Business Crimes Hotline

Pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. ' 1833a (FIRREA), which was enacted in the wake of the 1980s savings and loan crisis and which, in relevant part, authorizes the recovery of civil penalties for specified types of fraud against financial institutions and depositors, the Complaint accused S&P of three different types of fraud. Specifically, the Government alleged violations of 18 U.S.C. ' 1341 (mail fraud affecting federally insured financial institutions), 1343 (wire fraud affecting federally insured financial institutions), and 1344 (financial institution fraud). These civil claims centered on S&P's actions from 2004 through 2007 in connection with Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs), two types of structured financial products. The Government noted that its Complaint was the culmination of an investigation ' code-named “Alchemy” ' that had commenced in November 2009 and was a product of the President's Financial Fraud Enforcement Task Force.

The Complaint seeking civil monetary penalties under FIRREA was filed in the Central District of California, as that federal district is home to the now-defunct Western Federal Corporate Credit Union (WesCorp), formerly the largest corporate credit union in the country. WesCorp collapsed in the wake of the 2008 financial crisis after suffering significant losses on S&P-rated RMBS and CDOs.

CALIFORNIA

DOJ Suit Leverages FIRREA

On Feb. 5, 2013, the Department of Justice (DOJ) announced its filing of a civil lawsuit in the United States District Court for the Central District of California against McGraw-Hill Companies, Inc. and the company's wholly owned subsidiary, Standard & Poor's Financial Services LLC (collectively, S&P), the credit rating agency, for their activities in the years leading up to the recent financial crisis.

Pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. ' 1833a (FIRREA), which was enacted in the wake of the 1980s savings and loan crisis and which, in relevant part, authorizes the recovery of civil penalties for specified types of fraud against financial institutions and depositors, the Complaint accused S&P of three different types of fraud. Specifically, the Government alleged violations of 18 U.S.C. ' 1341 (mail fraud affecting federally insured financial institutions), 1343 (wire fraud affecting federally insured financial institutions), and 1344 (financial institution fraud). These civil claims centered on S&P's actions from 2004 through 2007 in connection with Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs), two types of structured financial products. The Government noted that its Complaint was the culmination of an investigation ' code-named “Alchemy” ' that had commenced in November 2009 and was a product of the President's Financial Fraud Enforcement Task Force.

The Complaint seeking civil monetary penalties under FIRREA was filed in the Central District of California, as that federal district is home to the now-defunct Western Federal Corporate Credit Union (WesCorp), formerly the largest corporate credit union in the country. WesCorp collapsed in the wake of the 2008 financial crisis after suffering significant losses on S&P-rated RMBS and CDOs.