A federal district court in California has become the latest court to hold that the 10-year statute of limitations under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for offenses “affecting a financial institution” extends to offenses committed by banks and their employees, not just offenses committed against them. The decision is the latest chapter in a long-running debate between the Government and financial institutions that has played out in a series of federal court decisions over the last three years regarding interpretation of FIRREA. While this is not the first decision to hold that the 10-year limitations period applies to offenses by financial institutions, it is the first outside of the Second Circuit.
A provision of FIRREA, 18 U.S.C. § 3293(2) establishes that the statute of limitations for various criminal offenses is extended to 10 years in cases where the conduct at issue “affects a financial institution,” and permits the Department of Justice (“DOJ”) to bring both civil and criminal cases under the statute. The debate over how to interpret FIRREA has focused on two issues. First, there is the question of whether the statute permits a “self-affecting” theory of liability by which a financial institution could potentially be liable for its own fraud or the fraud of one of its employees. Second, there is the question of whether the effect on the financial institution must be directly linked to the charged conduct, or if more tenuous effects, such as litigation risk, reputational risk, or settlement costs, may trigger FIRREA’s application. As to the first question, courts in the Southern District of New York have determined that FIRREA does extend to a self-affecting theory of liability, holding that such a decision stems from the plain language of the statute.[1] However, the Second Circuit, when presented with an opportunity to affirm this finding, did not.[2] As to the second, the Second Circuit has held that FIRREA should be understood to permit a broad interpretation of “affecting a financial institution,” and, for example, litigation risks and losses from settlement agreements may constitute effects falling under the statute.[3]
A federal district court in California has now weighed-in on both questions. In United States v. Bogucki, 19-cr-00021-CRB-1, the Government alleged that Robert Bogucki, a former options trader at Barclays, was involved in a conspiracy to defraud Barclays’ counterparty, Hewlett Packard (“HP”), in a foreign exchange transaction during a 2011 options trade. Moving to dismiss the superseding indictment, Bogucki argued that the case against him was time-barred because it was filed outside of the five-year limitations period under 18 U.S.C. § 3282. The Government’s position was that FIRREA extends the statute of limitations because Barclays was harmed by Bogucki’s conduct in that it experienced litigation risks and costs.
On July 2, 2018, Judge Breyer of the...
