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"The False Claims Act, higher education, and the risks for research universities" by Andrew W. Schilling (NACUA Note)
Andrew W. Schilling wrote an article for the National Association of College and University Attorneys covering the risks these institutions face from Department of Justice enforcement of the False Claims Act. The article summarizes recent FCA cases of relevance to colleges and universities, while...
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...
Articles"5 FCA enforcement predictions after Coronavirus relief bill" by Andrew W. Schilling (Law360)
On March 27, President Donald Trump signed into law the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. Although the False Claims Act is not mentioned in this stimulus bill, the implications of the act on FCA enforcement are likely to be significant. Click here to...
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"Cooperation in False Claims Act investigations: The benefits of conducting a proactive internal investigation" by Andrew W. Schilling (Bloomberg Law)
Most companies that receive a civil investigative demand (CID) in a False Claims Act (FCA) investigation decide early that they will ‘‘fully cooperate’’ with the government’s investigation. That’s an easy decision because there really is no alternative: Failure to cooperate with the Justice...
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...
ArticlesA False Claims Act Win for the Banks
In the years following the financial crisis, the U.S. Department of Justice and the relators bar have aggressively used the False Claims Act to target banks and nonbank mortgage lenders and servicers, using increasingly creative theories of liability to hold these companies responsible for failing...
ArticlesAmending FIRREA: An Alternative Proposal
Near the end of his tenure, Attorney General Eric Holder publicly raised the prospect of amending FIRREA—the Financial Institutions Reform, Recovery, and Enforcement Act of 1989—to increase the incentives for blowing the whistle on financial fraud. FIRREA is the federal statute the Department of...
ArticlesFannie And Freddie Loans Could Be Next FCA Targets
By now, lenders that make loans insured by the federal government are well acquainted with the False Claims Act. Following the financial crisis, the U.S. Department of Justice has aggressively used the FCA to collect billions of dollars in settlements from mortgage lenders whose loans are backed by...
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...
ArticlesUS v. Heinz May Bolster Expansive FIRREA Interpretation
The U.S. Department of Justice’s aggressive use of the Financial Institutions Reform, Recovery, and Enforcement Act to sue banks for fraud just received an unexpected boost, and from an unlikely source: In a criminal case decided last week,the Second Circuit endorsed an expansive approach to the...
ArticlesShould FIRREA Whistleblower Bounties Be Higher?
On Sept. 17, U.S. Attorney General Eric Holder raised the prospect of amending FIRREA — the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 — to increase its whistleblower awards with the goal of further incentivizing cooperation in financial fraud cases.[1] While FIRREA has...
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...
ArticlesFHFA Inspector General Emerging as Key Enforcement Player: What to Expect in 2014
These days, there is certainly no shortage of investigators, auditors, regulators, and prosecutors inundating the financial services industry with audits, inquiries, civil investigative demands, and subpoenas. Some of these inquiries, such as audits by an entity’s regulator, are familiar territory...
ArticlesChallenging FIRREA Subpoenas: The RMBS Working Group Faces Subpoena Fight
As the Justice Department has stepped up its pursuit of financial institutions, there has been a surge of civil fraud lawsuits brought by the government under FIRREA — the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 — a law that allows the government to sue for civil...
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...
Articles
News & Blogs
DOJ 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...
InfoBytesDOJ reaches $2.47 million settlement to resolve alleged lending violations regarding FHA-insured reverse mortgages
On March 31, the DOJ announced a $2.47 million settlement with an Oklahoma-based mortgage lender in connection with alleged violations of the False Claims Act (FCA) related to an acquired predecessor entity’s origination and underwriting of home equity conversion mortgages (HECM). According to the...
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