll be talking to him second half of this episode. So without further ado, let me introduce my guests.

Right now, we have Patrick Lovell, who was the star, if you will, the voice of the series, The Con. We also have Eric Vaughan, who was the writer, and the guy who put it all together. And then we have Lori Noble. And with that, let me bring on Lori Noble. Lori, thank you so much for joining us. I want to hit on the guys who wrote this before we dive into your story, but I just really want to thank you for your hard work and in everything you’ve done to bring the spotlight to this. So with that, Eric, why don’t we start with you. Tell us, what about this particular episode so important to you?

[00:01:55.420] – Eric Vaughan

I don’t want to say too much because I want to get straight to Lori here. But I think the biggest thing to understand is that the independent appraisal process is critical to a functioning lending system and that what Lori and other figures like her did was help make sure that proper lending was happening. And when that gets subverted through various means, that it basically creates trouble everywhere else down the line.

And one of the other important things is that in the run up to the collapse, they were probably one of the first and most excellent warnings of what was about to happen because they were experiencing the duress coming from lenders to hit a particular number as opposed to the proper appraisal process of setting the value of the house. So anyway, with that, I’ll go ahead and let Patrick chime in before Lori explains the whole deal to us.

[00:03:08.190] – Patrick Lovell

Well, I appreciate that both Steve and Eric, and I just want to say thank you to Lori.  Lori is near and dear to my heart because I think we both come from the same generation. We’ve seen a lot of this evolve really most of our adult lives and Lori has been a professional in this space since, particularly the late 90s, when a lot of the deregulation of policy changes took place that Lori was able to see in the trenches of her professionalism.

And she brought a degree of integrity to her craft that was literally chipped away at throughout the last several decades. And as this evolved and given where Lori was in this whole process, like everybody else in terms of this program, Steve, she exemplifies the notion of an untouchable. She exemplifies integrity, courage, and a commitment not just to the craft of professionalism, but to her clients and people as a whole. And we’ll get a little bit more involved with what that means in terms of what her sacrifice was.

But I can assure you, as you move into this, Steve, to understand, again, what we’re revealing is that at every step of the way of this incredible con, were heroic people who are professionals who did everything in their power to prevent what took place. And on that note, Lori, why don’t you give us an overview of how you look at what created The Con?

[00:04:39.460] – Lori Noble

Thank you for having me. Thank you so much, guys. It’s great to be with Eric and Patrick again and meeting these new people too. Thank you, Mr. Black, again. I guess I’m going to reflect a little bit on 2000 and the repeal of Glass-Steagall. That was my initial trigger. Even though I was very young in the business, I didn’t realize exactly what it meant. And with the signing of Gramm-Leach-Bliley, it was sold to us as a privacy, as a matter of privacy, so that information could legally cross state lines, enter interstate banking.

And that was the big change. And even early, early, early 2000, I got with my colleagues and peers, and we asked . . . so I could sense what was going on, but I couldn’t quite pinpoint it. And between 2000 and 2010 was just an ultimate carnage of the real estate market. And what I’m reflecting on from 2010 until now is that we’re still we’re still dealing with the real issues because they were never properly addressed.

And I’m looking at the economy and the leadership and a lot of people working to solve very, very complex and difficult problems, and they could really lean back on something like a Glass-Steagall to help correlate and bring things in a more uniform and manageable way. And in the appraisal space, we have no independence any longer. It’s really been taken away. And this is something that we’re working diligently to educate the consumer and working with lenders and information like this is going to be very beneficial to people and individuals when they’re making their biggest decision, you know, of purchasing a home.

[00:06:58.640] – Vaughan

What is so important about the independence of an appraiser?

[00:07:03.420] – Noble

Bill Black really defines mortgage control fraud, and it was something that I was able to . . . When I finally got that definition and understood and researched it, it really identified so many of the infractions that appraisers are under and mortgage control fraud is the element that takes away independence from the appraisers to function and serve their customers.

There are literally too many hands in the fire. And appraisers represent a very small number of people, so comparatively, the influence that we have is much smaller compared to realtors or the banks; and that said, we’re on the forefront of change, and we see change. It is in our DNA to identify its problems. The problem is that we’re a small group. So when we speak of it, it doesn’t get the attention that it’s garnered and should be deserved.

[00:08:13.420] – Vaughan

But the general idea, just like maybe . . . it’s like, tell us in the most basic terms what an appraiser’s position is in the process.

[00:08:25.010] – Noble

This, though, goes into the area of who is the client, the intended user, and who non-intended users are when it comes to mortgage appraisals; and we really need to grasp that appraisers’ appraisals are prepared for lenders and not for individuals. So the lender is contacting that appraiser to prepare the appraisal for them with their lender overlays.

The appraiser is to be allowed to function completely independently without influence, bribery, extortion from anyone involved in the transaction. We have Dodd Frank and a plethora of laws that rolled out after the crash. It has ultimately led to even more problems. It hasn’t answered all the problems.

[00:09:27.570] – Grumbine

So, Lori, let me ask you, you know, in context of where you live and where you practice, tell us about how that relates to the predatory lending, fraud.

[00:09:41.190] – Noble

I’m going to speak very personally and very candidly at this point, and I believe that the concept of local banks being involved in the local communities with people who work at the lenders representing the fabric of that community, right – people. So everyone works together. We don’t have that any longer. And I’m from an area that was very, very strong in that level where the brick and mortar bank, you knew that banker, everybody knew that banker. Everybody in town knew that banker, so that banker did the right thing.

Fast-forward to where we went to after the repeal of Glass-Steagall and working in my hometown, I suddenly went from working with local people to people I don’t know, and they don’t know my area. And that is the evolution that’s occurred. So now banking in the mortgage realm functions at this 50,000 degree view. People are trying to figure out problems and saying we need to get down on a granular level again and work in our communities again, but we don’t have a banking environment that facilitates that. So, you know, appraisers have evolved through this process and taken a lot, a lot, a lot of big hits on the backside of it too.

[00:11:19.920] – Lovell

So, Lori, I’m going to drop in here just really quick from a predatory standpoint. You live in West Virginia and this is going to be a national audience. And what we’re trying to convey here through the Pecora files and, of course, like you being somebody who walks in Bill Black’s sort of drumbeat, you came to understand that unless you lay out the facts to a national audience to create a connection where people have experienced, you can’t overcome the corruption that’s actually choked the system.

And so in West Virginia, it probably wouldn’t surprise people. And I want to get your sort of experience here to the public that it was literally a target of predation because you guys have experienced a massive loss of jobs in West Virginia, coal industry and so forth. And suddenly, fast-forward to this time era, Countrywide was doing mortgages and lending like crazy. Can you compartmentalize about that?

[00:12:15.270] – Noble

I can. It was the craziest phenomenon I’d ever seen. And people, you know, intrinsically interested in the economy, when you see things like that, you recognize it and you know it.  So, Countrywide in West Virginia during the run up was one of the . . . We had a lender who was one of the top producers in the country for Countrywide. The reason being in my market and it still applies today is that people have a lot of equity in their homes, and they were genuinely targeted to take that equity.

And I guess that’s how the inflated appraisals occurred. I had an instance with Countrywide, I did an appraisal and plainly stated this property does not pass secondary market requirements, and it was on the tail end of them hanging onto their seat, I guess, they pushed it through, and within two months, that borrower defaulted on that appraisal and I got sued for that.

[00:13:25.270] – Lovell

This is what’s going to really resonate with you in terms of Lori’s story, and even towards Michael’s. West Virginia had completely lost its working class. It had since the 80s, a destruction of the coal industry, a lot of offshoring, outsourcing, so the working class was no longer. So suddenly, here comes this opportunity of these lenders who were in the shadow sector based on what you just learned from our friends in Ohio; and they’re lending like crazy.

One of the largest producers of predatory loans. Well, loans, we don’t know they’re predatory at this stage, is happening in West Virginia. People who don’t really know a lot about sophistication within the real estate market are now being offered so much more than they could have ever realized, but for a specific outcome. Lori, can you connect the collapse working class of Virginia to this predatory lending?

[00:14:17.380] – Noble

Fortunately, we didn’t experience an extreme downturn like so many of the other states did. I can’t say that, but I’m going to say that that’s because of the wherewithal with a lot of the appraisers here holding steadfast. The target, though, that is on rural America and it isn’t just West Virginia is immense because the lenders know that there is an enormous amount of equity that they can capture from this market.

They have taken it to the degree that one state totally allows for appraisal waivers, that’s how it is and that’s what they press for.  It’s not going to lend well to accurate data. This data is not getting fleshed out and documented properly so, there’s going to be some serious distortions on the backside of this too.

[00:15:14.260] – Lovell

Can you talk about the human toll?

[00:15:16.150] – Noble

After covid, I’m deeply, deeply concerned with what’s going to happen on the backside of this with the housing situation, with the interest rates as low as they are, with the money that’s getting put into the shadow inventory, it’s a very synthetic system, and the independence that you speak of is daily, daily getting chipped away from the appraisers because we are the ones that are supposed to be on the front line sounding the alarm and the mortgage control fraud is coming in from them, taking away all of those little elements that we have to . . . that allow us to inform people ahead of time. So on the backside, that’s going to be very, very detrimental to the economy.

[00:16:14.540] – Vaughan

How just . . .  to get a little idea of how this actually happened, how were appraisers forced basically, to hit numbers as opposed to getting the actual value of a home?

[00:16:29.160] – Noble

From what I gather, a lot of predetermined values were pushed on appraisers before the appraisal was ever done. So when that assignment would come out, that predetermined value was there so that lender pressure it existed when that assignment was delivered. And that was an initial thing. Of course, the blacklisting, many, many of us have experienced that. It’s the most . .

[00:17:05.740] – Vaughan

Can you tell us what blacklisted means?

[00:17:10.310] – Noble

If you don’t hit this number, if you don’t do what we say, you will no longer get work. And that was a common practice. When I approached the folks at Countrywide here in my rural West Virginia market and explaining that their expectations and reality were two completely different things, they basically told me that that was my problem. There was nothing that I could do about it. And if I didn’t like it, you know, they would find someone else.

[00:17:41.910] – Vaughan

So how difficult was it financially to be an honest appraiser at the height of the fraud epidemic?

[00:17:50.740] – Noble

Honest appraisers were completely blacklisted. The work is given to the number hitters and, it’s the craziest thing I’ve ever seen because on one side, you have the client saying, you know, we want the best and, the on the other side, there’s every corner cut that you could possibly imagine. It really wiped me out. Even an honest appraiser isn’t going to make someone rich.

[00:18:24.710] – Grumbine

Explain to me, I guess, if you will, the impact that it had on you. I mean, as a human being, you wake up in the morning, you go to work, you show up. What does that day look like, knowing full well that the industry that you’re in is  literally propelling fraud? It’s literally the engine for fraud. What does that look like?

[00:18:49.250] – Noble

It just looks like a daily reminder that when I see those examples that we can point it out and recognize it and point it out to other people and point it out to regulators. That’s the best that we can do. And they try to paint it in a picture like they’re beating us over the head and saying, “you have to hit this value.” It’s not that. It is an extensive amount of pressure, lender overlays.

The nonbank influence on bankers, on the banking business, has been very detrimental, I think, in the manner of the way that we run the business these days. They’ve managed somehow to now drive the train, though at the same time, though, they don’t have any skin in the game. And that is a problem, and that’s like right there in front of people’s faces to recognize while they’re trying to figure out solutions but it’s not getting addressed.

[00:19:58.750] – Grumbine

This brings up the Gresham’s Dynamic. A lot of bad people in this thing and a lot of the worst . .  Talk about the Gresham’s, the Gresham’s Dynamic in this case.

[00:20:09.520] – Noble

In this case, for what I have seen with Gresham’s, I recognize it today and I can easily point it out. And historically, Gresham’s is where the people who didn’t play right were actually rewarded. And they’re still in business today, and that makes me very uncomfortable, very, very uncomfortable and very weary of those bad actors, and we have to coalesce together. Gresham’s is so embedded in the thread of now our system since the repeal of Glass-Steagall that what I see are a lot of firefighters running around, putting out fires everywhere, problems.

But there’s nobody taking up, well, what are we going to do to stop these fires from happening? So we’re just totally spinning our wheels at this moment. It is a very synthetic system, and because they’ve broken it out into so many fragmented pieces, it’s very, very difficult to say it’s fraud because it’s so, it’s been so fragmented and that is a game. That’s the game that they play to, to hide fraud, and to hide Gresham’s and to, you know, act like things are being on the up and up. And they’re really not.

[00:21:56.790] – Grumbine

One of the most important reasons why we’re doing the series is not just because we’re trying to tell these stories. These stories were told eloquently in The Con, and we have lots of good information about that. But one of the things that is vital here is for the regular people to get up in arms, to pay attention, to drive the point home, to get the politicians and the legal professionals to take action.

Tell me about your personal experience, a personal . . . as a personal life stories here of the people that were impacted by this. This is the connecting points that the average voter or homeowner person potentially buying a home might feel in this case. What is the real cost to people?

[00:22:49.140] – Noble

I need people to ask more questions and not be so comfortable to accept just what they’re told, to be more discerning in what they’re doing, because this is the biggest investment that they’re going to make. Hiring an independent appraiser gives an individual that advantage above anything. And we need to have people who really want to know the truth. And that’s basically where we’re at.

We are just not in an economy right now where truth seems to be the most important item. Now, what concerns me on the backside of this is that I don’t want people to have to suffer what I suffered, and so many other people suffered. We’re trying to parlay some information that is very convoluted and complex in a manner that people can actually understand. Ask the questions, and I’d say that the biggest help that I could give people going into 2021 ask what kind of appraisal that you’re getting when you purchase your home.

[00:24:04.130] – Lovell

Can you tell us about the personal tragedies that people that you’ve known have experienced for not understanding the information?

[00:24:12.480] – Noble

My personal story?

[00:24:14.340] – Lovell

Whether it’s your story or anybody in your circle, because I think what we’re trying to gather here is the consequences. It’s devastating, is it not?

[00:24:21.900] – Noble

It is. It is the most heartbreaking, devastating thing I think I’ve ever seen, and we have a pandemic that we’re dealing with right now where rents and payments have . . . they’ve been given forbearance, but those days are going to come due. I’m deeply concerned with what we’re going to be seeing on the backside of this.

[00:24:47.070] – Vaughan

My last question, Lori, is what do you make of this rush to automation of the appraisal process?

[00:24:54.570] – Noble

They’re just digging a deeper hole. I’m a proponent of technology and it needs to be utilized, but they’re doing it to benefit themselves. This is . . .it has nothing whatsoever to do with benefiting consumers at all. And the systems that exist, they’re not great. You know, they say they’re great. They are wonderful, but they do get hacked and they do get, you know.

That privacy that the Graham-Leach Bliley Act allowed, that’s where we’re at today and everyone’s private banking information is not, as you know, perhaps safe, as we think it is. Wells Fargo, I mean, just the number of data breaches that have existed, and again, it’s taking that 50,000-degree view. Everybody’s up in arms and worried about it, but no one is suggesting what can we do to protect people?

And that is something along the lines of the Glass-Steagall. The insurance guys don’t need to be selling mortgages. The mortgage guys don’t need to be selling insurance. Do you see what I mean? They’ve convoluted and they’ve blended and they’ve broken it down into these pieces that make the fraud hard to find. Everybody needs to get back to their specialty. And that’s how we serve citizens.

[00:26:39.540] – Vaughan

There’s a note here that talked about how Cuomo, when he was New York’s A.G., would help in destroying the independence of appraisers because of one model that was in place. And then basically he helped nationalize that model. Wonder if you could talk a little bit about that?

[00:27:05.160] – Noble

This is something actually that should terrify people, and I’m going to use the word terrify. The evolution of that New York A.G.’s lawsuit that has now created one of the largest conglomerates that has control fraud over appraisers. I mean, they hold our . . . everything, everything from our software to our data resources. I mean, I could just go on and on, and there’s something terribly wrong with this.

You talk about mortgage control fraud. This is it, because that is the company that Cuomo sued. And they were able to split and ProLogic was able to evolve from that. And, of course, they came in and bought up every piece of paper tech application that you could ever imagine. And now every appraiser in the country is held at their mercy to a degree. Here’s where it really gets good, though.

They’re taking our data, they’re taking our verification, our expertise, they’re repackaging it,  and they’re selling it to create these automated systems. And, you know, Fannie and Freddie are taking data too. . .  but the evolution of that. OK, it just blows my mind that company is bigger than they ever were. They didn’t get broken. They got bigger and now they own every appraiser’s well-being in their hands. Now, the irony of that is just. It’s beyond uncomfortable.

[00:29:17.330] – Vaughan

Actually, one of the things that we didn’t talk too much about was Dodd-Frank and how it in sort of at least its surface attempt to alleviate issues concerning appraisal fraud, it actually kind of helped institutionalize it in the form of . . . the management companies. I wanted you to talk a little bit about that.

[00:29:44.120] – Noble

Dodd-Frank was supposed to really drill down on that appraiser independence and give appraisers something to hang our hat on. You can’t extort appraisers. You can’t deny them work, but by the time all of that goes through the bureaucracy, it’s watered down. And right now we have literally because of Dodd-Frank and because the unregulated players became regulated, we have an FTC antitrust case against one of the states because they stood up for appraiser’s independence.

The whole state agency now is being sued. It’s been going on for a few years. We don’t have the people in place. The laws exist. We don’t have the people in place to uphold them and hold people accountable.

[00:30:44.040] – Grumbine

When you watched, end to end, and you don’t just do the appraisal, you watch people themselves have to live in your community. You watch the outcomes of stuff. What do you see from the average person that is caught up in this fraud? What . . . were the outcomes? Everybody didn’t fall apart, but of those that did, what was it that really caused you to say, “Oh, my God?” What were the Oh, my God stories of being inside?

[00:31:17.800] – Noble

I saw a veteran gentlemen lose his home, and he was elderly, suffered a lot of PTSD, and he tried to kill himself. So I saw blood, and that was absolutely, you know. It . . . I just knew that we never needed to be in that position from any of it. It was so unnecessary, so unnecessary.

[00:31:56.590] – Grumbine

With that, Lori, I want to thank you so much for joining us today. This has been a pleasure and I really appreciate it. We’ll be joining with Michael Winston here for the second part of this episode. Lori, thank you so much once again. I appreciate it immensely.

[00:32:11.710] – Noble

Thank you, guys. Thank you so much.

[00:32:14.290] – Grumbine

Joining us now is Michael Winston, who was a Countrywide executive whistleblower, one of the most powerful stories from The Con. Michael’s story is probably the most impactful of all of them. He was able to witness the Countrywide scam from inside and his story told to us today. Patrick, go ahead and lead us into this.

[00:32:40.060] – Lovell

Well, Michael Winston is of just incredible heroism to me. I had been introduced to Michael from some articles written by Matt Taibbi of Rolling Stone. And as I was trying to understand this big picture, I kept finding bits and pieces of the puzzle that were incorporated into the generic I call a cottage industry of media that was around the great financial crisis, but nobody was putting the full story together.

And, so I found out from Matt Taibbi’s writings, that Michael Winston had won a grand jury lawsuit against Countrywide, which then became Bank of America – in the transition between what was happening in the predatory lending stages and sequencing to the meltdown of Wall Street in 2008. And right before that happened, Bank of America came in and purchased Countrywide.

Well, in that process, Mike, Michael was a whistleblower, a whistleblower who had cc’d, sweet access at Countrywide and brought a lawsuit against Countrywide for a lot of what constitutes what we discovered later as being The Con. Unfortunately, in the process, like so many others, Steve, and this is really another part of The Con that’s almost impossible to believe.

But there is corruption in the courts from a standpoint that the banks literally had influence in our judicial system at a level that none of us can comprehend. But that’s a story that comes down the street. The place we want to understand and start with Michael is what he saw and what he learned at Countrywide when he actually was recruited to become what they called the gold standard to make sure that their outward-facing PR to financial publications was such that a man of his professionalism was what it was all cracked up to be.

And as it turns out, it was anything but that. So, Michael, I would recommend from the very beginning with obviously considering your voice, just a kind of a comprehensive perspective of your experience.

[00:35:01.470] – Michael Winston

If I may, I’d like to read from some documents that we recently introduced if that’s ok.

[00:35:08.020] – Vaughan

Please.

[00:35:10.700] – Winston

I gave, if you can believe this, a speech a week ago Monday with this voice. I had a lot of trepidation about doing it.  So here’s how they introduced me.  Before becoming one of the United States highest profile whistleblowers connected to the financial services meltdown. I’m Michael Winston, spent 34 years working as a business leader, change agent, and organization strategist with some of America’s most prestigious corporations.

He served as an executive officer for Lockheed Corp, McDonnell Douglas, Motorola for 14 years, Merrill Lynch, and then Countrywide Financial. Michael was named Best Instructor at the University of Illinois, University of California, Irvine, and Pepperdine. And then it tells me what our new friends said which is . . .  My Ph.D. was from the University of Illinois, and my master’s was from Notre Dame, and I was sent by Lockheed as an unlimited high potential guide at both Stanford and Wharton.

And, so I had been recruited by many people, absolutely. Actually, excuse me, many around the time they were recruiting me. . . .  Countrywide kept on for five years. And I thought, well, I’ll help as much as I can. It’ll be my last job anyway. But I turned down Hewlett Packard and I turned down a number of others that were also very promising. The year I joined Angelo Mozilo was Fortune Magazine’s Executive of the Year.

The company was one of the fastest moving stocks on Wall Street. And now they recruited me, was to say they wanted me to build a Goldman Sachs on the Pacific. Well, I know a lot of guys at Goldman Sachs. I had previously been offered a job from Goldman Sachs. A childhood friend of mine was the president of Goldman Sachs, so they got my attention by saying Goldman Sachs on the Pacific. And I tried until I ran into unmistakable, irrefutable fraud.

And, of course, because I had worked for really ethical companies, I thought, “Well, I’ll tell you execs they don’t know about this. These guys are going off as sort of rebels, renegades. What I had seen was in such dissonance to their people; people, principles, and something else that they used to hype. And so, I told Angelo what I had seen. I didn’t know that made me a marked guy for the rest of my life. But apparently it did.  And I also told Dave Sambol, the number two guy, and Drew Gissinger, the number three guy.

And those people are not to be crossed. I could have left easily because I was a known entity in the largest corporations in the world. However, pardon me. Let me try again. I could have left, however, I had recruited six people from companies that, six people who used to work for me out of their companies. And all those people, now they all have kids.  Their kids had to change school.  They had to sell houses. Their kids had to make new friends. So I wasn’t going to leave them in the lurch.  But the abuse.

When the wrongdoing was just too much for me to bear.  So, not really related to financial services, but Countrywide did everything on the cheap, and they were sort of bred to be corrupt.  And so when a lot of people in the building in which my team was housed complained about toxicity in the air, I went to my boss, she was on vacation, so I went to her boss, then I went to Angelo:  “We have a problem. People are getting sick here and possibly if this is not treated, they might die in your building. We need to fix this.”

Anyway, without disclosing too much, I found out they were telling me they were fixing it but doing nothing. And, so I called Cal/OSHA because people were getting sick. I was the ranking officer in this building which housed 1150 people. It’s my responsibility. It’s not my job responsibility, it’s my responsibility as a human being. Oh, and something that I should add.

Shortly before I called Cal/OSHA, I had a staff meeting in my Countrywide office. It was called the Tapo Canyon building. And I was with maybe 10 people who worked for me. Some of them were waiting outside to access my office.  One or two were already there, you know, my assistant and secretary were already there handing out what we were going to review. While that happened, I heard a sound from above my head. I was sitting at my office table.

I heard a sound from above my head, and then I felt like droplets falling on my head. Before I could move my eyes up to see what was falling, everybody in my office was getting sick. Someone said, “Are they trying to poison us?” So I tried to stand up and lead my team out.  My legs were rubber. I couldn’t move. Now I had been an athlete in college and high school. I couldn’t walk.  I couldn’t take a step, and my assistant grabbed me from under the arms and said, “We’ve got to get him out of here.”

Anyway, Countrywide didn’t even respond to our complaint.  And in court many years later, they claimed I made the whole thing up, until, of course, five people testified to being in the room at that time. What did the judge say? He said, “I’m not interested in Michael Winston’s health issues.”

[00:44:26.060] – Grumbine

Michael, would you mind taking a moment to explain what the actual fraud was? Can you describe the Countrywide model that you stumbled on to?

[00:44:39.980] – Winston

Can I read from a couple of pages?

[00:44:43.370] – Vaughan

That would be fine.

[00:44:44.260] – Grumbine

Sure.

[00:44:46.590] – Winston

But first of all, though I operated from within the Human Resources Division, my role is like, as the organization integrator, bringing the strengths and opportunities from all the disparate divisions, operations and teams to combine to a whole that is much greater than the sum of its parts. And with the exception of Countrywide, Lockheed, McDonnell Douglas, Motorola, and Merrill Lynch all grew exponentially while I headed up my function.

I don’t know if it was a direct cause and effect, but I had a huge impact on those organizations. So, when I saw people who told me later that they own their home outright and Countrywide is fucking them, they were going to foreclose on them for failure to pay, well it’s sort of like me in this house. I have a ninety-three hundred square foot house. I bought it for cash. It would be like Countrywide coming to me and saying we’ve got to kick you out. 

You didn’t make your payment for this month. That’s because there is no payment.  I own it outright. I saw them doing that a lot, and they were, they had such a power to intimidate that people said, “Hold on, I’ll help you out.” And when I started, when I got to meet the lead fraud investigator who said, “You know, the office supply that they need most in this company is whiteout because everybody’s making up stories to get the properties sold. So you had these people being intimidated, forced, strong-armed into buying homes they knew they couldn’t afford.

[00:47:21.910] – Vaughan

So in The Con, you describe like your first kind of episode of this, when you happened upon the gentleman who had the ‘FUND EM’ car and that from there, it was like you were asking many questions, and that as you ask those questions, people seem to be less and less interested in answering them. When did it become clear what was happening, that everything that’s happening there was intentional and not an accident of bad oversight or bad management?

[00:47:57.080] – Winston

And so you’re talking with somebody who was concerned about what he saw. But given my upbringing, given the companies I’ve been with before, I thought why will they like they keep selling properties people can’t afford? Those mortgages are going to end up insolvent and on their front door. I never thought they, there wasn’t securitizing, cross-selling. There no such thing in the beginning.

You guys understand that? Sort of like, I thought, I didn’t think I was telling on Countrywide. I thought I was saving Countrywide. This is why when they started, I don’t know, I think I had about 300 hundred people in the beginning, it was 200 people, then 150 then ended up with two. Now, it’s not that I’m dimwitted or slow, but I had just never seen, I had never been exposed to retaliation in my life.

And I thought, why retaliate against the one person who’s trying to save you, but they already just, they had Angelo screaming in their ear that he doesn’t want any bad loans be on the books for more than one second. If it is, you’re out of here. That’s the kind of leadership that was provided at the top.

[00:49:45.250] – Grumbine

Wow! So what you’re telling us is, is that you’ve gone into this guy’s office and you’re sitting there saying, “Hey, I’ve discovered this fiasco, man. I’m here to help you.” And they’re like, “Shut this man down. Get him out of here. Quiet this guy! We don’t want to hear that because we already know what’s going on. Can’t say it. We already know what’s going on. You shut up. You go in your corner.” Is that the essence?

[00:50:10.620] – Winston

Yes.

[00:50:10.620] – Grumbine

So with that in mind, as you parted ways with Countrywide, what was some of the things that if you were to tell people that were impacted by that time, what would be some of the things you might tell them today? I mean, obviously, the people that were impacted by Countrywide’s fraud are so vast because they had tons of loans they processed. They had tons of fraudulent behavior. What do you think you might tell them today? What would be your words to those people?

[00:50:46.340] – Winston

Well, what I would tell them is that there are people who work every day, 10 or 15 hours, to try to get them to recognize their damages and try to get them paid for their damages. There are and I know one personally, he sounds just like me. My case against Bank of America is finally – exonerate the victims. And I have a judgment made against the culprits. So I work on that every day.

I was scheduled to give testimony May 15, excuse me, March 15. However, that’s when the Coronavirus started, so it was all shut down. But I’m going to do this then four weeks now. I have all the records that I need to prove it. So I think the rescue is on the way. Quite frankly, I needed motivation while taking six cancer surgeries. And the implicit promise to fix this is what kept me going.

[00:52:26.640] – Lovell

Michael, it’s been a long journey for us. You’ve been in the trenches . . .

[00:52:30.490] – Winston

Me, too.

[00:52:30.490] – Lovell

Well, I know, and that’s what I’m referring to, Michael. When we first met and I started to understand your story, you come from this level of professionalism that I think this country expects from the highest levels of operations, as you’ve established. And when you started to, in your senior role, to make the country sorry, the country, that’s kind of a funny slip.

But the company, all the disparate pieces work in unison to maximize the efficiencies for this operation, you had to ask questions. And as you started to ask questions, you started to discover that this entire huge multi-billion dollar company was something that it didn’t appear to be to the outsiders who, quite frankly, the company had relied upon you to be able to project that perception of professionalism.

Can you put into perspective for Steve and his audience what it’s like to discover everything that’s the opposite of what you were told it was? And then what do you do in that circumstance? And what did you meet with?

[00:53:47.720] – Winston

I’ll give you just a couple of points on that. My team became very disaffected, very disenchanted, and one of the guys, first name Jonathan, last name, I remember but I don’t want to put it out.. He said, “Michael, I’m embarrassed to say I work for Countrywide.” And everybody chimed in. And I said, “Let’s not think of ourselves working for Countrywide. Let’s think about ourselves as working on Countrywide.” And we did, it gave us a new outlook.

Because many of us had been strategy consultants in the past, like me and. So, if we could take an outside look, we could be more effective. And so that helped, but actually when I realized a woman named Sharon Doyle, who had worked for me forever at Motorola. She came into work one day and all 10 of her direct reports were fired out from underneath her.

Now, Sharon is one of the best employees I’ve ever had. And one of the most, maybe, the most productive I’ve ever had. And, so I did confront my manager, Liora, and said, “By what authority do you have to terminate Sharon’s team? And she used all sorts of “I’m your boss and if you say one more thing, I’ll fire everybody around you.” Just was almost comedic to me it was so sad. And, you know, my world had crashed, but what I was trying to do was fix, there were some really good people that wanted to make the right thing happen.

I know that because as my team got smaller, the number of people who dropped by at seven o’clock at night, eight o’clock at night got larger. They just waited until no prying eyes left work, and they rejoin me again. So I would say that my team large was small. At Countrywide it pound for pound, as good work as any of the other teams I’ve managed, four out of five were top 10 teams in the United States, only Countrywide was not. If they had let us do the work.

Their three Ps where people, passion, principles. Those are the tenets upon which they said Countrywide stands. I saw the worst human resource practices I had ever seen in 19, excuse me, in 2006. Believe something like, maybe they had something like an 80 percent turnover rate. Now, I’m saying 80, not eight. At Motorola, if we went over five percent, there was a meeting in the tower; but nobody was leaving Motorola because they did the right thing for the right reasons in the right way.

Everybody wanted was heading for the door, and ironically, Countrywide canceled, when that happened, our program called retaining talent. So, of course, they treated their people like crap if they had a passion. It was the opposite of my philosophy, my philosophy of management, which has worked is don’t pay attention to shortcomings.  Everybody has them. Build on strengths. Those are the things that provide sustainable, competitive advantage. What can you do that nobody else can do.

That’s the mode that you want. I’m speaking like a global head of strategy which I was. That’s the mode nobody who was that broke. The pain was so unbearable so I took them to court because I thought well, if we win a court judgment, which we did, 10 to 2 the jury verdict, then the board of directors will get rid of the guys who are running the place, and at least maybe save some of the talented people who work there. I think very few wanted to defraud the public.  But the ones who did were the ones at the top.

[00:59:35.790] – Grumbine

So this all started at the top? This was not a bottom-up process at all. This was a top-down fraud.

[00:59:43.500] – Winston

Countrywide likes to say it was just a few renegades at the bottom end. This comes from, in the material I’ve submitted to the court as well, in a much heralded CEO, Angelo Muzilo, turned out to be the ultimate snake oil salesman. Alas, the world didn’t realize this until going through much pain and the deterioration of a global economy. As an officer of the place, I felt that I wanted to fix it. And I felt it and I’d try to do my best to fix it.

But how do you deal with a situation like this? In a court of law, Angelo Mozilo claimed he had never heard of Michael Winston and doubts that he works there. He claimed he did not know me. Ted Mathews, my then lawyer, responded by playing a video in court in which Angelo referred to me by name several times. This included Angelo advising his top 110 officers to heed my wisdom about leadership and ethics.

In the same courtroom later on, he would claim that he had never given me the hallowed Countrywide gold-plated cuff links given to special employees. He said he knew right away I was not Countrywide material.  After which I was then asked by my lawyer to pull out the Countrywide cuff links given to me by Angelo, and to give them to the bailiff.  I walked to the bailiff, handed him the cuff links Angelo had denied giving me. He then handed the cuff links to the judge.

This is going to be in the court record.  I’ve never known people as corrupt as that. You know, my dad was big guy about being principled. I follow his tenets. My son follows mine. My son is a  counter-terrorism agent, and he’s very highly regarded. And my daughter now has a, my daughter is a therapist, a clinical therapist. And now as a of a month ago, she has her own practice. After 10 years you get that.

My kids do the right things, they’ve never done the wrong thing. And I’m sure their kids will do the right thing and never do the wrong thing. I don’t know what Angelo’s upbringing was or the people he attracted, but it’s no place I would want to be.

[01:02:56.240] – Grumbine

Wow! Patrick, Eric, any other thoughts?

[01:03:00.740] – Vaughan

Just that thank goodness that Michael isn’t Countrywide material.

[01:03:08.530] – Grumbine

Amen! That’s a great one.

[01:03:11.400] – Winston

That’s one of the best compliments I’ve ever had.

[01:03:14.550] – Grumbine

Indeed, indeed.

[01:03:16.110] – Winston

But interestingly, I was promoted three times the first 13 months. So which part of that wasn’t Countrywide material?

[01:03:25.870] – Grumbine

Mike, let me finalize this with you. Obviously, you’ve been through an awful lot, both personally and professionally, but you also got to experience and witness an awful lot. One of the key reasons why we’re doing this addendum to The Con series, in particular, is to get individuals motivated and ready to fight, to bring about what we would like to consider a modern Pecora Investigation, to bring about a 1929 style investigation on these fraudsters.

We don’t want them to get away with it. We don’t want them to be able to walk away and smile in their mansions. What would you have to say to average people that are just now picking up on this and trying to understand how they could take actions?

[01:04:20.290] – Winston

All I can say is they will be ecstatic a couple of months from now, if the judge is not on the take. If the judge is paid, “paid for hire,” kind of judge then I will lose all faith in the United States already. But we have the right answers. We have the right attorneys. We are working. That’s all I do.  And, we believe and we’re going to advocate on behalf of seven United States counties, 25 million people, and I don’t get a penny.

We’re seeking to have them paid. And we’re expecting that when we win, more counties, well, we’ve had overtures from another 17 counties, more counties will come and join us. The lawyers that I’m helping, they are getting paid if they win. I’m doing this because I believe in public service. That’s why.

[01:05:50.590] – Grumbine

Amazing. With that, folks, I just want to thank you so much for joining us. It really means the world to me. This is an honor that I did not expect to be able to be a part of. So I want to thank both Eric and Patrick, of course, and you, Michael, thank you so much. And Lori, who’s not with us. I want to thank all of you for being a part of this. And this will take us into our next episode, episode number four of this mini-series. I really appreciate you. You really, truly are an untouchable. Thank you so much.

Mentioned in the podcast:

The Gramm-Leach-Bliley Act

Gresham’s Dynamic: Why Bad Actors Dominate Financial Services

Louisiana Real Estate Appraisers Board

A Whistleblower’s Horror Story – Michael Winston’s story in Rolling Stone

Michael Winston’s Whistleblower Profile

Wall Street’s Greatest Enemy: The Man Who Knows Too Much from Moyers on Democracy

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