A recent SDNY ruling strengthens the Department of Justice’s expanding application the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
UPDATE On October 23, a jury returned the first FIRREA verdict under the Department of Justice’s new application of the Act. Discussion of that verdict and its ramifications are included in this update.
Once a rarely used and little known statute, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA or the Act) has seen a resurgence in the last two years as the Department of Justice (DOJ or the Department) has repeatedly used the statute to bring civil, rather than criminal, cases against financial institutions. In doing so, the government seeks to take advantage of the Act’s lower standard of proof than that which applies to criminal prosecutions. In a trio of cases moving through the Southern District of New York, the DOJ has pushed the boundaries of the Act – so far successfully – to bring civil charges against the very institutions the Department alleges were harmed by fraudulent acts.
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