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A high-level executive who reported corrupt lending practices at Countrywide Financial Corp. was improperly fired for leading internal investigations that “revealed widespread and pervasive wire, mail and bank fraud” at the lender, a federal agency ruled Wednesday.

The Labor Department ordered Bank of America Corp., which bought Countrywide, to pay the former executive roughly $930,000 and reinstate her.

Eileen Foster, who worked as a vice president at Countrywide and then at Bank of America after it acquired Countrywide in 2008, claimed that high-level executives at Countrywide covered up fraud within the company. She said whistleblowers who tried to report forged documents, faked data and other questionable activity inside the nation’s largest mortgage lender were fired.

Foster ran Countrywide’s mortgage fraud investigation unit at the time of the merger. In a series of interviews with iWatch News, Foster said Countrywide’s management protected sales staffers who inflated borrowers’ incomes on loan applications and falsified paperwork in order to push through a high volume of risky mortgages.

“The organization built its business to take advantage of the fraud,” Foster said. “It benefitted from the fraud. And it protected the fraud.”

Asked Wednesday about the labor agency’s decision, Foster said, “I don’t want to comment at this time, considering that I may be returning to Bank of America as an employee.”

Bank of America said it plans to appeal the ruling.

“This is an old matter dating from 2008,” bank spokeswoman Shirley Norton said. “We are disappointed with the ruling and plan to exercise our option to challenge the order.”

Under whistleblower-protection provisions of the 2002 Sarbanes-Oxley corporate reform law, Bank of America has 30 days to file an appeal with a Labor Department administrative law judge.

In a news release, the Labor Department said that Foster’s allegations included a claim that workers who tried to report fraud to Countrywide’s employee relations department “suffered persistent retaliation.”

“It’s clear from our investigation that Bank of America used illegal retaliatory tactics against this employee,” Assistant Secretary of Labor David Michaels said in a statement. “This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same.”

Foster, who has 25 years’ experience in banking, was hired by Countrywide as a first vice president in September 2005. She was later promoted to senior vice president and then, in March 2007, was elevated to executive vice president in charge of fraud risk management.

Fosters’ investigations in 2007 and early 2008 turned up numerous examples of fraud within the mortgage lender. In mid-2007, for example, an investigation of Countrywide’s subprime mortgage branches in and around Boston “revealed multiple incidents of egregious fraud spread throughout the entire region,” according a preliminary Labor Department ruling in her case this past June. These frauds included “loan document forgery or alteration” and “destruction of valid client documents,” the preliminary ruling said.

The investigation also turned up “evidence that blank templates from several different financial institutions were emailed back and forth among loan officers in various branches for use in forging proof of borrower income and assets,” the ruling said. As a result of the investigation, the ruling said, six of eight Boston-area branches were shut down and roughly 44 employees were fired.

In interviews with iWatch, Foster said that by early 2008 she became concerned that fraud was being allowed the flourish because honest employees who tried to report wrongdoing were being targeted and fired.

She claimed that after she reported her concerns up the corporate ladder, the company’s employee relations department began an investigation of her.

The investigation continued as Bank of America prepared to complete its purchase of Countrywide, which had faltered in the wake of widespread mortgage defaults. As the merger was completed in July 2008, Foster was hired by Bank of America to run its new consolidated mortgage fraud investigation unit.

The investigation against her hadn’t ended, however. In September 2008, Bank of America informed Foster that she was being fired for “inappropriate and unprofessional conduct” and “poor judgment as a leader.”

Foster filed a Sarbanes-Oxley claim against Countrywide and Bank of America, claiming that the investigation had been trumped up in an effort to silence her. The complaint sparked an almost three-year legal battle with Bank of America.

The bank steadfastly denied throughout that it had done anything wrong.

In a statement on Wednesday, Norton, the bank spokesperson, said, the bank’s decision to fire Foster was “solely based on issues with the employee’s management style and in no way related to the employee’s complaints and the allegations made in the complaint.”

Norton said the bank takes “allegations of fraud very seriously.” It encourages employees to “raise issues they see” and report them to higher ups. “We take such escalations seriously and investigate them thoroughly,” she said, adding that the bank never retaliates against workers who raise questions about problems.

The Labor Department saw things differently.

In its preliminary ruling, it said it found “reasonable cause” to believe Countywide and Bank of America had illegally dismissed Foster from her job and violated federal whistleblower protections. The agency said it had found evidence of “animus and intent to retaliate” against her.

Michaels, the assistant labor secretary, said in his statement that whistleblowers “play a vital role in ensuring the integrity of our financial system, as well as the safety of our food, air, water, workplaces and transportation systems. This case highlights the importance of defending employees against retaliation when they try to protect the public from the consequences of an employer’s illegal activities.”

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