The U.S. Attorney General is pressing congress to change legislation that caps whistleblower awards at 1.6 million dollars under the Financial Institutions Reform Recovery Enforcement Act to encourage additional reports and assistance in the prosecution of claims against financial institutions. According to the U.S. Attorney General, risky behavior by financial institutions is on the upswing and by encouraging more complaints and whistleblowers it will enable the government to deter future violations.
By way of background, FIRREA is becoming the government’s new-favorite weapon to utilize against financial institutions in connection with mortgage based claims. FIRREA authorizes million-dollar penalties against individual officers of institutions for engaging in fraudulent acts that have the ability to impact federally chartered banks. Moreover, the definition of "fraudulent" is very loose, with government agencies taking the position that gross negligence equates to fraud. Due to the leniency in its application and the extreme penalties that can be imposed personally on officers of banks and non-depositories, the fact that the government wants to increase financial incentives to facilitate additional whistleblower claims is certainly not positive news for lenders.
Nonetheless, the U.S. Attorney General's request comes at the same time that the new Department of Housing and Urban Development Secretary and others in the administration are pressing for
