The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) was passed in response to the Savings and Loan Crisis of the late 1980s. The FIRREA law reorganized the federal structure of agencies supervising savings and loan associations or “thrifts,” and overhauled the regulations impacting the savings and loan banking system, the real estate appraisal industry, and Deposit Insurance.  FIREAA also permitted the DOJ to pursue both criminal and civil charges (monetary penalties) against fraud in the financial industry, including mortgage fraud, by going after those who fraudulently harm banks, financial institutions, and their customers. 

Congress subsequently passed the Financial Institutions Anti-Fraud Enforcement Act (“FIAFEA”), which created a rewards program for whistleblowers who help uncover fraudulent schemes by reporting non-public violations of FIRREA. 

The FIAFEA statute provides for a whistleblower reward program that entitles a qualified whistleblower to receive a percentage of any monetary recovery resulting from the action.

This is how the FIAFEA Whistleblower program works:

• To receive a reward under FIRREA, a whistleblower must file a declaration under oath with the Attorney General of the U.S. Department of Justice (“DOJ”) specifically describing the facts and circumstances surrounding the alleged fraud against the financial institution, the fraud of which gives rise to civil penalties. Such fraud includes among others – Receipt of gifts for procuring loans; False Statements, Overvaluation of Securities; Theft; Embezzlement; Misapplying Funds; Bank Fraud; and more.
• The whistleblower must be the original source of the information if the information is already publicly available; that is to say, the whistleblower must be the first one to report the non-public information in order to be eligible for a reward if the information is already out there in some publicly available form. The information must lead to a successful enforcement action by the government, where money is recovered from the defendant. 
• If an enforcement action is successful, the whistleblower will be entitled to 20% to 30% of any money up to $1 million recovered, 10% to 20% of the next $4 million recovered, and 5% to 10% of the next $5 million recovered. 
• The Attorney General has the discretion to determine the percentage awarded, depending on a number of factors including the significance of the information provided and whether it leads to a successful enforcement action. The Attorney General has issued regulations that provide detailed instructions on how a whistleblower can apply for a reward and what information is required. The regulations also set forth the procedures for making a claim for a reward and the criteria that will be considered in determining whether to pay a reward.
• $1.6 million is the maximum amount a whistleblower may recover under FIRREA. This would entail the enforcement action leading to the DOJ recovering $10 million or more from the party who defrauded the financial institution. 

Under FIRREA, past successful actions include a $4 billion civil penalty with Citigroup in 2014 over misleading investors about mortgage-backed securities, and a $16.6 billion settlement with Bank of America over financial fraud. 

FIRREA has even been used by federal prosecutors as part of a criminal and civil judgment against Volkswagen by the DOJ for a scheme to cheat on emissions testing standards. Volkswagen was in violation of the FIRREA since lenders were harmed by underwriting loans for Volkswagen vehicles that were not as environmentally friendly as Volkswagen claimed, and thus the value of these vehicles was artificially inflated. Volkswagen agreed to pay a $2.8 Billion Criminal Fine and a $1.5 Billion Settlement of Civil Environmental, Customs and Financial Violations.

If you or anyone you know has information about fraud committed against financial institutions, do not hesitate to contact us at Whistleblowers International. We provide a free consultation to discuss and evaluate your claim. You can remain anonymous and anything you tell us will remain confidential.