Overview
In an opinion today, Judge Furman largely denied Wells Fargo’s motion to dismiss a government lawsuit relating to its underwriting of government-insured mortgage loans. Judge Furman joined Judges Rakoff and Kaplan in holding that the Financial Institutional Reform, Recovery, and Enforcement Act (“FIRREA”), which allows the government to pursue civil charges against those who commit crimes like mail or wire fraud “affecting a federally insured financial institution,” applies even where the conduct at issue is a bank "affecting" itself. (See our prior posts on the issue here and here, and see here for a longer version of these posts at Columbia University’s CLS Blue Sky Blog). One of the predicate acts the government alleged against Wells Fargo involved alleged violations of paragraph 4 of 18 U.S.C. § 1005, which criminalizes receiving funds from a bank with the intent to defraud the government. Wells Fargo argued that paragraph 4 is limited to bank insiders, and a 2011 decision from Judge Marrero, United States v. Rubin/Chambers, supports that interpretation. Judge Furman disagreed with the Rubin decision:
This Court agrees with the Government that paragraph four of Section 1005 is not limited to bank insiders. It nearly goes without saying that, “when [a] statute’s language is plain, the sole function of the courts — at least where the disposition required by the text is not absurd — is to enforce it according to its terms.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000) (internal quotation marks omitted). In deviating from this principle with respect to paragraphs two and three of Section 1005, courts have relied on the legislative history of those paragraphs. Specifically, before 1948, “[t]he substantive conduct proscribed by [those] paragraphs was contained . . . in a single paragraph that began with language limiting the provision expressly to any [bank] officer, director, agent, or employee.” Rubin, 798 F. Supp. 2d at 525 (internal quotation marks omitted). When Congress revised the criminal code in 1948, it “divided the single paragraph into three separate paragraphs, after which the limiting language appeared in Paragraph One only.” Id. There was no other indication, however, that Congress intended to limit the restriction to paragraph one . . . . The fourth paragraph of Section 1005, however, was enacted nearly fifty years later, in 1989, as part of FIRREA. See Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub. L. No. 101-73, § 961(d)(3), 103 Stat. 183, 499 (1989). In adding paragraph four to the Section, Congress gave no indication that the word “whoever” should be limited to bank insiders . . . . In declining to interpret paragraph four by its terms, the Rubin Court relied in part on the legislative history of FIRREA, citing a statement in the Committee Report that “one of the ‘primary purposes of [FIRREA was to] . . . enhance the regulatory enforcement powers of the depository institution regulatory agencies to protect against fraud, waste and insider abuse.’” 798 F. Supp. 2d at 526-27 (quoting H.R. Rep. 101-54(I), at 307-08 (1989)) (emphasis in original). As the Rubin Court itself acknowledged, however, this legislative history is ambiguous at best . . . . In light of this ambiguity, whatever the merits of limiting paragraphs two and three of Section 1005 to bank insiders (a question this Court need not decide), there is no basis to deviate from the plain language of paragraph four by limiting it in a similar manner.
