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A Financial Institution's Fraud on Itself Triggers FIRREA


Matthew P. Previn, Michelle L. Rogers

The U.S. Department of Justice scored a significant victory on April 24, when the U.S. District Court for the Southern District of New York ruled that a federally insured financial institution may be prosecuted under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) for allegedly engaging in fraud that “affects” the same institution.

Significantly, this is the first time a court has interpreted the meaning of the phrase “affecting a federally insured financial institution” under FIRREA to allow the government to prosecute a financial institution for its own alleged misconduct. The case not only expands DOJ’s ability to aggressively use FIRREA to target alleged financial fraud, but also is likely impact other pending cases, including two in the SDNY that raise the same issue.

Originally published in Law360; reprinted with permission.

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