While many financial industry professionals are familiar with the qui tam provisions of the Dodd-Frank Act and the potential of awards to whistleblowers who expose illegal actions, other legal strategies are emerging to hold wrongdoers accountable. One example is a round of recent investigations of Bank of New York Mellon Corp. by federal and state authorities.
At issue is whether BNY Mellon overcharged institutional investors for foreign currency trades over the past decade. Specifically, the bank is accused of misrepresentations regarding the most favorable foreign-exchange rates available in daily trading. Prosecutors charge that BNY Mellon excessively benefitted from pocketing the difference between the rates charged to clients and the more favorable rate it received as a bank.
In addition to the US Department of Justice (DOJ), state attorneys general in New York, Virginia and Florida have sued BNY Mellon in rapidly spreading currency trading misconduct probes. The suits were instigated by a group of whistleblowers.
The Wall Street Journal recently reported one important development in the legal strategy followed by prosecutors and qui tam attorneys in the New York case: they were proceeding under a long-ignored federal statute, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).
FIRREA was enacted in response to the savings-and-loan crisis of the 1980s, but it has broader powers than that characterization suggests. FIRREA also provides for whistleblower-instigated civil actions and penalties for violations of federal wire and mail fraud statutes without the steeper challenges of a criminal prosecution, which would require proof beyond a reasonable doubt.
Claims filed under the FIRREA statute, like the False Claims Act and other civil fraud statutes, only require proof by a preponderance of the evidence. This essentially means that the evidence of a violation of the Act outweighs any evidence to the contrary.
Whistleblower Attorneys Advise Clients With Insider Knowledge of Wrongdoing
Staying on top of the latest legal developments is a vital part of the service a qui tam lawyer provides to clients. Sometimes that means using laws from the past to protect and benefit clients.
An example is utilizing FIRREA to obtain financial awards for whistleblowers, as authorized by 12 USCA section 1831(k), which provides a whistleblower reward of 25 percent of the amount recovered or $100,000, whichever is less. The law also provides anti-retaliation protections for whistleblowers who bring claims. An experienced qui tam litigator who understands a client’s full range of legal options can explain the most suitable legal strategy for obtaining a civil award while bringing corporate wrongdoing to light.