Bankruptcy Law
Judge Rules Trustee Lacks Authority to Sue Countrywide for Abuses
Posted Oct 6, 2008, 07:55 am CST
By Debra Cassens Weiss
A federal bankruptcy judge in Miami has tossed a suit by the U.S. Trustee against Countrywide, ruling the agency has no authority to sanction companies for alleged bad faith conduct.
Judge A. Jay Cristol said the trustee had “noble intentions” but the authority to seek punishment rests with federal prosecutors, not with the U.S. Trustee, the Wall Street Journal reports (sub. req.).
In February the U.S. Trustee filed suits in Florida, Georgia and Ohio that claimed Countrywide had abused the bankruptcy process by making inaccurate filings and imposing unauthorized fees.
In April a federal bankruptcy judge in Pittsburgh authorized the U.S. Trustee to investigate Countrywide’s mortgage processing systems. The company later agreed to pay $325,000 and to investigate its payment records to settle the probe, but the Justice Department objected to a provision that required the trustee to refrain from criticizing Countrywide.