In an opinion last week, Judge Pauley dismissed a second amended False Claims complaint brought by a former Moody’s managing director who claimed that Moody’s false ratings caused various government overpayments  (our coverage of the dismissal of the original complaint is here).

The opinion notes that, as a consequence of the dismissal, the plaintiff was not eligible to share in an $864 million settlement between Moody’s and the government for violations of FIRREA and parallel state laws, even though the plaintiff was apparently helpful to the government:
Continue Reading Judge Pauley: Moody’s Whistleblower Whose False Claim Act Case Was Dismissed Cannot Share in Related Government FIRREA Settlement

Today, the Second Circuit reversed Judge Rakoff’s $1.2 billion penalty against Bank of America/Countrywide for FIRREA violations (see our previous coverage here).  The case involved allegations that BoA/Countrywide had sold faulty mortgages to Fannie Mae and Freddie Mac, originally brought as a qui tam suit under the False Claims Act in which the government intervened.  The Second Circuit’s decision focused on whether the breach of a contractual promise, without further proof of fraudulent intent at the time of contracting, could sustain a claim for fraud.  The Second Circuit held that it court not:
Continue Reading Second Circuit Reverses Judge Rakoff’s $1.2 Billion Penalty in BOA-Countrywide FIRREA Litigation

In an opinion today, Judge Swain ruled Section 13 of the Securities Act, which states that no action may be brought “more than three years after the security was bona fide offered to the public” was not extended by the so-called “FDIC Extender Provision” of the Financial Institutions Reform, Recovery, and Enforcement Act (or

In an opinion today, Judge Rakoff rejected motions to set aside a jury verdict in the so-called “Hustle” case, in which the government accused Countrywide (later acquired by Bank of America) and an officer named Rebecca Mairone of a scheme to defraud Fannie Mae and Freddie Mac into buying faulty mortgages.  The jury had ruled against the defendants and Judge Rakoff then ordered damages of $1.3 billion (see our prior posts on the case here). The defendants sought to set aside the verdict by arguing “that the Government’s evidence did not establish that the HSSL loans were of lower quality than Fannie and Freddie could have reasonably expected, and therefore that they made no misrepresentations that were material,” but Judge Rakoff rejected the argument as “border[ing] on the frivolous”:
Continue Reading Judge Rakoff: Challenge to Countrywide “Hustle” Jury Verdict “Borders on the Frivolous”

In an opinion today, Judge Rakoff ordered Bank of America to pay $1.3 billion in the so-called “Hustle” case, in which a jury found that Countrywide (later acquired by Bank of America) and an officer named Rebecca Mairone engaged in a scheme to defraud Fannie Mae and Freddie Mac into buying faulty mortgages. Judge Rakoff rejected Bank of America’s argument that the statute at issue, FIRREA, required the penalties to be calculated by reference to the “net” gains or loss resulting from the alleged conduct:
Continue Reading Judge Rakoff Orders Bank of America to Pay $1.3 Billion in “Hustle” Case

In an opinion today, Judge Furman largely denied Wells Fargo’s motion to dismiss a government lawsuit relating to its underwriting of government-insured mortgage loans. Judge Furman joined Judges Rakoff and Kaplan in holding that the Financial Institutional Reform, Recovery, and Enforcement Act (“FIRREA”), which allows the government to pursue civil charges against those who commit crimes like mail or wire fraud “affecting a federally insured financial institution,” applies even where the conduct at issue is a bank “affecting” itself.  (See our prior posts on the issue here and here, and see here for a longer version of these posts at Columbia University’s CLS Blue Sky Blog). One of the predicate acts the government alleged against Wells Fargo involved alleged violations of paragraph 4 of 18 U.S.C. § 1005, which criminalizes receiving funds from a bank with the intent to defraud the government. Wells Fargo argued that paragraph 4 is limited to bank insiders, and a 2011 decision from Judge Marrero, United States v. Rubin/Chambers, supports that interpretation.  Judge Furman disagreed with the Rubin decision:
Continue Reading Judge Furman Joins Consensus Endorsing “Self-Affecting” Theory of FIRREA; Splits with Judge Marrero on Scope of Predicate Bank Fraud Law

In an opinion posted online today, Judge Rakoff allowed the federal government to proceed with civil claims against Countrywide and Bank of America under the Financial Institutions Reform, Recovery, and Enforcement Act, or “FIRREA,” for having misrepresented the quality of home loans sold to Fannie Mae and Freddie Mac.  FIRREA applies only to conduct that “affects” a federally-insured financial institution, and Judge Rakoff, reaching the same conclusion as Judge Kaplan (see our prior post here), rejected the defendants’ argument that FIRREA could not be premised on a defendant allegedly “affecting” itself:
Continue Reading Judge Rakoff Rules that Bank Misconduct “Affects” the Bank Itself Under FIRREA

Judge Kaplan today largely denied the Bank of New York’s motion to dismiss a DOJ civil lawsuit alleging that the bank promised its customers “best execution” of foreign exchange transactions but, in fact, maximized its own profit by giving customers the worst (or near worst) prices of the day.  A key question of first impression was whether the DOJ could sue a under statute covering frauds that affect a federally-insured institution, when the effects are alleged to be upon the defendant institution itself:
Continue Reading Judge Kaplan Largely Denies Motion to Dismiss DOJ Suit Relating to Bank of New York’s Foreign Exchange “Best Execution” Practices