Financial Institutions Reform Recovery & Enforcement Act
FIRREA Whistleblower Program
The Financial Institution Reform, Recovery, and Enforcement Act (“FIRREA”) was enacted as part of a sweeping governmental effort to combat fraud in the financial industry. FIRREA whistleblowers may be entitled to a monetary reward if the Government uses information provided by the whistleblower to successfully prosecute either criminal or civil actions against the fraudulent actor. Where the Government obtains criminal convictions against the fraudulent actor based, in whole or in part on the whistleblower’s information, the amount of any award is determined by reviewing a set of statutory factors. Where a civil judgment is obtained against a fraudulent actor, whistleblowers are entitled to significant monetary awards, calculated as a percentage of the amount recovered by the Government. The FIRREA whistleblower provision is often used in conjunction with the False Claims Act (FCA) and SEC whistleblower provisions to obtain multi-million, and even multi-billion dollar recoveries.
TYPES OF FIRREA FRAUD
Common types of fraud committed by the finance industry and combated by FIRREA include:
Making false statements or entries in bank records;
Conspiring to defraud a bank or other financial institution;
Exposing a financial institution to increased risk of loss;
Receiving bribes, kickbacks, or commissions for procuring loans;
Theft or embezzlement by bank employees.
ELIGIBILITY FOR AN AWARD
FIRREA does not limit who can bring a successful whistleblower claim. Whistleblowers that alert the Government to fraudulent conduct through a conforming document, called a “declaration,” are entitled to an award if the Government successfully uses that information, in whole or in part, to obtain either criminal or civil judgments against the fraudulent actor. Where the Government obtains criminal convictions against the wrongful actor, the Government considers numerous factors in determining the scope of the whistleblowers award, including:
the seriousness of the offense for which the conviction was obtained;
the extent to which the facts alleged in the declaration contributed to the conviction;
the number of offenders apprehended;
the extent to which the whistleblower cooperated with the Government;
the sentences and fines imposed on the offender and other offenders in related cases; and
the hardship to the whistleblower, including any expenses they incurred in preparing the declaration.
When a civil judgment is obtained against a fraudulent actor, whistleblowers are entitled to significant monetary awards, calculated as a percentage of the amount recovered by the Government. Specifically, under FIRREA, the whistleblower may receive up to 30% of the first $1 million recovered, up to 20% of the next $4 million recovered, and up to 10% of the next $5 million recovered. Used in conjunction with the FCA and SEC whistleblower provisions; however, collective award amounts may be significantly greater.
PROTECTIONS UNDER FIRREA