On February 3, Judge Jed S. Rakoff of the United States District Court of the Southern District of New York denied Bank of America Corporation’s and Rebecca Mairone’s motion for judgment as a matter of law, or, in the alternative a new trial. The jury found Bank of America and Mairone liable under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) for the sale of mortgage loans to Fannie Mae and Freddie Mac before the financial crisis. Judge Rakoff found that the jury’s October 23, 2013 verdict was supported by sufficient evidence. Order.
FIRREA
Federal Court Denies S&P’s Motion to Dismiss $5 Billion RMBS Fraud Suit
On July 16, Judge David O. Carter of the Federal District Court for the Central District of California denied Standard & Poor’s Financial Service LLC’s (S&P) motion to dismiss the U.S. government’s $5 billion fraud suit alleging that S&P intentionally issued false credit ratings of mortgage backed securities. In denying the motion, the court rejected S&P’s arguments that its statements about the securities were “puffery,” that the complaint fails to plead facts showing that the credit ratings were false or misleading, and that the complaint fails to plead scienter. The government’s claims are for civil penalties for alleged violations of criminal mail fraud, wire fraud and financial institution fraud statutes. Decision. Orrick covered this recent development and the Financial Institutions Reform Recovery Enforcement Act (FIRREA) here.
Federal Court Dismisses United States Action Against Countrywide In Part
On May 8, Judge Jed Rakoff of the United States District Court for the Southern District of New York dismissed claims by the United States for damages and civil penalties under the False Claims Act against Countrywide and Bank of America. The court held that the government could proceed with its claims for violations of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. FIRREA permits the government to recover civil penalties for fraudulent activities that “affect” federally insured financial institutions. The government alleged that Countrywide’s mortgage origination business had defrauded Fannie Mae and Freddie Mac. The court noted it would explain its reasoning at a later date. Order. Amended Complaint.