The HR lady pulled Michael Walker into a room and told him he was fired.
"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, Littleton, Colo., 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," Newman 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 Communications International Inc. (Q) , 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 it.
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 story."