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Stretching the Limitations Period in White-Collar Criminal Matters
Editor's Note: Statutes of limitations in criminal codes are meant to protect individuals and entities from having to defend themselves against charges stemming from conduct that occurred in the too-distant past. Though they might seem straightforward on their faces, limitations periods are often elongated by legislation or court interpretation. The authors began looking at some of these exceptions to the stated limitations periods last month in Part One of this article. They continue here with further examples.
FIRREA Implements 10-Year Statute of Limitations for Frauds 'Affecting' Financial Institutions
Congress added another weapon to the government's deadline-extension arsenal when it passed 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, and permits the Department of Justice (DOJ) to seek enormous civil financial penalties for violations of several federal criminal offenses, including mail and wire frauds “affecting a federally insured financial institution.” 12 U.S.C. §1833a. Among its many reforms, FIRREA also instituted a 10-year statute of limitations for mail and wire frauds that “affect” financial institutions. 18 U.S.C. §3293(2). Congress justified this generous doubling of the limitations period by citing an “enormous backlog of thousands of currently pending [bank fraud] investigations and prosecutions and the complexity of many of the cases.” H.R. Rep. 101-54, at 472 (1989), reprinted in 1989 U.S.C.C.A.N. 65, 211.
FIRREA does not define the term “affects,” and courts have taken divergent approaches as to the type of effects on a financial institution that are sufficient to trigger the law's 10-year statute of limitations. The First and Fourth Circuits have narrowly interpreted the term, concluding that a fraud offense “affects” a financial institution only if the institution was “victimized by the fraud,” suffered “actual financial loss,” or was exposed to the “realistic prospect of loss.” United States v. Agne, 214 F.3d 47, 53 (1st Cir. 2000); United States v. Ubakanma, 215 F.3d 421, 426 (4th Cir. 2000). Courts adopting this narrow approach have held that the risk of losing a customer and potential reputational damage are not sufficient to trigger the 10-year statute of limitations. Agne, 214 F.3d at 5253.
The majority interpretation of “affects,” however, is much broader. Courts in the Second, Seventh, Ninth, and Tenth Circuits have held that frauds “affect” financial institutions where they expose such institutions to “a new or increased risk of loss,” even if the institutions suffer no actual or net loss. United States v. Stargell, 738 F.3d 1018, 1022-23 (9th Cir. 2013); United States v. Ghavami, 2012 WL 2878126, at 6 (S.D.N.Y. July 13, 2012), aff'd sub. nom. United States v. Heinz, 780 F.3d 365 (2d Cir. 2015) (per curiam); United States v. Mullins, 613 F.3d 1273, 127879 (10th Cir. 2010); United States v. Serpico, 320 F.3d 691, 69495 (7th Cir. 2003). Several courts have gone a step further and have concluded that a financial institution may be “affected” by a fraud even if the institution itself participated in the fraud — a so-called “self-affecting” theory that prosecutors have used successfully to bring charges against individual employees of financial institutions. See, e.g., United States v. Bank of N.Y. Mellon, 941 F. Supp. 2d 438, 46163 (S.D.N.Y. 2013).
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