On Wednesday, September 17th, U.S. Attorney General Eric Holder
signaled that the Department
of Justice (DOJ) will continue its aggressive prosecution of claims
arising out of the financial crisis and called for enhanced
financial fraud whistleblower awards. Attorney General Holder also
stressed the importance of prosecuting financial fraud, civilly and
criminally, against both corporate actors and individuals. In this
respect, his statements echoed remarks by Benjamin M. Lawsky, New
York State's Superintendent of Financial Services, who in a
speech earlier this year announced his intention to hold more
individuals, and not just corporations, accountable for alleged
financial wrongdoing.
Attorney General Holder indicated that more criminal charges for
financial fraud were in the pipeline and argued for enhancing the
whistleblower awards available under the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) on the
grounds that the whistleblower awards available under the statute
are too low to serve as meaningful incentives for would-be
whistleblowers in the financial services industry.
FIRREA was enacted in response to the savings and loans crisis of
the 1980s. Its primary purpose was to reform the financial
regulatory regime for the thrift industry, but Section 951 of
FIRREA (12 U.S.C. §1833a) also granted the DOJ new authority
to bring civil claims for fraudulent activities. Section 1833a was
largely forgotten until the DOJ began using it to investigate and
prosecute banks for claims relating to the financial crisis. Since
then, FIRREA has been used in some of the largest financial
industry cases in recent years, including the $4 billion civil
penalty against Citigroup and the $16.65 billion Bank of America
settlement in July 2014.
FIRREA contains a whistleblower provision providing for awards of
up to $1.6 million dollars if prosecutors pursue a case based on a
whistleblower tip. However, the $1.6 million cap under FIRREA is
significantly lower than the awards available to whistleblowers
under the False Claims Act and the Dodd-Frank Act, both of which
provide for awards that are equal to as much as 30% of the assessed
penalty.
In his speech, Attorney General Holder also responded to recent
criticism of the lack of criminal cases against Wall Street
executives and asserted that increasing the financial incentives
under FIRREA would encourage individuals to "come forward and
cooperate with ongoing investigations." This would enable the
government to take more rapid and effective action against
financial crimes perpetrated by individuals and corporations.
According to Attorney General Holder, increasing the whistleblower
awards available under FIRREA, "perhaps to False Claim Act
levels," would improve the DOJ's ability to conduct
investigations and stop misconduct before wrongdoing "becomes
so widespread that it foments the next crisis."
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