Hmmmm....

How is one to reconcile the civil fraud allegations in the US's suit against Countrywide for defrauding the GSEs with the Department of Justice dropping its criminal investigation of Angelo Mozillo in 2011?  If the DOJ thinks that they've got Countrywide on civil fraud, I would think that should give them basically all they need to get Mozillo (and a whole bunch of other Countrywide folks) on wire fraud or mail fraud.  Mozillo, recall, settled with the SEC, but not, as far as I know with the Dept. of Justice or, for that matter, with any state Attorney General.  Just sayin'.   

The answer, I first thought, might relate to statutes of limitations.  Maybe it's too late for the Feds to go after Mozillo.  Mail and wire fraud statutes of limitations are five years.  But they are extended to 10 years under FIRREA for mail and wire frauds " affecting a federally insured financial institution". That brings us back to the suit against BoA/CW:  the DOJ is making an interesting argument for deploying FIRREA.  Countrywide is alleged to have defrauded the GSEs. That alone doesn't trigger FIRREA's extension of the statute of limitations.  So the DOJ is arguing that the fraud affected federally insured financial institutions that invested in GSE stock because they were harmed when the GSE's share price fell.

I get the argument, but it seems to prove too much.  The statutory language doesn't clearly require direct harm--just "affecting a federally insured financial institution," but there have to be some limits on indirect harm or everything would trigger FIRREA statute of limitation extensions.  If the DOJ's argument is taken literally, defrauding a consumer is a FIRREA violation because it affects the consumer's ability repay loans to a federally insured financial institution.  Or my A's wire fraud on B affected B's ability to pay C, which affected C's ability to repay a FDIC insured bank.  Is A really subject to a 10-year FIRREA statute of limitations?  Perhaps reading in a materiality requirement to the "affected" term in the statute would remedy the situation, but even that doesn't deal with the sort of indirect harm problem.  Maybe a foreseeability component? Absent some sort of limiting principle, however, the DOJ's interpretation of FIRREA would seem to produce some otherwise seems border-line absurd results.

Still, for purposes of prosecuting Mozillo, if the DOJ thinks its got a FIRREA hook for Countrywide, then it should also have that hook for Mozillo.  So again, I say hmmmm.