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Client Alerts

Government Relies on Old Savings & Loan Crisis Statute to Pursue Sub-Prime Fraud

November 4, 2013

Client Alerts

Government Relies on Old Savings & Loan Crisis Statute to Pursue Sub-Prime Fraud

November 4, 2013

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Government Relies on Old Savings & Loan Crisis Statute to Pursue Sub-Prime Fraud

Recent decisions have helped open the door for federal prosecutors to use a 1980s statute to bring civil claims against major financial institutions related to the sub-prime meltdown of 2008. This includes the jury award against Bank of America for “the hustle,” with potential penalties approaching $1 billion. The statute at issue is the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which Congress passed as a response to the savings and loan crisis of the late 1980s and early 1990s.

While FIRREA might be a vestige of a time gone by, it is alive and well in this time, when prosecutors are investigating and prosecuting conduct arising out of the sub-prime meltdown of 2008. Read the complete Alert on Fish’s Litigation Blog.

Thus far, courts have been receptive to government’s claims under FIRREA. A key early legal test, including in the Bank of America case, was the issue of whether losses caused by a financial institution’s own conduct qualify as conduct “affecting a federally insured financial institution.” Defendants argued that they could not be liable under FIRREA if their conduct caused losses to themselves – at least, for allegations of criminal violations of the statute, such as mail and wire fraud. Several courts, however, have allowed cases to move forward even where the alleged “victim” of the fraud was the perpetrator. As one judge in the Southern District of New York ruled, a self-affecting theory “requires nothing more than straightforward application of the plain words of the statute.” It’s not clear, at the moment, whether that will stand up on appeal; however, federal prosecutors are wasting no time bringing additional actions.

On the Fish Litigation Blog, we further discuss FIRREA and the key considerations regarding the broad civil claim options, lower burden of proof, 10-year statute of limitations, monetary penalties, and the government’s powers. Read Government Relies on Old Savings & Loan Crisis Statute to Pursue Sub-Prime Fraud for the full text of this blog post. Should you have questions, please contact:

Bill Mateja
Principal
Dallas
mateja@fr.com
214-760-6101

Thomas Frongillo
Principal
Boston
frongillo@fr.com
617-521-7050

Franceska O. Schroeder
Principal
Washington, DC
schroeder@fr.com
202-626-7718

Ariel Raphael
Of Counsel
Boston
raphael@fr.com
617-521-7058

Caroline Simons
Associate
Boston
simons@fr.com
617-956-5907
© Copyright 2012 Fish & Richardson P.C. These materials may be considered advertising for legal services under the laws and rules of professional conduct of the jurisdictions in which we practice. The material contained in this newsletter has been gathered by the lawyers at Fish & Richardson P.C. for informational purposes only and is not intended to be legal advice. Transmission is not intended to create and receipt does not establish an attorney-client relationship. Legal advice of any nature should be sought from legal counsel. For more information about Fish & Richardson P.C. and our practices, please visit www.fr.com.

 

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