Record penalties under FIRREA helped make financial fraud the largest source of money collected by the Department of Justice through enforcement efforts in Fiscal Year 2014. The DOJ statistics released today revealed that agency led enforcement actions and negotiated civil settlements resulted in collections of more than $24 billion during the fiscal year ending in September.
FIRREA had fallen into disuse until prosecutors began bringing enforcement actions against banks for conduct surrounding the financial crisis of 2008. Now, it has become the nation’s leading tool against mortgage fraud. It resulted in settlement amounts of $2 billion (JPMorgan), $4 billion (Citigroup) and $5 billion (Bank of America) over the past year as banks sought to put their misconduct involving residential mortgage backed securities behind them. JPMorgan and Citigroup were cited by the DOJ as paying significant sums in 2014, with Bank of America unnamed. Because the BofA settlement happened toward the end of the fiscal year, it may not have paid the money to the U.S. Government yet.
FIRREA’s increasing importance also led Attorney General Eric Holder to call for an increase in the law’s incentives for whistleblowers just days before he announced he was stepping down. Rewards are currently capped at a maximum of $1.6 million. The False Claims Act, SEC and IRS programs are all uncapped, with payments potentially reaching over $100 million on large cases.
In the press release, the Justice Department credited whistleblowers under the False Claims Act for bringing many of the cases leading to large civil collections. Whistleblowers were involved in a number of large cases reaching a resolution in 2014, including investigations into Bank of America and JPMorgan Chase in the financial arena and Johnson & Johnson in health care.
The DOJ press release added another financial crime to the list of penalties paid by financial institutions: LIBOR manipulation. UBS Securities Japan and RBS Securities Japan paid large amounts to end investigations into their manipulation of the London Interbank Offered Rate.
The $24 billion number includes money paid during FY2014 even if the settlement or enforcement action happened in a preceding year. It excludes settlements agreed to in 2014 but not paid during the government’s fiscal year. The DOJ received $13.7 billion while its civil and criminal enforcement efforts helped other federal agencies, states and additional parties receive another $11 billion. It’s unclear to us how much, if any, overlaps with the $7 billion collected by the CFTC and SEC.
The amount was more than three times the $8.1 billion collected in 2013. The ongoing antitrust investigation into the auto parts industry, environmental cleanups of pollution and criminal penalties for violations of the FCPA also led to significant collections. Significant antitrust and environmental cases also led to more than $1 billion in 2013.
Last year, health care fraud topped the list of collections with large fines paid by Abbott and Amgen. It’s absence from the list this year is noticeable because of the large amounts settlements gathered from this area in the past ten years for violations of the False Claims Act.
For additional information about today’s DOJ announcement, here is the press release.