U.S. v. Countrywide Financial Corp.
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The Southern District of New York took a broad view of what conduct by a defendant “affects” a financial institution for the purposes of FIRREA and FIAFEA, including “self-inflicted” fraud by a bank on itself.
What Happened in Court
Mail and wire fraud that resulted in two entities purchasing loans that they would not otherwise have purchased by misrepresenting the quality of that loans, was conduct “affecting a federal insured financial institution” as required to impose the penalties under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which forms the basis of FIAFEA claims. The fraud a had huge effect on other insured banks after mergers with the banks that committed fraud. The court further concluded that “self-inflicted” fraud—where the effects are felt by the bank that perpetrated the fraud— are sufficient to meet the FIRREA standards.