An appeals court dealt the Obama administration a major setback in its efforts to levy tough fines on corporations and executives, overturning a civil mortgage-fraud case against Bank of America Corp. tied to the financial crisis, the Wall Street Journal reported today. The court yesterday also tossed out a $1 million civil penalty against Rebecca Mairone, a former executive at Countrywide Financial Corp., who was one of the few individuals fined for alleged misdeeds during the crisis.The ruling by the U.S. Court of Appeals for the Second Circuit raises the bar for the government to prove fraud against companies and individuals, weakening a weapon the Justice Department has used to push Wall Street to agree to big mortgage settlements. If it stands, the three-judge panel’s unanimous decision could affect the remaining investigations into crisis-era mortgage securities, some observers said, including those into European lenders Royal Bank of Scotland Group PLC and UBS Group AG. The decision also could encourage other firms to push back against prosecutions. The original verdict in the Bank of America case helped pave the way for the government to reach multibillion-dollar settlements with large banks for alleged financial-crisis misdeeds. The ruling won’t alter the nearly $45 billion in mortgage-securities settlements the Justice Department already has reached with the biggest U.S. banks, including J.P. Morgan Chase & Co. and Citigroup Inc.
