Time to Get FIRREA’d Up

FIRREA may not be familiar to you, even if you have some connection to the banking industry, because the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) is nearly thirty years old. In 1989, Congress enacted FIRREA as a response to the savings and loan crisis. For nearly twenty years, it hardly made a ripple. Then the financial crisis of 2008 appeared, and along with it came an increasing wave of whistleblowers.

Why is such an old set of laws important? FIRREA gives the Department of Justice authorization to sue banks, banking officials, and related third parties for frauds that implicate U.S. banks or financial institutions. The Act also has a statute of limitations longer than that of other laws concerning financial fraud cases—a full 10 years. But another lesser-known part of the law is that whistleblowers can bring cases that claim FIRREA violations. In 1990, a separate law enacted a process that gives the DOJ a year to investigate whistleblower claims brought under FIRREA. That’s good news for whistleblowers. In other whistleblower actions, the DOJ has less time—60 days—to investigate so it can determine whether it wants to join a suit. Confidentiality is also given under FIRREA.

What Does FIRREA Cover?

According to the Act, illegal or improper actions must affect “a federally-insured financial institution,” which is any bank in the United States that is insured by FDIC (commercial banks) or FSLIC (savings and loans). In practice, almost every bank in the U.S. is insured by one of these agencies, so almost all banks are covered by FIRREA. In certain cases, the involvement of Fannie Mae (Federal National Mortgage Association), Freddie Mac (Federal Home Loan Mortgage Corporation), and FHA (Federal Housing Administration) can qualify a whistleblower suit under FIRREA.

The types of financial fraud and wrongdoing that are covered by FIRREA include:

• Wire fraud
• Mail fraud
• Embezzlement
• Theft
• Misappropriation of assets/funds
• Illegal gifts
• Keeping false records (two sets of books)
• False statements on loan applications.

After the 2008 crash, it was discovered that a number of loan providers used false information on loan applications. It’s possible that fraud concerning federal mortgage entities such as Fannie Mae and Freddie Mac could be prosecuted under FIRREA’s provisions.

Which Factors Can Affect FIRREA Awards?

Awards based on a FIRREA case consider certain factors that are used to assess civil penalties:

• Good and bad faith actions, and the intent or knowledge of the wrongdoing
• Injury and loss to the general public and/or to others
• The severity of the violation
• Whether the violation was an isolated instance or a repeated instance
• The defendant’s ability to pay any fines
• The amount of a criminal fine that could be levied for the violation
• How much the defendant profited from the wrongdoing
• The range of penalties that can be levied under FIRREA.

The Bank of America Case

In a settlement of False Claims Act allegations, Bank of America paid $1.85 billion during fiscal year 2014, according to the Department of Justice. The allegations concerned mortgages sold to Fannie Mae and Freddie Mac, as well as inflated insurance claims sent to the FHA. Part of the $1.85 billion was a segment of a bigger penalty that included $5 billion under FIRREA.

Awards Under FIRREA

Under current interpretations of the law, whistleblowers can receive a percentage of the first $10 million in penalties. Once you pass $10 million, whistleblowers can expect around $1.6 million.

It isn’t difficult to reach $10 million in penalties. Under FIRREA, banks pay massive penalties because each violation incurs at least a $1.1 million penalty. Ongoing violations can be subject to as much as $5.5 million, depending on the circumstances.

Generally, whistleblowers using FIRREA’s provisions need inside information. Such information these days can include the entire realm of cybercrime, including data breaches, cover-ups, and less-than-adequate security.

Making a difference.

If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.

Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.

For a free, confidential evaluation of your case, call the Louthian Law Firm today at 1-803-454-1200 or, if you prefer, you can fill out our online contact form.