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Fourth Circuit Upholds $161 Million Judgment

RICHMOND, VA. (CN) - The Fourth Circuit upheld the $161 million judgment against Sean Bakkebo for fraud and conspiracy for his role in inducing Keystone to buy thousands of subprime mortgages and resell them as mortgage-backed securities.

Bakkebo's close friend, Dan Melgar, convinced Keystone to buy the loans from Clearview Capital and process them through Price Financial - two companies owned by Bakkebo. Keystone was unaware that Prime and Clearview were paying Melgar hundreds of thousands of dollars in "consulting fees" that were actually kickbacks. When the loan securitization program tanked, Keystone went bankrupt.

The Federal Deposit Insurance Corporation, as the bank's insurer and receiver, sued Bakkebo to recover some of the money, but Bakkebo had fled to Norway to escape unrelated charges of insurance fraud. Bakkebo challenged the ultimate verdict against him on several grounds, including the judge's use of the phrase "funny business" to refer to Bakkebo's dealings with Keystone. The circuit dismissed each of his arguments and affirmed the judgment. See ruling in Federal Deposit Insurance v. Bakkebo.

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