Financial Fraud Whistleblower Provisions Firrea Allow Individuals To Recover

Financial Fraud Whistleblower Provisions Firrea Allow Individuals To Recover

The federal government’s success with the federal False Claims Act caused Congress to create other fraud statutes with incentives for whistleblowers. One prominent example are the financial and banking fraud laws known as FIRREA and FIAFEA and those statutes’ whistleblower provisions.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), 12 U.S.C. §1833a et seq., and the Financial Institutions Anti-Fraud Enforcement Act of 1990 (“FIAFEA”), 12 U.S.C. §4201 et seq., are actually old laws.  Both were enacted in the wake of the savings and loan crisis of the late 1980s and, despite the presence of whistleblower provisions, the laws didn’t actually start to generate much interest until the financial crisis of 2008.

Both financial fraud laws have extremely broad coverage. Essentially, any fraud at a federally insured financial institutions – such as a bank or credit union – for wrongful acts including wire and mail fraud, embezzlement, illegal gifts, bookkeeping violations, and false statements in loan applications.

FIRREA permits the government to collect civil penalties of $1 million to $5 million per violation. (12 U.S.C. § 1833a (b)(1) & (2)). In cases where the banking fraud involves multiple transactions, each individual transaction could constitute a separate fraud, resulting in statutory penalties in the hundreds of millions of dollars.

Unlike the federal False Claims Act, whistleblower recoveries under FIRREA are capped at $1.6 million, which of course reduces their effectiveness somewhat.  Certainly there are individuals with knowledge of complex financial frauds that may, in some cases, receive much more than that in annual compensation.  In fact, towards the end of his tenure, Attorney General Eric Holder began pushing for the limitations on whistleblower recoveries to be either removed or at least raised.

The statute of limitations for frauds prosecuted under FIRREA and FIAFEA is quite long – 10 years “from the date the cause of action accrues.” 12 U.S.C. § 1833a (h).

If you have knowledge of fraud either by or upon a federally insured financial institution, you may be able to bring a whistleblower claim under FIRREA and/or FIAFEA and you can click here to tell us more about it.