Brad S. Karp is chairman and partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum by Mr. Karp, Dan Kramer, Jane O’Brien, Walter Rieman, and Richard A. Rosen.
On May 23, 2016, the United States Court of Appeals for the Second Circuit reversed a jury’s finding of liability and the district court’s imposition of a $1.27 billion civil penalty on Countrywide and related defendants (collectively, “Countrywide”) under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for mail or wire fraud affecting a federally insured financial institution. [1] The Second Circuit held that the trial evidence was insufficient to establish fraudulent intent. But in ruling on that basis, the court avoided the controversial legal question of whether FIRREA, which authorizes civil penalties for fraud “affecting” a federally insured financial institution, applies to fraud by such an institution.
