Professor David Engstrom spoke with Business Week-Bloomberg’s David Glovin on the U.S. governments $1 billion fraud lawsuit against Bank of America Corp. and why he predicts the government might soon join other mortgage cases. 

The whistle-blower helping the U.S. government mount a $1 billion fraud lawsuit against Bank of America Corp. (BAC) was himself accused of fraud by an investor in a financing company he co-founded, and now works at Fannie Mae (FNMA), one of two entities he claims the bank defrauded.

Edward O’Donnell sued Bank of America, the second-biggest U.S. lender by assets (BAC), in February under the False Claims Act, saying the bank’s Countrywide Financial unit, where he once worked, issued defective mortgages and sold them to Fannie Mae and Freddie Mac. Last month, the Justice Department joined his suit, making it the first time the U.S. has accused a bank of fraud over loans sold to the two government-sponsored mortgage- finance companies.

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O’Donnell stands to get as much as $250 million if the government wins the $1 billion in unreimbursed losses that it’s seeking from Bank of America, said David Engstrom, a Stanford Law School professor, who said the amount may also be much less.

The U.S. wins a recovery in 90 percent of the whistle- blower cases it elects to join, said Engstrom, who has analyzed thousands of such lawsuits filed since 1986. The government joins about one-fourth of all False Claims Act cases that have been unsealed and made public by judges, he said.

“That’s a very good situation for him,” Engstrom said of O’Donnell. “He’s cleared a major hurdle.”

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It’s “exceedingly rare” for False Claims Act cases to reach trial, said Engstrom. Because the U.S. has probably amassed documents and other evidence to support the claims, details of O’Donnell’s background may be no more than “atmospherics” that don’t affect the outcome, he said.

Engstrom predicted the government might join other mortgage cases. That it took the Justice Department eight months to decide to join O’Donnell’s lawsuit — compared with an average of 24 months in other whistle-blower cases — indicates that the U.S. is taking such allegations seriously, he said.

“It certainly suggests to me that this is part of a broader strategic decision by DOJ to intervene in this space,” he said.