In a ruling issued on Thursday, a federal magistrate judge in Charlotte recommended dismissal of a government lawsuit alleging that Bank of America defrauded investors in a mortgage-backed security. The ruling, which is a win for Skadden, Arps, Slate, Meagher & Flom, may undermine the U.S. Department of Justice’s efforts to use a statute known as FIRREA to hold banks liable for the 2008 financial crisis.
Congress enacted FIRREA (the Financial Institutions Reform, Recovery and Enforcement Act) in the wake of the savings and loan crisis of the 1980s. The statute authorizes civil enforcement of various criminal offenses, such as wire fraud or making false statements. Prosecutors resuscitated the statute after the subprime meltdown and brought several cases under FIRREA in lieu of criminal indictments, hoping to take advantage of FIRREA’s generous statute of limitations and lower burden of proof.
