False Claims Act & FIRREA
Practice Overview
The Department of Justice has been aggressive in its enforcement of the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act. As the federal government provides unprecedented financial assistance to private businesses and institutions large and small, including through the Paycheck Protection Program and Small Business Administration lending, the risk of FCA and FIRREA enforcement in today’s environment is particularly acute. Buckley’s enforcement attorneys have extensive experience guiding clients through the enforcement process, from counseling clients on ways to minimize enforcement risk in federal programs, through the investigation, settlement, and litigation processes.
We work with clients to identify compliance risk and take corrective action with the goal of avoiding investigation or enforcement action. On these efforts, our FCA/FIRREA enforcement attorneys routinely work hand in hand with the firm’s regulatory and compliance attorneys, who are steeped in the intricate regulatory issues that often underlie such investigations. Buckley also assists clients throughout the life cycle of government agency audits, which can often provide the impetus for an investigation or enforcement action. Our experience includes preparation of responses to audit reports, reviewing and revising compliance documents, conducting risk assessments, overseeing loan file reviews, assisting with annual recertification, and responding to notices of violation and matters involving the Department of Housing and Urban Development’s Mortgagee Review Board (MRB). We also help clients minimize the risk of FCA/FIRREA exposure by conducting effective internal investigations into the allegations of whistleblowers.
Our team has extensive experience handling FCA/FIRREA matters at the investigative stage, helping our clients manage their compliance with often burdensome civil investigative demands and subpoenas issued by the DOJ, U.S. attorney's offices, and federal agency offices of inspectors general. FCA/FIRREA investigations can be extensive in their reach and extremely costly; we work with our clients to minimize the burden and intrusiveness of these sometimes sprawling investigations by negotiating with the government. We have a proven track record of convincing the government to decline enforcement action against our clients, and in negotiating successful pre-suit settlements when litigation cannot be avoided. Our team includes several former government enforcement attorneys who bring valuable insights into the government’s approach to these cases, and who can lend additional credibility in pre-suit negotiations.
We know how to litigate — and win. Our FCA/FIRREA attorneys are steeped in the subject matter and recognized thought leaders, as well as experienced trial and appellate attorneys. We have regularly succeeded in getting litigated FCA cases dismissed by the courts at the earliest possible stage.
Significant representations include:
- Successfully represented multiple large mortgage lenders in FCA and FIRREA investigations into Federal Housing Administration lending, reaching pre-suit settlement agreements with the DOJ in several cases that included no admission of liability, no administrative sanction, and no prospective relief
- Successfully represented a large lender in an FCA qui tam investigation of SBA lending
- Successfully represented a top research university in reaching a favorable, pre-suit settlement of an FCA qui tam investigation regarding federally sponsored research grants
- Successfully represented eight mortgage servicers in U.S. ex rel. Grubea v. Rosicki, Rosicki & Assoc., 318 F. Supp. 2d 680 (S.D.N.Y. 2018), an FCA qui tam litigation in the Southern District of New York, which resulted in a dismissal with prejudice for all clients, a result that the American Lawyer called “a big win for a veritable army of outside counsel led by Buckley”
- Successfully represented multiple indirect auto finance companies in FIRREA investigations of subprime auto lending and securitization practices
- Successfully represented multiple top banks in responding to the DOJ’s “Operation Choke Point” FIRREA investigation into third-party payment processing, in which the government declined to pursue enforcement action
- Successfully represented a top mortgage loan servicer in an FCA qui tam investigation into servicing and loss mitigation activities, in which the government declined to intervene in the case; the district court dismissed the case on motion, and the Sixth Circuit upheld the dismissal
Topic Spotlight: Assistance in responding to government oversight of pandemic relief
The federal government’s financial response to the Covid-19 pandemic is measured in trillions of dollars, and the intensity of oversight related to that response reflects this unprecedented commitment. All involved in the government’s response, particularly financial services providers, should expect increased scrutiny of how those dollars have been and will be spent.
Buckley’s white collar, enforcement, congressional investigations, class actions, complex civil litigation, and False Claims Act & FIRREA teams are prepared to assist with government and congressional inquiries, examinations, investigations, and government and private party litigation that arise from the pandemic response. We work closely with our financial services regulatory practices to combine the firm’s core substantive experience with our deep knowledge of government investigations and litigation of all kinds.
Articles
"School of hard knocks: Federal student loan servicing and the looming federal student loan crisis" by Jeffrey P. Naimon, Sasha Leonhardt, and Sarah B. Meehan (American University Administrative Law Review)
Nearly forty-three million Americans collectively owe $1.5 trillion in outstanding student loan debt. Of that, approximately ten percent of student loan debt is over ninety days delinquent or in default, while the actual delinquency rate is estimated to likely be double this amount due to the fact...
Articles"Op-ed: Prepare for the coronavirus scams: Learning from post-9/11 fraud" by Daniel R. Alonso (Daily News)
On the morning of Sept. 11, 2001, Beatrice Kaufman sat in her Hamptons house watching the Twin Towers collapse. Although she lived and worked in Manhattan, her 6,000-square-foot apartment was being renovated, so she stayed at her country home instead. But that did not stop her from filing papers...
ArticlesSpecial Alert: HUD, DOJ sign MOU on mortgage False Claims Act violations
On October 28, HUD and DOJ announced a long-awaited Memorandum of Understanding (MOU), which provides prudential guidance concerning the application of the False Claims Act to matters involving alleged noncompliance with FHA guidelines. The announcement was made by HUD Secretary Dr. Benjamin S...
Special Alerts"FHA enforcement: What decreased reliance on the False Claims Act means for FHA lenders and servicers" by Melissa Klimkiewicz (HousingWire)
Top offcials at the U.S. Department of Housing and Urban Development are looking to chart a new course to win back banks that have fled the Federal Housing Administration lending program following a series of multimilliondollar False Claims Act settlements. In the past, HUD has partnered with the U...
Articles"The False Claims Act seal: Does it bind and gag the defendant?" by Andrew W. Schilling and Megan E. Whitehill (Business Crimes Bulletin)
A company that finds itself the target of a federal fraud investigation often faces the fraught question of whether it may, or even must, disclose the existence of that investigation to third parties, such as its investors, shareholders, major creditors, or insurers. The question can be even more...
ArticlesSpecial Alert: Second Circuit Rules Fraud Claim Based on Contractual Promise Cannot Support FIRREA Violation Without Proof of Fraudulent Intent at Time of Contract Execution
On May 23, in an opinion delivered by Circuit Judge Richard Wesley, the Second Circuit Court of Appeals reversed the District Court for the Southern District of New York’s (SDNY) July 30, 2014 judgment ordering a bank and its lender subsidiary to pay penalties in excess of $1.2 billion for alleged...
ArticlesWhy Getting the FHA's Loan Servicing Rules 'Right' Matters
In recent years, servicing U.S. Federal Housing Administration-insured loans has become risky business. The U.S. Department of Housing and Urban Development has heightened its monitoring and enforcement, with servicers experiencing increased Quality Assurance Division (QAD) reviews, HUD Office of...
ArticlesLook Before You LEAP - This Year's FHA Annual Recertification Process
It’s that time of year again. No, not spring break; the Federal Housing Administration’s ("FHA") annual recertification deadline is upon us (or, more specifically, FHA program participants). The good news is that, this year, mortgagees with a December 31st fiscal year end will have some extra time...
ArticlesAnother Court Affirms DOJ Financial Fraud Strategy
On Sept. 24, 2013, Judge Jesse Furman in the Southern District of New York released his widely anticipated decision allowing the U.S. Department of Justice’s False Claims Act and Financial Institutions Reform, Recovery and Enforcement Act case against a major financial institution to proceed. The...
ArticlesAvoiding the FCA & FIRREA Trap: Practical Tips for Compliance Professionals
As the government becomes increasingly aggressive in its efforts to fight financial fraud, companies naturally are looking for new ways to avoid becoming the next target. In the last two years, the Department of Justice (‘‘DOJ’’) has filed lawsuits seeking billions of dollars in damages from...
ArticlesHUD Sets Stage for FCA Claims Against Fund Recipients
The Fair Housing Act requires agencies to administer their programs and activities relating to housing and urban development “affirmatively to further” fair housing. Recipients of U.S. Department of Housing and Urban Development program funding currently are required to conduct a fairly...
ArticlesHAMP Risk on the Rise: A Complicated Regulatory Scheme Under the Spotlight
The Home Affordable Modification Program (“HAMP”) has had a rocky history in the three short years since its inception. Although participation in the Treasury Department’s HAMP program is voluntary, loan investors, including Fannie Mae and Freddie Mac, require their mortgage servicers to...
ArticlesU.S. Using Subpoenas Under 1989 Act as New Tool to Probe Financial Firms
The U.S. Department of Justice has increased its use of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) to prosecute wrong-doing by financial firms. Accordingly, more institutions may find themselves having to deal with a subpoena under the act, including those that are...
ArticlesDOJ Sues Mortgage Lender Over Alleged Fraudlent Certification of FHA Loans
On October 9, the U.S. Attorney for the Southern District of New York and the U.S. Department of Housing and Urban Development (HUD) announced a civil fraud suit against a mortgage lender alleged to have falsely certified loans under the FHA’s Direct Endorsement Lender Program. The suit, filed in...
ArticlesWhistle-Blower Bounties May Encourage Residential Mortgage-Backed Securities Fraud Reporting
The False Claims Act, 31 U.S.C. § 3729, which has been around since the Civil War, permits whistle-blowers with information about fraud perpetrated upon the U.S. government to bring civil fraud suits on behalf of the United States and share in the recovery. While much attention is paid to the...
ArticlesUnderstanding FIRREA's Reach: When Does Fraud "Affect" a Financial Institution?
Recently, the Justice Department has made increasing - and increasingly aggressive - use of FIRREA, a civil penalty statute that it had all but ignored for more than two decades. Enacted in response to the S&L crisis, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)...
ArticlesHUD Announces Another Mortgage False Claims Act Settlement
On May 10, HUD and the U.S. Attorney for the Southern District of New York announced the settlement of a lawsuit alleging violation of the False Claims Act by a mortgage originator and affiliated entities. The government alleged that, for nearly a decade, MortgageIT, Inc. certified falsely that the...
ArticlesHow to Respond to a Subpoena: 10 Things You Should Do Immediately
Responding to a subpoena can be a daunting task and early missteps can have severe repercussions. Here is a short list of critical steps you can take in the early stages of the subpoena response to protect your company. Preserve. Preserve. Preserve. Immediately upon receipt of a subpoena, you...
ArticlesSpecial Alert: Federal and State Officials File Settlement with Nation's Five Largest Mortgage Servicers
On March 12, 2012, Federal and state officials filed documents in the United States District Court for the District of Columbia formalizing a previously announced settlement (the Settlement) of various government probes into alleged mortgage-related violations by the five largest residential...
ArticlesFederal Government Obtains Settlement of False Claims Act Claims Against CitiMortgage
On February 15, HUD and the U.S. Attorney for the Southern District of New York announced that CitiMortgage, Inc. had agreed to settle the government’s claims that CitiMortgage violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act by failing to comply...
Articles
News & Blogs
California mortgage lender to pay $1 million to settle fraud allegations
Recently, the United States Attorney for the Eastern District of Washington announced a settlement with a California-based mortgage lender to resolve allegations that it “improperly and fraudulently” originated government-backed mortgage loans insured by FHA, resulting in losses to the government...
InfoBytesDOJ announces $31,000 FCA settlement for duplicative PPP loans
On February 11, the DOJ announced a $31,000 settlement with an IT services company to resolve allegations that it violated the False Claims Act (FCA) by obtaining more than one Paycheck Protection Program (PPP) loan in 2020. According to the settlement agreement, in April 2020 the company received...
InfoBytesDistrict Court partially grants summary judgment to defendants in FCA case
On February 1, the U.S. District Court for the Eastern District of California denied a relator’s (plaintiff’s) motion for summary judgment on an allegation of promissory fraud in violation of the False Claims Act (FCA) in a case against a rocket manufacturer and its subsidy (defendants). The court...
InfoBytesDOJ announces $7.9 million FCA settlement with student loan contractor
On January 14, the DOJ announced a $7.9 million settlement with a contractor that serviced student loans for lenders under the Federal Family Education Loan Program to resolve allegations that it violated the False Claims Act by submitting or causing the submission of false claims to the Department...
InfoBytesNational bank to pay $37 million for alleged foreign exchange violations
On September 27, a proposed settlement was filed in the U.S. District Court for the Southern District of New York resolving allegations that a national bank (defendant) allegedly defrauded nearly 800 commercial customers by charging higher prices on foreign exchange (FX) transactions despite having...
InfoBytesCFPB releases fall 2020 rulemaking agenda
On December 11, the CFPB released its fall 2020 rulemaking agenda . According to a Bureau announcement, the information details the regulatory matters that the Bureau “expect[s] to focus on” between November 2020 and November 2021. The announcement notes that the Bureau will also continue to...
InfoBytesCourt dismisses FCA action against national bank
On October 29, the U.S. District Court for the Eastern District of Missouri dismissed a False Claims Act (FCA) suit against a national bank, concluding the relator failed to prove the inapplicability of the public disclosure bar. According to the opinion, the relator filed an action against the...
InfoBytesDOJ reaches $25 million settlement with mortgage lender to resolve false claims allegations
On October 20, the DOJ announced a nearly $25 million settlement with a California-based mortgage lender in connection with alleged violations of the False Claims Act (FCA) related to originating and underwriting mortgages insured by the Federal Housing Administration (FHA). According to the DOJ,...
InfoBytesDOJ: Lender allegedly violated FIRREA, False Claims Act by forging certifications and using unqualified underwriters
On September 25, the DOJ filed a complaint against a lender alleging that it forged certifications and used unqualified underwriters to approve FHA-insured Home Equity Conversion Mortgages (HECMs) to increase its loan production in violation of the Financial Institutions Reform, Recovery and...
InfoBytesDistrict court dismisses False Claims Act suit at DOJ’s request
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...
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