We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
The U.S. District Court for the Eastern District of New York
decided a long-running whistleblower case last month, which alleged
that Wells Fargo and its predecessors-in-interest had defrauded
Federal Reserve Banks (FRBs) in order to borrow money at lower
interest rates. In United States v. Wells Fargo &
Co., No 1:11-cv-05457 (E.D.N.Y. May 9, 2018), the
Court ultimately dismissed the False Claims Act (FCA) case, which
had been remanded from the Second Circuit in September 2017.
The relators, former employees of Wachovia Bank and World
Savings Bank, both of which merged into Wells Fargo in 2008, argued
that the FRBs were government agencies for purposes of their FCA
case. In addressing this issue, the Court looked to two Supreme
Court decisions, Rainwater v. United States and United
States v. McNinch, for a non-exclusive list of factors to
consider.
Relators relied on provisions of the Federal Reserve Act that
create a financial connection between FRBs and the U.S. government.
For example, Section 289 states that surplus funds are to be
transferred to the Federal Reserve Board and then deposited into
the U.S. Department of Treasury's (Treasury) general fund.
Based on this provision, the relators argued that because Wells
Fargo and its predecessors did not pay as much for loans as they
should have, the FRBs that issued the loans had less money to send
back to Treasury, thereby depriving the government of money to
which it was entitled. The Court found this was "too tenuous
of a connection" that "taken to its extreme would render
any fraud that reduced a party's liability to the [g]overnment
actionable under the FCA." Ultimately, the Court ruled that
FRBs are not the U.S. government or its agents for purposes of the
FCA because the government has a considerably limited financial
connection with FRBs, and as a result, the Court granted the
defendants' motion to dismiss the relators' fourth amended
complaint for failure to state a claim.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In Judge v. Shikellamy Sch. Dist., No. 17-2189, 2018 U.S. App. LEXIS 27229 (3d Cir. Sep. 24, 2018), the 3rd Circuit Court of Appeals adopted a new approach to constructive discharge cases where an employee alleges...
Assistant Attorney General Brian A. Benczkowski made a splash at the NYU School of Law Program on Corporate Compliance and Enforcement Conference by unveiling the new policy by the U.S. DOJ for selecting corporate monitors.
On 11 June 2018, the U.S. Supreme Court held in China Agritech, Inc. v. Resh that the tolling rule first stated in American Pipe & Construction Co. v. Utah ...
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Behavioral Sciences Approach to Risk Management 
