August 20, 2013
Judge Rakoff Is All FIRREA-ed Up
Law360 quoted me in a story, Rakoff Gives DOJ License To Be Bold In Bank Crackdown (behind a paywall), that reads in part,
U.S. District Judge Jed S. Rakoff’s expansive Monday opinion backing the federal government’s $1 billion mortgage fraud suit against Bank of America Corp. leaves the U.S. Department of Justice wide latitude to use its favorite financial fraud tools in cases linked to the recent financial crisis.
Judge Rakoff’s opinion expanded his May decision allowing the Justice Department’s October suit against Bank of America over lending practices during the housing bubble and financial crisis to move forward under the Financial Institutions Reform Recovery Enforcement Act, while also explaining why portions of its case using the False Claims Act failed.
The ruling, which accepted the government’s broad view of which federally insured financial institutions can be sued under FIRREA and on what grounds, gives the government further ammunition to bring such cases in the future, said Brooklyn Law School professor David Reiss.
“The federal government has taken an expansive view of this phrase, and Judge Rakoff agrees that it can be read broadly in certain circumstances, such as when the affected federally insured financial institution is the alleged wrongdoer itself,” he said.
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[T]he Second Circuit will look closely at other appellate rulings related to interpreting congressional intent, as well as any rulings dealing specifically with FIRREA should an appeal come its way, as many observers expect.
However, it is likely to look closely at Judge Rakoff’s opinion when rendering an ultimate decision, which is why he considered those issues, Reiss said.
“Judge Rakoff stated that this result clearly flowed from the plain language of FIRREA, so the defendants may have a hard time on appeal,” he said.
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