FIRREA Whistleblowers

The U.S. will pay up to $1.6 Million to FIRREA whistleblowers for information about fraud involving federally insured financial institutions, such as mortgage fraud.

FIRREA authorizes the Attorney General to bring a civil lawsuit for fraud involving a federally insured financial institution.  It has become a key tool in the arsenal used by the government in cases of mortgage fraud in the wake of the financial crisis of 2008.  There have already been several settlements over $1 billion for misconduct related to mortgage backed securities and residential mortgages under the law.

For bank whistleblowers, it presents an additional option to earn a reward when tipping the federal government to some forms of financial fraud. The government pays up to $1.6 million for information about violations of FIRREA that lead to successful monetary recovery.

To discuss reporting information about financial fraud at a federally insured bank with an attorney, call 1-800-590-4116

bank branch with automated teller machine

The History of FIRREA and FIAFEA

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) was passed in 1989 as a response to the savings and loan crisis. The purpose was to restore public confidence in the savings and loan industry. It enhanced regulatory supervision of the financial institutions in this industry. It also created the Resolution Trust Corporation to liquidate the assets of insolvent trusts.

The law also strengthened civil enforcement available against financial institutions.  Individuals or companies that commit a violation of one of the 14 listed criminal statutes are subject to extensive civil monetary penalties.  For the government, there are some advantages.  The government has ten years to bring a cause of action under the law and does not need to meet the high burden of proof from a criminal prosecution.  Instead, the government is only required to prove its case by a “preponderance of the evidence.”  They also have broad pre-trial investigation powers under the law, as they are allowed to issue administrative subpoenas for document production and taking depositions of key witnesses without judicial approval.

In a separate piece of legislation shortly thereafter, the government authorized payments for tips about violations of FIRREA.  The Financial Institutions Anti-Fraud Enforcement Act (FIAFEA) of 1990 authorizes rewards to certain individual who submit a declaration to the Attorney General of the United States concerning a violation of 12 U.S.C. 1833a.

Recent Cases and Settlements

Volkswagen: In or around March 2016, the Justice Department issued a subpoena to VW as part of the “Dieselgate” scandal under FIRREA.  We are not aware of other applications of the law to the auto industry but the theory was rather straightforward.  By inflating the value of financed automobiles with defeat devices, it theorized that the auto company defrauded the banks that financed the cars.

Bank of America: In August 2014, Bank of America paid a $5 billion penalty to resolve allegations of FIRREA violations as part of its $16 billion settlement.  The law is also at the center of a lawsuit against Bank of America for misleading investors about $850 million in mortgage-backed securities. Whistleblower Edward O’Donnell filed it under the False Claims Act but also submitted a tip to the Department of Justice under FIRREA.  Although the case was dismissed under the False Claims Act, the government is still pursuing it under FIRREA.  O’Donnell may not be entitled to the large award which might have resulted from the lawsuit under the False Claims Act, he may still be entitled to a reward.

JP Morgan: In 2013, when JPMorgan settled allegations concerning its residential mortgage-backed securities in a $13 billion global settlement, the civil penalty to settle the FIRREA claim resulted in a $2 billion payment to the Justice Department.

Rating Agencies: The litigation against McGraw Hill and Standard & Poor’s regarding their ratings of residential mortgage backed securities also involves the law. They are accused of inflating their ratings and misrepresenting the true credit risks while falsely representing that their ratings were objective and independent.

Other Banks: Citigroup and Flagstar Bank have also settled allegations which included violations of FIRREA.

The Interaction with the False Claims Act

The cap on whistleblower rewards in FIRREA does not apply to the False Claims Act, a law which results in the payment of hundreds of millions of dollars to whistleblowers every year.  Many cases of mortgage fraud have been brought successfully under the False Claims Act.  Our False Claims Act attorneys will review your potential case under FIRREA with an eye toward bringing the case under the False Claims Act as well.

To confidentially discuss reporting fraud to the U.S. through FIRREA, call 1-800-590-4116.

FIRREA News

Our Whistleblower Law Practice

Our whistleblower attorneys have helped numerous employees and ex-employees report misconduct by their employer under the nation’s whistleblower laws.  Attorneys at McEldrew Young have assisted the United States with the recovery of billions of dollars lost due to fraud.  We’re here to help you and we will respect your confidentiality to the utmost at all stages of the process.

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