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NOV 30, 2012

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Whistleblower Claims Under FIRREA Are Getting Scarier For Bank Executives

NOV 30, 2012 9:20am ET
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The government’s increasing use of the Financial Institution Reform Recovery and Enforcement Act (“FIRREA”) is creating greater levels of concern amongst banks and especially their officers and directors. For those of you not familiar with FIRREA, it was an act arising out the S&L crises of the 1980s that is now being aggressively used by the Department of Justice to institute claims against banks as well as claims against the officers and directors. A sobering thought is that under FIRREA, the government can seek damages up to 1 million dollars per violation (and more than that for continuous violations) as civil monetary penalties to be assessed personally against bank officers and directors.

Beyond the government’s attempt to expand the scope of this statute (probably beyond what was intended) through aggressive litigation tactics, FIRREA should concern banks as it contains a whistleblower provision that allows any employee to share up to 30% of the government’s recovery.  Moreover, the person that initiates any such claim or investigation leading to a recovery need only be submitted by a simple filing with the government, and it is entirely possible that the whistleblower would need to do very little if anything to receive an award, as the government could very well initiate and prosecute the claim, paying the whistleblower what is essentially a very large finder’s fee.

Obviously, when one considers the possibility that this would provide a disgruntled employee with ample means to exact revenge upon a former boss or institution, it only reinforces the notion that banks should be well informed about the scope and reach of FIRREA and carefully follow the recent FIRREA cases filed by the government. This “forgotten” statute is suddenly becoming very important and probably will continue to be an area of concern moving forward. You certainly do not want to be in a position of learning about FIRREA, only after its become relevant to you.

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