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Financial Services Law Insights and Observations

District court dismisses False Claims Act suit at DOJ’s request

Courts False Claims Act / FIRREA DOJ Whistleblower Sanctions Iran


On July 2, the U.S. District Court for the Southern District of New York dismissed a False Claims Act suit against a British bank accused of allegedly engaging in banking practices that violated U.S. sanctions against Iran. The bank had entered into deferred prosecution agreements in 2012 and 2019 with the DOJ and agreed to pay penalties to federal and New York authorities to resolve allegations that it had facilitated U.S. dollar transactions for Iranian entities in violation of U.S. sanctions and various New York and federal banking regulations. According to the whistleblower’s suit, the bank mislead the DOJ when negotiating the 2012 deferred prosecution agreement, and allegedly continued to engage in sanctions-violating conduct, “notwithstanding their representations to the [DOJ] that they had thereafter ceased doing so.” The DOJ twice declined to intervene in the case and moved to dismiss, arguing that it was “meritless” and that continuing to discovery would waste government resources. The whistleblower countered that the DOJ “failed to properly investigate its contentions,” but the court determined that this argument was “insufficient to transform the Government’s decision into one that is arbitrary and capricious.” In reaching its decision, the court determined that it did not need to adopt a specific standard, stating, “[l]ike other courts in this [d]istrict to have considered this question, the [c]ourt concludes that it need not definitively determine the appropriate standard of review to resolve this case.” According to the court, this “is because the Government has carried its burden even under the more searching. . .standard” outlined by the U.S. Court of Appeals for the Ninth Circuit in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., which requires the DOJ to identify “‘a valid government purpose’ and ‘a rational relation between dismissal and accomplishment of the purpose.’”