July 23, 2014 — The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), enacted after the savings and loan crisis of the 1980s, is being employed today to address misconduct in the banking industry that helped to bring about the 2008 financial crisis. In particular, FIRREA targets schemes that defraud a federally insured financial institution or that cause the entry of false information in a financial institution’s records, even when the government is not harmed directly.
FIRREA’s whistleblower provision encourages private individuals to collaborate with the government by filing confidential allegations concerning violations of the statute with the U.S. Department of Justice (DOJ). Informants might notify the DOJ, for example, about FIRREA violations relating to mortgage-backed securities issuances, mortgage sales to Fannie Mae and Freddie Mac or setting exchange rates for foreign currency.
If the DOJ recovers penalties or damages based on a tipster’s confidential information, the whistleblower may receive between twenty and thirty percent of the first $1 million received, ten to twenty percent of the next $4 million obtained and five to ten percent of the next $5 million, for a maximum total whistleblower reward of $1.6 million.
Citigroup Admits To Misleading RMBS Investors, Agrees To $4 Billion Penalty As Part Of $7 Billion Settlement
Citigroup Inc. has settled federal and state civil claims against it concerning the institution’s misconduct in packaging, securitizing, marketing, selling and issuing residential mortgage-backed securities (RMBS) prior to 2009. The $7 billion settlement includes the largest FIRREA civil penalty to date — $4 billion.
Citigroup has admitted, as part of the settlement announced by the DOJ, that it deceived the investing public about the quality of the mortgage loans it securitized in RMBS. All the while, Citigroup securitized and sold RMBS using underlying mortgage loans the institution knew had material defects. In internal emails, one Citigroup trader speculated that half of the mortgage loans were defective and might soon be in default. Despite this knowledge, Citigroup securitized the loan pools and created RMBS that Citibank sold to investors for billions of dollars. Unaware of the material defects, investors who purchased RMBS from Citigroup suffered devastating losses. Citibank’s conduct, together with that of other banks that securitized toxic loans and deceived investors who purchased those securities, contributed to cause the nation’s worst financial crisis since the Great Depression.
From the record-setting settlement, $4.5 billion will be applied to resolve claims against Citigroup by the federal and state governments. The remaining $2.5 billion will go toward helping consumers harmed by Citigroup’s unlawful conduct.
Whistleblowers Notify Government Of FIRREA Violations
Banking industry insiders with information about FIRREA violations are wise to safeguard their own interests by speaking with a qui tam lawyer before notifying the DOJ about an employer’s misconduct. While Waters & Kraus did not handle this particular case, we are handling similar cases. If you have similar claims against a different banking institution, contact us or call our attorneys at 855.784.0268. Anne Izzo and George Tankard in Waters & Kraus’ Maryland office have the experience necessary to protect whistleblowers in these types of cases.
Contact us by email or phone our qui tam attorneys at 855.784.0268 to learn how we can work together in FIRREA violation cases to protect American consumers and investors.