Staff StudiesFederal Deposit Insurance Corporation

Staff Studies

Report No. 2022-02

Legal Claims and Administrative 

Enforcement Proceedings 

2008–2013 Banking Crisis

January 2022

www.fdic.gov/cfr • @FDICgov • #FDICCFR • #FDICResearch

Legal Claims and Administrative Enforcement Proceedings 

2008–2013 Banking Crisis 

Dominic Arni, Patricia Butler, Melanie Coates, Gregory Conway, Aaron Forester, Christine Hsu, B. Amon 

James, Thomas Johnson, Roberta Koss, Cheryl Marken, Sydney Mayer, Jeffrey Schmitt, Rex Taylor, and 

Merlene White1 

Abstract 

During the 2008–2013 banking crisis and its aftermath, the FDIC pursued and defended more legal claims in both its 

receivership and corporate capacities than during the savings and loan and banking crisis of the 1980s and early 1990s. As 

receiver for failed banks, the FDIC investigated and litigated numerous professional liability claims, engaged in large-scale 

income tax refund and other commercial litigation, and sought to enter and collect on criminal restitution and forfeiture 

orders related to failed banks. In its corporate capacity, the FDIC pursued a variety of enforcement claims and other actions 

related to both open and failed banks. This paper provides an overview of the more significant of these claims. 

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 The views expressed are those of the authors and do not necessarily reflect the oficial positions of the Federal Deposit Insurance Corporation or the United 

States. The authors thank Brandi Jones for assistance in collecting supporting data. 

1 
Claims Filed in Court and Administrative Enforcement Proceedings 

Overview 

The banking crisis that began in 2008 and continued until 2013 resulted in substantial litigation and other claims brought 

by and against the FDIC, in both its receivership and corporate capacities. Leading up to this crisis, banks and thrifts engaged 

in a greater variety of financial activities than had been the case in the savings and loan and banking crisis of the 1980s and 

early 1990s (S&L crisis). As a result, the FDIC as receiver pursued a wider range of professional liability claims arising from the 

2008–2013 banking crisis. The FDIC as receiver also engaged in large-scale income tax refund litigation arising from a one-time 

change in federal tax law enacted in 2009 as part of the government’s response to the financial crisis. In its corporate capacity, 

the FDIC pursued administrative enforcement claims involving failed banks to a greater extent than it did during the S&L crisis. 

This paper reviews the more significant of these legal and enforcement claims. 

Professional Liability Claims and Recoveries 

Under the Federal Deposit Insurance Act (FDI Act), the FDIC as receiver acquires certain legal rights, titles, and privileges 

when an insured depository institution (IDI) fails. These include the right to pursue civil professional liability (PL) claims 

on behalf of the receivership estate of the failed IDI. The FDIC pursues PL claims to recover funds and hold professionals 

accountable for losses caused by breaches of their legal duties to IDIs and to enhance industry awareness of sound corporate 

governance standards in the banking industry. 

The FDIC Legal Division’s Professional Liability and Financial Crimes Section (PLFCS) and the Investigations Department 

of the FDIC Division of Resolutions and Receiverships (DRR) identify and investigate potential PL claims and pursue claims 

that are both meritorious and expected to be cost-effective.2 If these claims cannot be resolved pre-litigation, the FDIC as 

receiver will file a civil lawsuit. Lawsuits are filed only after the FDIC Board of Directors, or, for smaller cases, staff acting under 

delegated authority, authorize them. The recovery sources for PL claims typically are proceeds from liability, malpractice, and 

fidelity bond insurance, and the corporate or personal assets of defendants. Recoveries collected by FDIC receiverships are 

used to pay receivership claims in the priority specified by the FDI Act. 

From 2007 through year-end 2020, PLFCS and DRR recovered $4.4 billion in damages from PL claims. During the 

2008–2013 banking crisis, some PL claim types pursued—director and officer (D&O) liability claims, fidelity bond claims, 

and professional malpractice claims against attorneys, accountants, appraisers, and others—were similar to those pursued 

following the S&L crisis. Three new and significant types of claims also were identified and pursued: (1) residential mortgagebacked securities (RMBS) claims; (2) antitrust and other claims for suppression of the U.S. Dollar (USD) London Interbank 

Offered Rate (LIBOR); and (3) residential mortgage malpractice and/or mortgage fraud (MMF) claims. Recoveries from RMBS 

claims were the largest (44.7 percent) single source of PL recoveries arising from the 2008–2013 banking crisis through 2020. 

D&O liability claims were the second-largest source (30.08 percent). 

A. Responding to the 2008–2013 Banking Crisis3 

D&O claims were by far the most common claim. The FDIC as receiver pursued D&O claims from 207 (38.4 percent) of the 

539 IDIs that failed from 2007 through 2020. Table 1 shows the number and percentage of failed IDIs with PL claims pursued 

(by claim area) through year-end 2020. 

2

 Where appropriate, PLFCS also refers matters to the FDIC Legal Division’s Enforcement Section for administrative enforcement action by the failed IDI’s 

primary financial regulator. 

3

 During this period, 489 IDIs failed. Unless otherwise stated, the statistics for the PL program include the years 2008 through the end of 2020 to account for 

the characteristic multi-year lag between an institution’s failure and when the FDIC actually receives PL recoveries. This period more accurately reflects PL 

activity and recoveries attributable to institutions that failed during the 2008–2013 banking crisis. 

2 
Table 1 

Failed Insured Depository Institutions With Professional Liability Claims, 2007–2020 

D&O 

Fidelity 

Bond 

USD 

LIBOR 

& Other 

Misc 

RMBS & 

Securities Attorney Insurance MMF Accountant Appraiser 

All 

Claims 

Number of 

IDIs With 

Claims 

Pursued 

207 51 47 33 20 18 14 13 13 262 

Percent of 

IDIs With 

Claims 

Pursued 

38.40% 9.46% 8.72% 6.12% 3.71% 3.34% 2.60% 2.41% 2.41% 48.61% 

Source: FDIC. 

Note: The “All Claims” column reflects the number and percentage of insured depository institutions (IDIs) with at least one claim 

pursued. Because a single bank failure may give rise to multiple claims, data in this column are not the sum of data in preceding 

columns. Of these 262 failed IDIs, multiple claims were pursued in 94. D&O is director and officer claims. RMBS is residential mortgagebacked securities claims. MMF is residential mortgage malpractice or mortgage fraud claims. 

From 2007 through 2020, the FDIC filed 111 D&O lawsuits, 22 RMBS and RMBS trustee lawsuits, 23 fidelity bond lawsuits, 8 

attorney lawsuits, 6 appraiser lawsuits, 5 insurance lawsuits, 4 accountant lawsuits, and 3 LIBOR suppression lawsuits.4

As of year-end 2020, the PL program had active matters for 106 failed IDIs (comprising 55 with active investigations or 

litigation and another 51 open solely for collection purposes), 18 pending PL lawsuits (8 of which were MMF lawsuits), open 

investigations in 53 claim areas arising out of 9 failed IDIs, and 90 collection matters arising out of 63 failed IDIs (51 were 

open for collection only and 12 had other active investigations or litigation). Figure 1 shows the number of non-MMF lawsuits 

pending and filed by PLFCS between 2007 and 2020. 

As the crisis developed and the workload increased, PLFCS hired temporary in-house staff and retained outside counsel 

through competitive bidding to help with PL investigations and litigation. PLFCS in-house attorneys are responsible for 

managing outside counsel. DRR core investigations staff similarly hired in-house temporary staff and retained outside 

contractors through Receivership Assistance Contracts (RACs). By 2009, DRR integrated contractors from eight RACs into the 

bank closing process and tasked them with providing complete closing and post-closing investigation functions under the 

supervision of in-house DRR staff. 

Between 2007 and 2020, PLFCS and DRR recovered $4.4 billion and incurred expenses totaling $1.07 billion for all PL 

activity. Table 2 lists the recoveries obtained from the various claim types. 

Recoveries and expenses by year from 2007 through the end of 2020 are shown in Figure 2. From the inception of the 

PL program in 1986 through 2020, the FDIC has recovered more than $10.43 billion and incurred expenses of $2.47 billion, 

resulting in an overall recoveries-to-expenses ratio of 4.2 to 1. 

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 The FDIC as receiver also continues to pursue lawsuits filed by an IDI before it failed if, afer investigation, the FDIC determines that the case is meritorious 

and expected to be cost-efective. Settlement agreements entered into since 2007 to resolve PL claims are publicly available on the FDIC’s public website at 

https://www.fdic.gov/foia/plsa/. 

3 
Figure 1 

FDIC Professional Liability Civil Actions 

Civil Actions 

Count 

140

120

100

80

60

40

20

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Pending 9 17 25 24 52 95 119 102 49 28 22 21 11 10

Filed 0 1 1 6 33 46 45 25 9 5 3 0 2 2

Source: FDIC. 

Note: Number of lawsuits excludes residential mortgage malpractice or mortgage fraud (MMF) claims and matters 

related to, but not directly a part of, professional liability (PL) cases, such as bankruptcy cases filed by individual 

defendants in PL cases. 

Table 2 

Professional Liability Recoveries by Claim Type, 2007–2020 

Type of Claim 

Total Recoveries 

2007–2020 

Securities 

RMBS $1,969,488,409 (44.7%) 

Other Securities Claims $62,850,022 (1.4%) 

D&O Liability $1,325,717,105 (30.1%) 

Accountant Malpractice $461,635,367 (10.5%) 

MMF $237,439,706 (5.4%) 

Fidelity Bond $203,729,058 (4.6%) 

Appraiser Malpractice $45,738,132 (1.0%) 

Attorney Malpractice $44,424,157 (1.0%) 

Miscellaneous $34,400,065 (0.8%) 

Insurance $22,478,837 (0.5%) 

TOTAL $4,407,900,858 (100.0%) 

Source: FDIC. 

Note: RMBS is residential mortgage-backed securities claims. D&O is director and officer claims. MMF is residential mortgage 

malpractice or mortgage fraud claims. 

4 
Figure 2 

FDIC Professional Liability Recoveries and Expenses 

Amount Recovered Versus Expenses 

Dollars (Millions) 

1,200

1,000

800

600

400

200

0

2007 2008 2009 2010 2011 2012 2013

Recoveries 47.1 31.3 47.1 79.4 231.9 337.3 674.2

Expenses 5.0 9.7 52.9 160.8 139.5 110.1 144.6

Source: FDIC. 

2014 2015 2016 2017 2018 2019 2020

1142.7 450.3 470.9 105.4 116.3 626.4 47.4

119.8 96.5 73.5 63.5 47.3 27.6 17.3

B. Types of Professional Liability Claims 

1. New Claims Pursued as a Result of the 2008–2013 Banking Crisis 

a. RMBS Claims 

RMBS are a form of structured finance securities that became prevalent during the early 2000s. In a typical RMBS 

transaction, a special purpose entity known as a “depositor” acquires residential mortgage loans and sells them to a trust 

that securitizes the loans in a collateral pool. Loans from different originators may be included in a single collateral pool. To 

raise cash to buy the loans, the trust sells certificates, sometimes called bonds, to underwriters and broker-dealers, who resell 

them to investors. The underwriters prepare prospectus supplements that provide quantitative metrics, such as loan-to-value 

ratios and owner-occupancy statistics, regarding the collateral loans that are commonly understood to reflect the quality of 

the loans and to predict the likelihood of a loan’s default. The prospectus supplement also includes information about the 

standards used to underwrite the collateral loans. The prospectus supplement is the principal offering document for the 

RMBS and must be filed with the U.S. Securities and Exchange Commission (SEC) as part of the registration statement for 

the certificates. Payments to investors on the certificates depend on the payments from the loans in the collateral pool. The 

securitized collateral pool is divided into tranches with different payment priorities. Because repayment of the collateral loans 

is the sole source of payment on the certificates, the credit quality of the loans is critical to an investor’s decision to purchase 

a certificate. Beginning in the mid-2000s, as RMBS became more prevalent, financial institutions began purchasing RMBS as 

investments. 

Following the 2008–2013 banking crisis, the FDIC as receiver investigated RMBS portfolios of failed IDIs. Often, the 

investigations revealed that RMBS portfolios suffered heavy losses because the credit quality of loans collateralizing the RMBS 

was much lower than the credit quality represented in the RMBS offering documents. The FDIC ultimately filed 19 lawsuits on 

behalf of eight receiverships seeking damages based on the IDIs’ purchases of RMBS. The FDIC also inherited one additional 

RMBS lawsuit filed by an IDI before it failed, for a total of 20 RMBS lawsuits. Other financial regulatory agencies also pursued 

RMBS claims. The Federal Housing Finance Agency (FHFA) filed suit against multiple financial institutions that sold RMBS to 

5 
  

Fannie Mae and Freddie Mac. The National Credit Union Administration Board (NCUAB) also filed several lawsuits against 

financial institutions that sold RMBS to credit unions that subsequently failed. 

In the RMBS lawsuits, the FDIC sued, among others, the sellers and underwriters of the RMBS, typically major investment 

banks, claiming that they violated state securities laws governing the registration, issuance, and sale of securities (i.e., “blue 

sky” laws) and Sections 11 and 12 of the federal Securities Act of 1933 by making material misrepresentations and omissions 

in offering documents and misleading investors about the riskiness of the RMBS. The FDIC also filed three lawsuits against 

RMBS trustees for breaches of their contractual duties. Eighteen of the twenty lawsuits against the sellers and underwriters 

have settled. The two remaining lawsuits are being actively litigated before a New York federal district court. The lawsuits 

against the RMBS trustees were dismissed. 

An important issue that was the subject of substantial early litigation in the RMBS cases was whether the FDIC’s claims 

were time-barred by statutes of repose in state and federal securities acts or whether the FDIC’s Extender Statute, 12 U.S.C. 

§ 1821(d)(14), preempted these statutes of repose and gave the FDIC additional time to file suit.5 All five appellate courts 

that have addressed the issue concluded that the FDIC’s Extender Statute and the materially identical extender statutes of 

the FHFA and the NCUAB supersede all other limitations periods, including state and federal statutes of repose, and thereby 

provide these agencies with additional time to file suit.6

b. LIBOR Suppression Claims 

LIBOR is a benchmark interest rate used by financial institutions around the world for setting short-term interest rates. 

Created by the British Bankers’ Association (BBA) in 1986, LIBOR is a series of average interest rates that each member of a 

panel of major banks (panel banks) estimates it would be charged to borrow from other banks and is calculated daily in ten 

currencies for 15 borrowing periods ranging from overnight to 12 months. The BBA and the panel banks promoted LIBOR as a 

transparent benchmark calculated from competitive interest rates in the market for unsecured interbank loans. 

On March 14, 2014, the FDIC as receiver for 38 failed IDIs that held assets tied to USD LIBOR filed a lawsuit styled FDIC 

as Receiver for Amcore Bank, N.A. v. Bank of America Corp. in the United States District Court for the Southern District of New 

York against 17 panel banks, 14 of their affiliates, and 3 BBA entities (LIBOR Lawsuit). A 39th IDI receivership for a bank that 

failed in 2015 was added as a plaintiff in 2018. The FDIC’s complaint alleges that the defendants participated in a conspiracy 

to engage in sustained suppression of USD LIBOR from 2007 to at least mid-2011. By knowingly making artificially low LIBOR 

submissions, which resulted in suppressed USD LIBOR rates, the FDIC contends that the panel banks interfered with the 

competitive process in the markets for short-term wholesale funding, USD interest-rate benchmarks, USD over-the-counter 

interest-rate derivatives, floating-rate retail loans, and floating-rate mortgage-backed securities. In these RMBS cases, the FDIC 

asserts tort claims (fraud, negligent misrepresentation, tortious interference, aiding and abetting, and conspiracy) under state 

law, as well as state and federal antitrust, breach of contract, and unjust enrichment claims. It seeks compensatory damages, 

punitive damages, treble antitrust damages, attorney fees, and prejudgment interest. The LIBOR Lawsuit was consolidated for 

dispositive motions and discovery purposes in a multi-district litigation for LIBOR-based claims in the United States District 

Court for the Southern District of New York and remained pending as of the end of 2021. On March 10, 2017, the FDIC filed 

a lawsuit in the High Court of Justice in London, England, asserting claims by the receiverships for all 39 failed IDIs against 

seven panel banks and entities of the BBA based outside of the United States and that had been dismissed in whole or in part 

5

 Statutes of repose bar claims by plaintifs unless they are brought within a certain period of time afer the defendant’s action, even if the plaintif is not yet 

injured. By contrast, a statute of limitations typically runs from the date of the plaintif’s injury. 

6

 See FDIC as Receiver for Citizens Nat’l Bank and FDIC as Receiver for Strategic Capital Bank v. Credit Suisse First Boston Mortgage Sec., 674 Fed. Appx. 86 (2d 

Cir. 2017), reh’g denied, No. 15-1037 (2d Cir. Mar. 27, 2017), cert. denied, 138 S. Ct. 501 (2017); NCUAB v. RBS Sec., No. 13-56620, 2016 WL 4269897 (9th Cir. Aug. 

15, 2016); FDIC as Receiver for Colonial Bank v. First Horizon Asset Sec., Inc., 821 F.3d 372 (2d Cir. 2016), reh’g denied, No. 14-3648 (2d Cir. July 28, 2016); FDIC as 

Receiver for Guaranty Bank v. RBS Sec. Inc., 798 F.3d 244, 245-46 (5th Cir. 2015), cert. denied, 136 S. Ct. 1492 (2016); NCUAB v. Nomura Home Equity Loans, 727 

F.3d 1246 (10th Cir. 2013), vacated and remanded, No. 13-576 (U.S. June 16, 2014), af’d on reh’g, 764 F.3d 1199 (10th Cir. 2014); FHFA v. UBS Americas, Inc., 712 

F.3d 136 (2d Cir. 2013); and FDIC as Receiver for Cmty. Bank of Nevada v. Rhodes, 336 P.3d 961, 966 (Nev. 2014). 

6 
from the New York lawsuit for lack of personal jurisdiction. The London lawsuit is styled FDIC as Receiver for Amcore Bank, N.A., 

and others v. Barclays Bank PLC, and others. 

U.S. and foreign government agencies also investigated and pursued claims, regulatory actions, and criminal charges 

against the panel banks and others for LIBOR suppression. These agencies include the Commodities Futures Trading 

Commission; the United States Department of Justice (DOJ); the former Financial Services Authority in the United Kingdom 

(UK) and its successor, the UK Financial Conduct Authority; the Switzerland Financial Markets Supervisory Authority; and the 

Netherlands Public Prosecution Service. At year-end 2020, seven panel banks had formally admitted that they had engaged in 

sustained suppression or inter-day manipulation of LIBOR and have paid fines for their admitted conduct. Law enforcement 

agencies in both the United States and the United Kingdom also have criminally prosecuted individuals for participating in 

manipulating LIBOR. 

c. Residential MMF Claims 

Residential MMF claims that the FDIC pursues typically are based on professional malpractice or intentional 

misrepresentations during the mortgage lending process. Defendants include mortgage brokers, appraisers, title insurance 

companies, closing agents, settlement agents, and borrowers (if they personally aided and abetted a fraud at issue). The main 

recovery sources for MMF claims are insurance policies and corporate and personal assets. Residential MMF cases are more 

numerous, but typically smaller, than other types of PL claims. PL investigations arising from the 2008–2013 banking crisis 

produced a large number of MMF claims from the portfolios of Washington Mutual Bank (WaMu), Downey S&LA, IndyMac 

Bank, AmTrust Bank, and BankUnited. 

Some FDIC MMF claims involved breaches of closing protection letters (CPLs) issued by title insurance companies, which 

promise to indemnify the mortgage lender for any negligence or fraud by the closing agent in the closing of mortgage loans. 

CPL claims differ from title insurance claims in that CPLs provide protection for more than defects in title and generally 

transfer to a lender’s successor, such as the FDIC as receiver. Mortgage lenders typically require title insurance at loan closings 

to protect the lender’s interest in the collateral and to protect the lender from fraud or dishonesty by the title insurer’s closing 

agent or from the agent’s failure to follow the lender’s closing instructions. The closing agent is generally responsible for 

insuring that the lender’s closing instructions are followed and that lender funds are disbursed properly, and a CPL insures 

the lender from loss resulting from a closing agent’s failures in these respects. The FDIC pursued seminal CPL cases arising 

from the failure of WaMu, which was one of the nation’s largest residential lenders. 

2. Traditional Claim Areas Pursued During the 2008–2013 Banking Crisis 

a. D&O Liability 

Since the FDIC PL program’s inception almost 35 years ago, a major focus of the program has been D&O claims. D&O 

claims typically are brought against former officers and directors who caused losses by breaching their duties to their IDIs, 

primarily by approving poorly underwritten loans or other loss transactions that violated their IDIs’ loan or investment 

policies. 

If the holding company of a failed IDI files for bankruptcy, a bankruptcy trustee for the holding company may seek to 

pursue claims that legally belong to the FDIC as receiver for the failed IDI. If the claims are derivative (i.e., claims brought by 

shareholders on behalf of the IDI), rather than direct claims owned by the holding company, the FDIC as receiver will move to 

intervene to assert ownership of all such claims against former officers and directors of a failed IDI. 

Directors and officers of an IDI owe duties to their institution, the most important of which are the duties of care and 

of loyalty. These duties require directors and officers to use the degree of care that ordinarily prudent and diligent persons 

would exercise under similar circumstances, and to administer the institution’s affairs and to protect the interests of 

depositors and shareholders with personal honesty and integrity, without advancing their own personal interests or those of 

7 
others over the interests of the institution. D&O liability results from breaches of these duties, whether through negligence, 

gross negligence, or worse conduct. The FDIC and other regulators have published guidelines that describe the duties and 

responsibilities expected of IDI directors and officers.7 FDIC Financial Institution Letter (FIL-87-92), dated December 3, 1992, in 

particular, discusses the factors that the FDIC considers in authorizing and filing civil D&O lawsuits. 

While many states recognize a simple negligence standard to establish D&O liability, some states have adopted insulating 

statutes or have recognized business judgment rule presumptions that may sometimes increase the standard of liability 

to gross negligence or recklessness. The business judgment rule protects directors and officers from liability if business 

decisions are made in good faith, with due care, based on full information, within the scope of their authority, and free from 

personal interests or self-dealing.8 The scope of these protections varies depending on state law. They typically are available 

to directors only and not officers, and they rarely apply to breach of the duty of loyalty. Section 11(k) of the FDI Act, 12 U.S.C. 

§ 1821(k), preempts any state law that provides a standard of liability greater than gross negligence. 

As of year-end 2020, the FDIC had pursued D&O claims in 207 (38.4 percent) of the 539 IDIs that had failed by the end of 

2020. During this same time period, the FDIC had reached settlements or other resolutions in connection with 204 of those 

claims and recovered $1.325 billion. Of the 204 claims concluded by the end of 2020, verdicts were obtained in three D&O 

liability cases. The first case, FDIC as Receiver for IndyMac Bank, F.S.B. v. Van Dellen, CV 10-4915 (C.D. Cal.), was based on 66 

poorly underwritten commercial real estate loans made to real estate developers by the Home Builder Division of IndyMac 

Bank, F.S.B. It resulted in a favorable judgment in favor of the FDIC for $168.8 million in damages after a four-week jury trial. 

The case ultimately settled for $41.975 million, avoiding the need to try claims on remaining loans not submitted to the jury. 

As part of the settlement, the defendants stipulated to the entry of final judgments against them. 

The second and third D&O liability cases to go to trial involved two smaller community banks. These were FDIC as 

Receiver for Buckhead Bank v. Loudermilk, CV 12-4156 (N.D. Ga.), and FDIC as Receiver for Butte Community Bank v. Ching, 

CV 12-at-00939 (E.D. Cal.). The Buckhead case was based on poorly underwritten commercial real estate loans approved 

by the bank’s loan committee and resulted in a judgment for the FDIC of $5 million in damages after an eight-day jury trial. 

In July 2019, the U.S. Court of Appeals for the Eleventh Circuit affirmed the judgment in all respects, holding that the loan 

committee members were jointly and severally liable for all damages. The Butte case was based on the defendants’ decision 

to pay themselves and other holding company shareholders dividends that resulted in the depletion of the bank’s capital and 

resulted in a judgment for the FDIC of $3.52 million after an 11-day jury trial. Both judgments have been fully satisfied. 

The largest D&O liability recovery obtained during the 2008–2013 banking crisis arose from the failure of WaMu. Over 

time, the FDIC entered into multiple settlements with 15 former directors and officers of WaMu for a collective total face value 

of $189.7 million, comprising insurance proceeds, personal asset contributions, and the right to proceeds from bankruptcy 

claims. The FDIC has received more than $169 million from these settlements. 

Since most D&O recoveries are paid by insurance, D&O insurance coverage was a substantial focus of litigation during 

the 2008 to 2013 banking crisis. Most notably, the FDIC challenged carrier claims that certain exclusions, originally intended 

to prevent insured parties from obtaining insurance coverage for lawsuits brought against other insureds under the same 

D&O policy, would preclude coverage for FDIC D&O claims. Carriers argued that the definition of “insured” in these exclusions, 

known as “insured v. insured exclusions,” included the FDIC as receiver for a failed IDI and thus barred coverage for claims 

brought by the FDIC against directors and officers insured under such D&O policies. Before the 2008 to 2013 banking crisis, 

7

 For example, during the 1980s and early 1990s, the Ofice of the Comptroller of the Currency (OCC), the Ofice of Thrif Supervision (OTS), and the FDIC 

developed several guides for directors: The Director’s Book, first published by the OCC in 1987 and updated in 2016; the Director Information Guidelines, 

published by the OTS in 1989; FDIC Financial Institution Letter (FIL-87-92), dated December 3, 1992; and the FDIC Pocket Guide for Directors, updated in 

December 2007. 

8

 Directors and oficers of an IDI violate their duty of loyalty to the institution when they engage in self-dealing, which is conduct that takes advantage of their 

position in a transaction and serves their own interests instead of the interests of the institution. 

8 
approximately two-thirds of courts held that insured v. insured exclusions did not apply to the FDIC as receiver. However, 

leading up to the last crisis, certain insurance carriers added language to the insured v. insured exclusion that they then 

claimed excluded coverage for FDIC D&O claims. In particular, the term “insured” in the exclusion was defined to include not 

only the named insured but also those acting “on behalf of” insureds. This provision was extensively litigated in the 2008 

to 2013 banking crisis, and every court to consider it (except one district court that was later reversed) ruled for the FDIC.9

Certain insurance carriers also sought declarations that, where the definition of “loss” excluded unpaid loans, coverage for 

FDIC claims would be precluded if the alleged wrongful conduct related to the bank’s lending function. These “unrepaid loan” 

provisions were new. In every instance, however, courts rejected this novel argument and found in favor of coverage for FDIC 

claims.10

Personal asset contributions also may be a recovery source for FDIC D&O claims with insufficient D&O insurance or for 

which insurance coverage has been denied. Although the FDIC does not always have information regarding the individual 

source of personal asset recoveries, based on available information, between 2007 and 2020, the FDIC collected more than 

$114 million through personal asset contributions in D&O liability settlements. During that period, the largest personal asset 

recovery for a single IDI, at $20.762 million of a $28.8 million total settlement, was obtained in 2020 in connection with the 

failure of R-G Premier Bank. 

b. Malpractice Claims 

i. Accounting Malpractice 

Audits conducted by independent accountants must be completed according to applicable professional standards, 

including generally accepted auditing standards, generally accepted accounting principles, and other auditing standards, 

such as those issued by the American Institute of Certified Public Accountants. Accountant malpractice claims may arise when 

auditors breach their duties by not adhering to applicable professional standards. A plaintiff also must show that the audit 

failure was material and caused a loss to the IDI. 

The FDIC has obtained large recoveries in connection with its accounting malpractice claims, the largest of which arose 

from a case that the FDIC as receiver for Colonial Bank (Colonial) filed in 2012 against PricewaterhouseCoopers LLP (PwC) 

and Crowe Horwath LLP (Crowe). PwC served as the independent external auditor for Colonial, and Crowe served as internal 

accountant. The FDIC alleged that PwC and Crowe breached their professional duties to Colonial by failing to detect a 

massive fraud perpetrated on Colonial by its largest customer, a mortgage originator named Taylor Bean & Whitaker Mortgage 

Corporation (TBW), resulting in more than $2 billion in losses to Colonial. In December 2017, following a four-week bench trial, 

the United States District Court for the Middle District of Alabama ruled in favor of the FDIC in the liability phase of the lawsuit 

against PwC.11 The court held that PwC committed professional negligence by failing to design its audits to detect fraud and 

by failing to obtain sufficient competent evidence to sign its unqualified audit reports in all of the audit years at issue in the 

case. That ruling is the first court decision since the enactment of the Sarbanes-Oxley Act to hold that auditors have a duty 

to design their audits to detect fraud. In a strongly worded opinion that received substantial coverage in the financial media, 

9

 See St. Paul Mercury Ins. Co. v. FDIC as Receiver for Pacific Coast National Bank, No. 14-56830, 2016 WL 6092400, at *2 (9th Cir. Oct. 19, 2016); St. Paul Mercury 

Ins. Co. v. FDIC as Receiver for Cmty. Bank & Trust, 774 F.3d 702, 705, 710 (11th Cir. 2014); Certain Underwriters at Lloyd’s, London v. FDIC as Receiver for Omni 

Nat’l Bank, Case No. 1:12-cv-01740-TCB, slip op. at 23 (N.D. Ga. Sept. 1, 2016); FDIC as Receiver for Eurobank v. Arrillaga-Torrens, Jr., Case No. 3:13-cv-01328-

PAD-BJM, slip op. at 62 (D.P.R. Aug. 26, 2016); Progressive Cas. Ins. Co. v. FDIC as Receiver for Vantus Bank, 80 F. Supp. 3d 923, 951 (N.D. Iowa 2015); Progressive 

Cas. Ins. Co. v. FDIC as Receiver for Omni Nat’l Bank, 926 F. Supp. 2d 1337, 1340 (N.D. Ga. 2013); W Holding Co. v. Chartis Ins. Co.–P.R., 904 F. Supp. 2d 169, 183 

(D.P.R. 2012). The only insured v. insured exclusion generally found to exclude claims by the FDIC acting as receiver during the 2008–2013 banking crisis were 

those in D&O liability policies underwritten by BancInsure Inc. (now known as Red Rock Insurance Company). BancInsure’s insured v. insured exclusions are 

unique in that they explicitly include “receiver” among the entities for which coverage is excluded. 

10 See St. Paul Mercury Ins. Co. v. FDIC as Receiver for Community Bank & Trust, 774 F.3d 702, 711 (11th Cir. 2014); St. Paul Mercury Ins. Co. v. Miller, 968 F. Supp. 2d 

1236, 1241 (N.D. Ga. 2013); Progressive Cas. Ins. Co. v. FDIC as Receiver for Omni Nat’l Bank, 926 F. Supp. 2d at 1337; Progressive Cas. Ins. Co. v. FDIC as Receiver 

for Michigan Heritage Bank, No. 11-CV-14816, 2012 WL 8437693, at *3 (E.D. Mich. Sept. 24, 2012); see also Progressive Cas. Ins. Co. v. FDIC as Receiver for Silver 

State Bank, No. 2:12-CV-00665, 2012 WL 5418298, at *1-2 (D. Nev. Nov. 2. 2012); Progressive Cas. Ins. Co. v. Delaney, No. 2:11-CV-00678, 2012 WL 3598274, at *2 

(D. Nev. Aug. 20, 2012). 

11 FDIC as Receiver for Colonial Bank v. PricewaterhouseCoopers LLP and Crowe Horwath LLP, No. 2:12-cv-957-BJR, 2017 WL 8890271 (M.D. Ala. Dec. 28, 2017). 

9 
the court criticized PwC’s audits as “unreasonable.” Having found PwC liable to the FDIC, the court held a separate one-week 

bench trial on damages. In July 2018, the court awarded the FDIC $625.3 million on its claims against PwC. In March 2019, the 

FDIC settled its claims against PwC for $335 million. Previously, in April 2018, the FDIC settled its malpractice claims against 

Crowe just before trial for $60 million. 

ii. Attorney Malpractice 

Compared with the S&L crisis, attorney malpractice claims were not a substantial source of recoveries in the 2008–2013 

banking crisis. Of the IDIs that failed during the 2008–2013 banking crisis, WaMu gave rise to the largest single attorney 

malpractice recovery. The law firm of Lathrop & Gage LLP (Lathrop) had failed to preserve certain key objections at a trial it 

handled, leading to a $10.7 million judgment against Lathrop’s client, North American Mortgage Company (North American). 

Before it failed, WaMu acquired North American during the appeal of this judgment and became obligated to pay the 

judgment. Following WaMu’s failure in 2008, the FDIC as receiver for WaMu settled the claim against Lathrop for $7.4 million. 

Causation is one of the issues in any attorney malpractice case and was the key issue in the one attorney malpractice 

case arising from the 2008–2013 banking crisis that the FDIC brought to trial. The case was against the law firm of Icard, 

Merrill, Cullis, Timm, Furen & Ginsburg P.A., and attorney Robert E. Messick (collectively, Icard). In 2013, the FDIC as receiver 

for First Priority Bank (First Priority) obtained a favorable jury verdict against Icard in a lawsuit over a $5.3 million acquisition 

loan that Icard closed for First Priority without delivering a required assignment of an option to purchase an adjoining land 

parcel. The loan subsequently resulted in a $4.5 million loss, which the FDIC asserted would not have occurred but for Icard’s 

malpractice. Although the jury found the defendants liable to the FDIC for $1.1 million in losses, the verdict was overturned 

in a split (2-1) decision by the United States Court of Appeals for the Eleventh Circuit, which held that the FDIC had not 

established causation by proving that First Priority would not have made the loan if Icard had properly performed its duties. 

iii. Appraiser Malpractice 

Appraisers provide a critical function in the loan approval process. Appraiser malpractice claims brought by the FDIC as 

receiver typically arise when appraisers fail to follow professional and industry standards in preparing appraisals of collateral 

property for loans. Examples include failures to inspect collateral property to verify its condition; to confirm issues related to 

the development potential of the property (e.g., the existence of required permits or variances); to identify contemporaneous 

sale prices for appropriate comparables based on size, location, and other features; to properly calculate the value of the 

property (e.g., relying on the as-built value instead of the as-is value before planned improvements); or to review or submit 

complete and accurate paperwork supporting the appraisal. The independence and integrity of an appraiser are necessary 

to ensure the credibility of the appraisals. These may be compromised when an appraiser is providing appraisals for an IDI in 

which there is a close relationship with management or improper reliance on information provided by IDI personnel instead 

of independently verified information gathered according to professional standards. When appraisals are improperly inflated 

and the loan later defaults, the IDI may be unable to recover the full amount of the outstanding loan balance, leaving the IDI 

with a loss because the true value of the collateral property was less than the appraised value. 

Appraiser malpractice recoveries from FDIC claims arising from the 2008–2013 banking crisis total nearly $46 million. 

The recoveries stem primarily from settlements of two large claims based on services provided to WaMu. In these cases, the 

FDIC asserted both negligence and breach of contract claims against two large national real estate appraisal management 

companies.12 The FDIC’s lawsuits against LSI Appraisal LLC (LSI) sought damages for breach of contract in providing 181 

grossly inflated appraisals to WaMu. The FDIC’s lawsuit against CoreLogic Valuation Services LLC (CoreLogic) as successor 

to eAppraiseIT LLC sought damages for breach of contract in providing 108 grossly inflated appraisals to WaMu. The FDIC’s 

12 FDIC as Receiver for WaMu v. LSI Appraisal, LLC (C.D. Cal.) No. 8:11-cv-00706-DOC-AN; FDIC as Receiver for WaMu v. CoreLogic Valuation Serv., LLC (C.D. Cal.) No. 

8:11-cv-00704-DOC-AN. 

10 
complaints alleged that LSI and CoreLogic caused $258.6 million in losses to WaMu. In 2014, the FDIC as receiver for WaMu 

settled these claims and received $30 million from LSI and $12 million from CoreLogic. 

c. Fidelity Bond Claims 

A fidelity bond provides an IDI with insurance to cover losses discovered during the policy period from fraud or 

dishonesty by officers or other employees of the IDI. Fidelity insurers rely on several contractual defenses to defend against 

fidelity bond claims based on language in the underlying bonds. Typical defenses include alleged failures to submit a notice 

of loss or proof of loss within the timeframes provided in the bond, misrepresentations by officers or employees of the IDI 

in the bond application that result in rescission of the bond, or that the perpetrators of the fraud at issue are not covered 

“employees” under the bond. 

The FDIC’s largest single recovery on a fidelity bond claim arising from the 2008–2013 banking crisis was $27.1 million 

from the settlement of a claim against Federal Insurance Company (Chubb) under three fidelity bonds providing coverage for 

Colonial. The FDIC as receiver for Colonial and the bankruptcy trustee for Colonial’s holding company, Colonial Bancgroup 

Inc., jointly litigated against Chubb and reached a $30 million settlement in 2014 subject to bankruptcy court approval. The 

bankruptcy court subsequently ordered $27.1 million to be paid to the FDIC as receiver and $2.9 million to be paid to the 

holding company trustee. The bond claims were based on the dishonest activities of Colonial employees who had conspired 

with the chief executive officer (CEO) of Colonial’s biggest customer, TBW, to fund thousands of fictitious loans resulting in 

losses to Colonial of more than $2 billion. 

Criminal Claims and Recoveries 

The FDIC working with DOJ plays a major role in protecting the safety and soundness of the banking and thrift 

communities by identifying and deterring financial crimes. For failed insured financial institutions, the DRR Investigations 

Department and PLFCS work together and coordinate with other business and legal units in the FDIC to identify and monitor 

criminal prosecutions involving failed banks and thrifts and to obtain and collect restitution and forfeiture orders in favor of 

FDIC receiverships. They also collaborate with law enforcement agencies and other bank regulatory agencies and facilitate 

communication, coordination, and cooperation among federal, state, international, and private sector groups and regulatory 

agencies in pursuit of their common mission to detect and deter bank fraud and other criminal activity. 

Restitution and Forfeiture Orders and Collection. The FDIC does not have authority to prosecute crimes directly. That 

authority lies with DOJ and state and local law enforcement authorities. However, DRR and PLFCS provide substantial 

assistance to DOJ and state authorities in this regard by facilitating the investigation, prosecution, and monetary recovery 

from crimes committed against IDIs that later fail and are placed in FDIC receivership. When a criminal defendant pleads to 

or is found guilty of a crime that caused loss to an IDI, a court may order that the defendant pay restitution and also award 

forfeiture to the FDIC as receiver for the IDI. DRR and PLFCS ensure that FDIC receiverships are properly identified as victims 

in criminal restitution and forfeiture orders, which entitle the receiverships to pro rata distributions of restitution recoveries 

with other victims. They coordinate with prosecutors and probation officers throughout the country in filing Victim Impact 

Statements that quantify and provide proof of the damages that the FDIC receiverships are entitled to recover. When it 

becomes the receiver for a failed IDI, the FDIC also inherits restitution orders awarded to the IDI before it was closed. As of 

year-end 2020, the FDIC had 1,909 remaining active restitution orders with a face value of $4.63 billion (Figure 3). 

Once a restitution or forfeiture order is entered, the process of collecting the order begins, since few criminal 

defendants pay their order before or at the time of sentencing. While restitution may be ordered in either a federal or state 

case, federal cases are the only source of forfeiture awards to the FDIC. DOJ is primarily responsible for collecting federal 

criminal restitution ordered in favor of the FDIC, and PLFCS actively supports DOJ for the purpose of collecting restitution 

and forfeiture owed to the FDIC, including seeking to have its financial crimes attorneys serve as Special Assistant United 

11 
States Attorneys. DRR and PLFCS also help DOJ identify assets available to satisfy federal restitution and forfeiture orders. 

In particular, the FDIC seeks to identify offenders after release from prison, monitors the offender throughout the life of the 

restitution payments, regularly conducts asset and property searches, and identifies fraudulent conveyances. For stateordered restitution, DRR and PLFCS aggressively pursue collection of these orders to the extent permitted by state law. 

Between 2007 and 2020, the FDIC collected a total of $83.1 million in restitution and forfeiture—$65.1 million in restitution and 

$18 million in forfeitures. 

Figure 3 

Outstanding FDIC Restitution Orders and Forfeiture 

Active Orders 

Count 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

Outstanding Orders 687 638 3,379 4,895 5,192 4,860 4,073 3,954 3,831 3,991 4,163 2,346 2,187 1,909 

Source: FDIC Division of Resolutions and Receiverships. 

Responding to Information Requests. When state and federal prosecutors and government agencies investigate and 

prosecute financial crimes, they need documents and witnesses to support their prosecutions. Between July 2012 and the 

end of 2020, the FDIC in its receivership capacity received more than 1,084 requests for information related to criminal matters 

made by DOJ, United States Attorney offices, state prosecutors, the Office of the Comptroller of the Currency (OCC), the SEC, 

the Internal Revenue Service (IRS), the Special Inspector General for the Troubled Asset Relief Program, and the Federal 

Reserve Board (FRB). Criminal defendants also have a right to, and issued numerous subpoenas for, failed IDI records relevant 

to allegations made against them. PLFCS and DRR facilitated the production of millions of pages of documents in criminal 

matters and identified and authorized witnesses to testify at trials. 

Policy Expertise, Working Groups, and Training. PLFCS coordinated FDIC policy and practice in the financial crimes 

program area both domestically and internationally. PLFCS financial crimes attorneys have expertise in a wide range of issues 

related to financial crimes, including fraud recognition and prevention, restitution, forfeiture, cybercrime, money laundering, 

phishing, terrorist financing, domestic and foreign asset tracing, E-Discovery, and computer forensics. They coordinated 

with law enforcement and the financial institution regulatory community in working groups that address these wide-ranging 

and important issues, and also conducted significant training on financial crimes matters for FDIC personnel, DOJ and law 

enforcement agencies, court clerks, and other financial institution regulatory agencies. 

12 
Income Tax Refund Litigation 

Because of a one-time change in federal tax law in 2009, part of the government’s response to the 2008 to 2013 banking 

crisis, the FDIC as receiver engaged in substantial litigation over the ownership of additional income tax refunds that the 

federal government paid as a result of the new law. The Worker, Homeownership, and Business Assistance Act of 2009 

(WHBAA), which became law on November 6, 2009, allowed certain businesses, including banks and their holding companies, 

a one-time irrevocable election to carry back 2008 and 2009 net operating losses to prior-year tax returns for up to five years 

rather than just two years. The WHBAA more than doubled the amount of income tax refunds that otherwise would have been 

paid. As a result of the Act, the total amount of tax refunds paid out as a result of consolidated tax returns involving failed 

banks was $4.4 billion. Through settlements, court decisions, and otherwise, the FDIC as receiver received $3.6 billion of this 

amount, and bank holding companies received $800 million.13

Bank holding companies typically file consolidated corporate income tax returns as the procedural agent for their 

consolidated group of companies. In consolidated tax returns, each member of the consolidated group calculates its income 

and losses as if it were a stand-alone taxpayer. The results are then consolidated in one tax return as if the members were a 

single taxpayer. A principal advantage of filing consolidated tax returns is that losses of one member may offset income of 

another member to reduce the consolidated group’s overall tax liability. 

When the consolidated group owes taxes, the holding company—the “common parent” under IRS regulations—pays the 

taxes to the IRS as agent for the group. When a refund is owed to the group, the IRS generally sends it to the common parent. 

IRS regulations provide that the common parent is the “sole agent” with respect to the consolidated tax return, but that all 

members of the consolidated group are jointly and severally liable for any tax liability.14 The regulations do not explicitly state 

which entity within a consolidated group actually owns the refund. 

In most instances, the consolidated group incurred large net operating losses in 2008 and 2009, which under the WHBAA 

could be carried back and applied against taxes paid during the previous five years. The refunds typically were paid based 

on the subsidiary bank’s income in earlier good years, although many of these banks failed during the crisis from substantial 

losses. Because consolidated tax return regulations do not explicitly state whether the subsidiary bank or its holding company 

owns a tax refund, members of a consolidated group generally entered into a tax allocation agreement specifying procedures 

for allocating tax liabilities and distributing tax refunds among members of the group. Those tax allocation agreements 

typically did not explicitly address ownership of tax refunds distributed among members of a consolidated group and instead 

covered matters such as the requirement to calculate taxes on a separate entity basis, the amount and timing of paying taxes, 

reimbursement for tax losses, and matters related to a member leaving the group. 

The FDIC litigated with bankrupt bank holding companies over the ownership of the substantial tax refunds that the 

WHBAA authorized. This litigation focused on the wording of tax allocation agreements and how they did or did not address 

the ownership of tax refunds paid to the bankrupt holding company as agent for the failed bank whose past income was the 

basis of the refunds. The primary issue courts considered in determining ownership was whether a tax allocation agreement 

acknowledged an agency or trust relationship (as the FDIC argued) or created a debtor-creditor relationship (as the holding 

companies argued). To decide this question, courts applied inconsistent legal standards that resulted in different outcomes. 

If a court determined that the tax refund was paid to the bank holding company as an agent or trustee of the bank, the FDIC 

prevailed. If a court held that the holding company received the refunds as owner and was only indebted to the bank to pay 

the bank an allocable share, the holding company prevailed. 

13 These amounts exclude tax refunds from the Washington Mutual receivership because they were sold to the assuming institution under the purchase and 

assumption agreement applicable to that receivership. 

14 Treas. Reg. § 1.1552-77(a). 

13 
In 1973, the United States Court of Appeals for the Ninth Circuit in Western Dealer Mgmt., Inc. v. England (In re Bob 

Richards Chrysler-Plymouth Corp.), 473 F.2d 262, 265 (9th Cir. 1973), held that a consolidated group’s parent receives refunds 

only as agent and in trust for the member whose earnings generated the refund, unless the parties entered into a “differing 

agreement.” Id. at 265. 

In 1978, the FDIC, the OCC, and the FRB, followed by the Office of Thrift Supervision (OTS) in 1990, separately published 

policy statements addressing the allocation of income taxes by banks and thrifts that are members of a consolidated tax 

group. The policies all recognized the “separate entity” concept requiring that banks receive no less favorable treatment 

because of a consolidated return than they would have received had they filed separate tax returns. 

On November 23, 1998, these same agencies issued an “Interagency Policy Statement on Income Tax Allocation in a 

Holding Company Structure” (IPS).15 The core point of the IPS was that a subsidiary bank should be treated no less favorably 

than if it were a separate taxpayer. It states: 

Regardless of the treatment of an institution’s tax loss for regulatory reporting and supervisory purposes ...an organization’s tax allocation agreement or other corporate policies should not purport 

to characterize refunds attributable to a subsidiary depository institution that the parent receives 

from a taxing authority as the property of the parent. 

The IPS also encourages banks and thrifts and their holding companies to enter into comprehensive tax allocation 

agreements addressing these issues. 

During the 2008 to 2013 banking crisis, courts had different views on the significance of Bob Richards. Some, like the 

Ninth and Third Circuits, concluded that the Bob Richards “differing agreement” requirement is satisfied by the mere existence 

of a tax allocation agreement, which should then be reviewed to determine how the parties intended to allocate tax refunds.16

These cases often held that if the tax allocation agreement provides that the holding company will “reimburse” or “pay” 

refunds to a subsidiary bank and does not contain any express agency language, the tax allocation agreement establishes 

that the parties have agreed that the holding company owns the refund and the bank’s claim to the refund is merely as an 

unsecured creditor of the bankrupt bank or thrift holding company. This was true even if the tax refund was solely attributable 

to the bank’s income and losses and even if the bank had provided the funds to the holding company to pay the taxes. These 

courts placed a heavy burden on the FDIC as receiver to prove an explicit agency relationship between the bank holding 

company and the subsidiary bank and generally held that tax refunds were property of the bank holding company. 

Other courts, particularly the Sixth and Eleventh Circuits, did not address Bob Richards and found tax allocation 

agreements to be ambiguous on the issue of ownership.17 In these cases, the courts applied state law to determine whether 

the parties intended a debtor-creditor relationship or an agency relationship with respect to the receipt of IRS tax refunds. The 

courts in these cases generally held that the tax refunds were property of the subsidiary bank or thrift. 

Ultimately, the U.S. Supreme Court in Rodriquez v. FDIC as Receiver for United Western Bank, 140 S.Ct. 713, ___ U.S. ___ 

(2020), held that the decision in Bob Richards was not a legitimate exercise of federal common lawmaking. In Rodriguez, the 

Supreme Court instructed that moving forward, courts should analyze whether tax allocation agreements create an agency/ 

trust or debtor-creditor relationship purely under applicable state law.18

15 63 Fed. Reg. 64757 (November 23, 1998). 

16 Cantor v. FDIC as Receiver for Downey Savings and Loan Assoc., 2015 WL 307013 (3d Cir. Jan. 26, 2015); FDIC as Receiver for IndyMac Bank FSB v. Siegel, 554 

Fed. Appx. 668 (9th Cir. Apr. 21, 2014). 

17 FDIC as Receiver for AmTrust Bank v. AmFin Fin. Corp., 757 F.3d 530 (2014); FDIC as Receiver for NetBank v. Zucker, 729 F.3d 1344 (2013); Zucker v. FDIC as 

Receiver for BankUnited FSB, 727 F.3d 1100 (3d 2013). 

18 Upon remand to the Tenth Circuit, the Court strictly applied Colorado state law and held that the FDIC was the owner of the disputed tax refunds because 

the tax allocation agreement created an agency relationship. Rodriguez v. FDIC as Receiver for United Western Bank, 959 F.3d 1269, 1277 (10th Cir. 2020). 

14 
In response to the inconsistent court decisions issued before Rodriguez, the banking agencies issued an Addendum to 

the IPS on June 19, 2014, clarifying the IPS and recommending that tax allocation agreements between banks or thrifts and 

their holding companies: 

• expressly acknowledge the existence of an agency relationship, 

• use express language sufficient to maintain an agency relationship, and 

• clarify that holding companies are required to immediately transmit refunds to their subsidiary bank or thrift. 

The Addendum further encourages all consolidated groups to amend their tax allocation agreements to include the following 

(or substantially similar) paragraph: 

The [holding company] is an agent for the [IDI and its subsidiaries] (the “Institution”) with respect 

to all matters related to consolidated tax returns and refund claims, and nothing in this agreement 

shall be construed to alter or modify this agency relationship. If the [holding company] receives 

a tax refund from a taxing authority, these funds are obtained as agent for the Institution. Any tax 

refund attributable to income earned, taxes paid, and losses incurred by the Institution is the property of and owned by the Institution, and shall be held in trust by the [holding company] for the 

benefit of the Institution. The [holding company] shall forward promptly the amounts held in trust 

to the Institution. Nothing in this agreement is intended to be or should be construed to provide 

the [holding company] with an ownership interest in a tax refund that is attributable to income 

earned, taxes paid, and losses incurred by the Institution. The [holding company] hereby agrees 

that this tax allocation agreement does not give it an ownership interest in a tax refund generated 

by the tax attributes of the Institution. 

The Addendum states that tax allocation agreements including this language comply with Sections 23A and 23B of 

the Federal Reserve Act (FRA) and that allocation agreements that do not clearly acknowledge the existence of an agency 

relationship or require the prompt transmittal of tax refunds may subject the parties to supervisory actions under Sections 

23A and 23B of the FRA. Tax refunds retained by a holding company with an allocation agreement that does not clearly 

acknowledge an agency relationship may constitute a loan or extension of credit from its subsidiary bank or thrift, which may 

be subject to the collateralization and other requirements of Section 23A of the FRA. In addition, tax allocation agreements 

that do not require a bank holding company to promptly forward tax refunds due to its subsidiary bank and instead allow 

the bank holding company to hold the tax refunds are inconsistent with Section 23B of the FRA. Section 23B generally 

requires affiliate transactions to be on terms substantially the same, or at least as favorable to the subsidiary institution, as 

comparable transactions involving non-affiliated companies. Failure to comply with these requirements may subject the 

holding company and subsidiary bank or thrift to supervisory action. 

Administrative Enforcement Proceedings 

The FDIC is the primary federal regulator of federally insured state-chartered banks that are not members of the Federal 

Reserve System, commonly referred to as state nonmember banks and state-chartered savings associations (FDIC-supervised 

institutions). As the primary federal regulator, the FDIC has enforcement authority under the FDI Act to address violations 

of law, including consumer protection laws, breaches of fiduciary duty, and unsafe or unsound practices.19 These powers 

became especially important during and after the 2008–2013 banking crisis. 

19 In addition to the FDI Act, certain other statutes provide separate enforcement action authority to the FDIC. For example, the Flood Disaster Protection Act, 

as amended (Flood Act), requires the FDIC to assess civil money penalties for certain pattern or practice violations of the Flood Act. 

15 
Between January 1, 2008, and December 31, 2014, the FDIC completed 3,430 formal administrative enforcement actions 

against open FDIC-supervised insured institutions and their institution-affiliated parties (IAPs), defined at 12 U.S.C. § 1813(u).20

This included 110 formal investigations and 134 notices of charges (notices). Most IAPs are directors, officers, employees or 

shareholders of insured depository institutions.21

The FDIC may initiate informal or formal enforcement actions to correct identified deficiencies, ensure compliance with 

applicable laws and regulations, address harm to consumers, and penalize and deter misconduct. Informal enforcement 

actions represent a supervisory action by the FDIC under which an insured institution agrees to take corrective action.22

Formal enforcement actions include formal orders issued against a bank or IAP either by consent or after litigation. 

Enforcement actions generally arise from bank examinations—whether risk management or consumer compliance— 

along with consumer complaints, suspicious activity reports, or referrals from law enforcement or other agencies. The 3,430 

final formal enforcement actions completed between January 1, 2008, and December 31, 2014, arose from the joint efforts 

of the Legal staff in Washington, DC, and the regional offices and examiners from the FDIC’s Division of Risk Management 

Supervision (RMS) and Division of Depositor and Consumer Protection who worked together to uncover and investigate 

potential misconduct by the banks and their officers, directors, employees, and other IAPs, such as vendors and third-party 

service providers. 

1. Types of Enforcement Actions 

a. Informal Enforcement Actions 

Informal enforcement actions are part of the FDIC’s supervisory authority. These actions are designed to correct 

identified deficiencies and ensure compliance with federal and state banking laws and regulations. Informal actions are not 

publicly disclosed, but they represent a joint effort between the FDIC and supervised institutions to correct certain issues 

before turning to a formal enforcement action. 

The most common informal enforcement actions used by the FDIC are the Board Resolution and the Memorandum of 

Understanding (MOU). A Board Resolution is an agreement by a bank’s board of directors to take certain corrective actions. 

The FDIC is not a party to the resolution, but it does approve and accept the resolution. By contrast, an MOU is an agreement 

between the FDIC and a bank that addresses and corrects identified weaknesses, such as risk management failures or 

problems with the bank’s compliance program. MOUs are typically used when the FDIC has determined that a Board 

Resolution would not adequately correct the bank’s deficiencies. 

b. Formal Enforcement Actions 

Section 8 of the FDI Act provides the FDIC with enforcement authority over FDIC-supervised institutions and their IAPs. 

Generally, enforcement actions must be brought within five years from the date of the misconduct. Section 8(b) of the FDI 

Act permits the FDIC to require banks and IAPs to cease and desist from certain conduct and practices. In addition, Section 

20 The 3,430 figure includes the following actions that were either initiated by a Notice of Charges, adjudicated afer an administrative hearing, or agreed to 

between the FDIC and a Respondent by Stipulation: Consent or Cease and Desist Orders under Section 8(b) of the FDI Act; Restitution under Section 8(b) 

(6) of the FDI Act; Civil Money Penalties under Section 8(i) of the FDI Act or under the Flood Act; Removal or Prohibition under Section 8(e) of the FDI Act; 

Prompt Corrective Action under Section 38 of the FDI Act, Cross-Guarantee Liability under Section 5(e) of the FDI Act, and other types of enforcement actions 

that were based on other statutory authority. This figure also includes Section 10(c) Orders of Investigation. See Enforcement Decisions & Orders website, 

https://orders.fdic.gov/s/ and FDIC Annual Reports, https://www.fdic.gov/about/financial-reports/reports/index.html (reporting 3,430 formal enforcement 

actions between 2008 and 2014). Unlike the professional liability claims described in the preceding section that were pursued in the wake of bank failures, 

the enforcement actions described in this section were largely taken against open banks and their IAPs in an efort to address and correct unsafe or unsound 

practices, breaches of fiduciary duty, and violations of law. As such, diferent review periods have been selected for the sections on professional liability 

matters and administrative enforcement actions. 

21 An IAP can also be a consultant, joint venture partner, or any other person who participates in the afairs of a bank. In addition, any independent contractor, 

including an attorney or accountant, who knowingly or recklessly participates in any violation, breach of fiduciary duty, or unsafe or unsound practice that 

caused or is likely to cause more than a minimal loss to, or a significant adverse efect on, a bank is considered an IAP. See 12 U.S.C. § 1813(u). 

22 FDIC Risk Management Manual of Examination Policies, April 2016, 13.1-2; FDIC Compliance Examination Manual, December 2018, II-9.1. 

16 
8(b) authorizes the FDIC to require banks and IAPs to take affirmative action to rectify unsafe or unsound conditions, correct 

violations of laws and regulations, or pay restitution to harmed parties, including banks or consumers. When an IAP harms 

an institution, the restitution is paid to the institution to compensate for the underlying loss. When a bank or IAP harms 

a consumer, restitution is paid to the consumer to compensate the consumer for the injury or loss or to disgorge unjust 

enrichment. 

Section 8(e) of the FDI Act permits the FDIC to prohibit bank officers, directors, employees, or other IAPs from 

participating in the banking industry for life. The FDIC may seek a prohibition action when an IAP violates a law or regulation, 

engages in an unsafe or unsound practice, or breaches a fiduciary duty to a bank. This misconduct must also result in 

an actual or likely loss to the bank, gain to the IAP, or prejudice to the bank’s depositors, and must also involve personal 

dishonesty or a willful or continuing disregard for the safety or soundness of the bank. 

Section 8(i)(2) of the FDI Act allows the FDIC to seek civil money penalties (CMPs) from a bank or an IAP for three levels, 

or tiers, of misconduct. CMPs are punitive and paid to the United States Treasury. If a bank or IAP violated a law, regulation, 

or written order, the FDIC can seek a first-tier CMP. If a bank or IAP violated a law or regulation, recklessly engaged in an 

unsafe or unsound practice, or breached a fiduciary duty to the bank, and this misconduct was part of a pattern, caused 

more than a minimal loss to the bank, or resulted in pecuniary gain, the FDIC can seek a second-tier CMP. If a bank or IAP 

knowingly commits a violation of law, engages in an unsafe or unsound practice, or breaches a fiduciary duty, and knowingly 

or recklessly causes a substantial loss or pecuniary gain, then the FDIC can seek a third-tier CMP. Just as the level of required 

misconduct increases with each tier, so too does the potential penalty amount, with a tier-one CMP being the lowest and a 

tier-three CMP being the highest. In addition to the general authority provided under Section 8(i)(2) of the FDI Act, the FDIC 

is authorized to seek CMPs from a bank or an IAP under several other statutes for specific violations of laws or regulations, 

including for flood insurance violations.23

In addition to the FDIC’s primary authority over FDIC-supervised institutions, Section 8(t) of the FDI Act empowers the 

FDIC with backup enforcement authority pertaining to all insured depository institutions and IAPs. This power was expanded 

by the Dodd-Frank Act in 2010 to include all depository institution holding companies.24 Under Section 8(t), the FDIC may 

recommend that the appropriate federal banking agency take an enforcement action against an institution or IAP under 

its jurisdiction.25 If the appropriate federal banking agency does not take the recommended enforcement action or provide 

a plan to respond to the FDIC’s concerns with the institution or IAP, the FDIC Board may authorize the FDIC to take the 

recommended action.26

Section 10(c) of the FDI Act authorizes the FDIC to conduct a formal investigation of a bank, its IAPs, or third parties as 

an adjunct to the FDIC’s examination authority. FDIC staff members are permitted to take sworn statements of individuals 

and issue subpoenas for documents to formally investigate potential misconduct by a bank or an IAP. Not all investigations 

into potential misconduct lead to a formal enforcement action. Orders of investigation and any potential respondents are 

confidential and therefore not made public, but the number of investigations is publicly reported each year.27

23 Federal Flood Disaster Protection Act of 1973, Pub.L. No. 93–234, 87 Stat. 975 (1973); Biggert-Waters Flood Insurance Reform Act of 2012 (increased civil 

money penalties for lenders that fail to ensure compliance with flood insurance purchase requirements from $350 to $2,000 per violation and removed the 

limit on annual penalties), Title II, Subtitle A of Pub. L. 112-141, 126 Stat. 405. CMPs assessed for flood insurance violations are paid to the FEMA National 

Flood Mitigation Fund. 

24 See Section 172(B)(b), Dodd-Frank Act. 

25 See Section 8(t)(1); 12 U.S.C. 1818(t)(1). 

26 See Section 8(t)(2); 12 U.S.C. 1818(t)(2). To do so, the FDIC Board must determine that the institution is in an unsafe or unsound condition; the institution 

or IAP is engaging in unsafe or unsound practices, and the recommended enforcement action will prevent the continuation of the practices; or the conduct 

or threatened conduct (including any acts or omissions) poses a risk to the Deposit Insurance Fund or may prejudice the institution’s depositors. This is 

considered a high legal standard. 

27 See 12 C.F.R. § 308.147. 

17 
2. FDIC Enforcement Response to the 2008–2013 Banking Crisis 

a. Actions Taken Against Open FDIC-Supervised Banks and Their IAPs 

i. Formal Enforcement Actions 

Between January 1, 2008, and December 31, 2014, the FDIC completed 3,430 formal enforcement actions against open 

FDIC-supervised banks and their IAPs.28 At the height of the crisis, RMS issued 1,170 Section 8(b) orders against banks—nearly 

every troubled bank under the FDIC’s jurisdiction at the time. The Section 8(b) actions involved a variety of supervisory 

concerns but largely focused on declining commercial real estate loan portfolios and capital deficiencies. The orders required 

the banks to raise capital, develop a contingency plan to address a potential sale or merger, and improve risk-management 

practices. 

The FDIC also issued 647 Section 8(e) prohibition orders, assessed 987 CMPs, and issued 44 restitution orders. The 

prohibition actions were based on individual misconduct that generally involved commercial real estate loan portfolios or 

self-dealing. Most of the CMPs were companion cases to Section 8(b) and 8(e) cases and involved both banks and IAPs. While 

most of these actions were stipulated, some were taken after issuing a notice and going through the administrative hearing 

process. 

ii. Informal Enforcement Actions 

In addition to these formal enforcement actions, the FDIC entered into 2,923 MOUs with banks and 1,224 banks adopted 

board resolutions, for a combined total of 4,147 informal enforcement actions. 

iii. Investigations 

Finally, the FDIC conducted 110 Section 10(c) investigations. Some of these investigations resulted in enforcement 

actions. 

iv. FDIC Open-Bank Formal Enforcement Actions from 2008 to 2014 

Table 3 summarizes the formal open-bank enforcement actions that the FDIC took between 2008 and 2014. 

b. Examples of Open-Bank Enforcement Actions 

In one case, for example, the FDIC issued CMPs against the directors of USA Bank for failing to comply with a depositinsurance approval order. Although these actions were against IAPs of an open bank, the misconduct ultimately contributed 

to the bank’s failure. 

Additionally, certain actions were taken for significant violations of consumer protection laws. For example, in October 

2012, the FDIC and the Consumer Financial Protection Bureau (CFPB) reached a settlement with American Express Centurion 

Bank (American Express) for deceptive debt collection and credit card marketing practices, in violation of Section 5 of the 

Federal Trade Commission Act.29

Jointly with the CFPB, the FDIC determined that American Express violated federal law prohibiting unfair and deceptive 

practices by misrepresenting to consumers that if they entered into an agreement to settle old debt (that was already no 

longer being reported to consumer reporting agencies), the settlement would be reported to consumer reporting agencies, 

which would improve consumer credit scores; and using settlement solicitations that implied that consumers who entered 

into settlement agreements to partially pay debts would have the remaining balance of their debts forgiven, when, in fact, the 

balance remained a debt owed to American Express. 

28 Prompt Corrective Action and Cross-Guarantee Liability are discussed below. 

29 FDIC, “FDIC Announces Settlement With American Express Centurion Bank for Unfair and Deceptive Practices in Debt Collection and Credit Card Marketing,” 

press release PR-114-2012, October 1, 2012, https://www.fdic.gov/news/news/press/2012/pr12114.html. 

18 
 

Table 3 

Open-Bank Formal Enforcement Actions, 2008–2014 

Year 

Total Formal 

Enforcement 

Actions 

Section 8(b) 

Order to 

Cease & Desist 

Section 8(b)(6) 

Order of 

Restitution 

Section 8(e) 

Order of 

Prohibition 

Section 8(i) 

and Flood Act 

Order to Pay 

CMP Section 10(c) 

Order of 

Orders Notices Orders Notices Orders Notices Orders Notices Investigation 

2008 273 93 1 3 0 62 1 100 3 4 

2009 551 302 8 4 0 65 1 160 1 11 

2010 758 357 3 3 0 112 10 215 10 15 

2011 557 186 6 7 0 100 19 195 17 30 

2012 557 114 0 10 0 110 8 168 5 17 

2013 414 70 3 10 1 99 14 80 14 17 

2014 320 48 0 7 1 99 4 69 4 16 

TOTAL 3,430 1,170 21 44 2 647 57 987 54 110 

Source: FDIC. 

Note: The figures under “Total Formal Enforcement Actions” include additional enforcement actions taken under other statutory 

authority. CMP is civil money penalty. 

Under the settlement agreement, American Express agreed to the issuance of Consent Orders, Orders for Restitution, and 

Orders to Pay Civil Money Penalties, which resulted in total restitution from all entities of approximately $85 million to more 

than 250,000 affected consumers, and the imposition of CMPs totaling approximately $27 million. In addition to restitution 

and CMPs, the Consent Order required American Express to correct all violations, provide clearly written disclosures on debt 

collection statements, and stop using deceptive credit card solicitations. 

Another notable case is the settlement with Sallie Mae Bank (Sallie Mae), for Section 5 and Servicemembers Civil Relief 

Act (SCRA) violations, in May 2014.30 The FDIC determined that Sallie Mae violated Section 5 for unfair and deceptive practices 

regarding student loan borrowers by failing to properly disclose its payment allocation practices and how to avoid late fees. 

In addition, service members were negatively affected by Sallie Mae’s practices, with Sallie Mae incorrectly advising service 

members that they must be deployed to receive SCRA benefits, conditioning service member SCRA benefits on requirements 

not required by law, and failing to provide complete SCRA relief to service members. 

The FDIC issued Consent Orders, Orders for Restitution, and Orders to Pay Civil Money Penalties (collectively, FDIC 

Orders). Sallie Mae was required to pay $6.6 million in CMPs, to pay restitution of approximately $30 million to the harmed 

borrowers, and to fund a $60 million settlement fund with the DOJ to provide remediation to service members.31 In addition, 

the FDIC Orders required Sallie Mae to take affirmative steps to ensure that disclosures regarding payment allocation and late 

fee avoidance were clear to consumers and that service members were properly treated under the SCRA. 

c. Prompt Corrective Action 

In addition to its enforcement powers under Section 8 of the FDI Act, the prompt corrective action (PCA) provisions found 

in Section 38 of the FDI Act authorize the FDIC to enact various measures against banks whose capital falls below certain 

thresholds. PCA is carried out to minimize potential losses to the Deposit Insurance Fund (DIF). As an institution’s capital 

30 FDIC, “FDIC Announces Settlement with Sallie Mae for Unfair and Deceptive Practices and Violations of the Servicemembers Civil Relief Act,” press release 

PR-33-2014, May 13, 2014, https://www.fdic.gov/news/news/press/2014/pr14033.html. 

31 DOJ had separately investigated Sallie Mae regarding the treatment of service members and took separate action against Sallie Mae for SCRA violations. 

19 
decreases, it becomes subject to increasingly stringent restrictions. Some of the restrictions apply by operation of law, such 

as restrictions on brokered deposits, capital distributions, and management fees. Others are within the FDIC’s discretion to 

impose through a supervisory directive, such as measures to require recapitalization, the dismissal of directors or senior 

officers, or restrictions on transactions with affiliates. Between 2008 and 2014, the FDIC issued 136 supervisory PCA directives. 

d. Cross-Guarantee Liability 

During the 2008–2013 banking crisis, the FDIC used cross-guarantee liability to reduce the number of bank failures, 

minimize losses to the DIF, and recover substantial sums for the DIF. A cross-guarantee is an arrangement between two 

or more companies that are often related, such as a parent company and its subsidiaries, to provide mutual promises or 

guarantees for each other’s liabilities, fulfillment of promises, or obligations. A creditor of any one member of the group 

becomes the creditor of every other member of the group. Therefore, if one of the companies to the agreement cannot pay 

back its loan, the other companies will step in to make the repayment. 

Section 5(e) of the FDI Act establishes cross-guarantee liability for “commonly controlled insured depository institutions” 

for losses incurred or anticipated by the FDIC in connection with the default of a commonly controlled insured depository 

institution. Its purpose is to make sure every insured depository institution owned by the same company is financially 

responsible for the failure or resolution costs of any affiliated insured institution.32 The provision lessened the cost to the 

DIF. Generally, the amount of the cross-guarantee liability is equal to the estimated loss to the DIF for the resolution of the 

affiliated institution(s) in default. The FDIC will assess cross-guarantee liability only when the assessment is determined to 

result in the lowest cost to the DIF. The FDIC Board must approve the assessment of cross-guarantee liability. 

The intent of Section 5(e) of the FDI Act is to induce bank holding companies to support each bank subsidiary. The FDIC 

was proactive in encouraging companies to identify strategies to prevent bank failures and the associated cross-guarantee 

liability. The FDIC was also effective in using cross-guarantee authority to implement supervisory and resolution strategies 

that minimized the risk of loss to the DIF. In particular, the FDIC used cross-guarantee liability related to the failure of 

Commerce Bank of Southwest Florida to wind down the holdings of Capitol Bancorp and move several troubled institutions 

out from control of the company at minimal loss to the DIF. During the crisis, the FDIC issued 33 orders of cross-guarantee 

liability. 

e. Actions Taken Against Failed FDIC Banks and Their IAPs

 FDIC staff reviewed material related to more than 500 banks that failed between January 1, 2008, and December 31, 

2014, to determine if enforcement actions were appropriate. In addition to FDIC-supervised institutions, these reviews 

included banks that were supervised by the OCC, OTS, and FRB. In total, staff reviewed every bank failure from the 2008–2013 

banking crisis. 

For each FDIC-supervised bank, staff performed a comprehensive red-flag review, which included analyzing materials 

from the FDIC Office of Inspector General (OIG), DRR, RMS, and the PLFCS. In 2014, the FDIC OIG co-published a report that 

analyzed the federal banking agency enforcement actions against former IAPs of failed banks. The report included Table 4. 

The FDIC’s supervisory oversight efforts ultimately led to enforcement actions involving several failed institutions, 

including two backup authority actions described below. These efforts held institutions and IAPs responsible for the harm 

they caused to consumers, the institutions, and the DIF. 

For example, in 2011, the FDIC filed a notice against the former CEO and a former director of the failed First Bank of 

Beverly Hills. The FDIC alleged that the former president recklessly expanded the bank’s acquisition, construction, and 

development lending portfolio, which contributed to the bank’s failure. The FDIC also alleged that the former director failed 

32 FDIC, “FDIC Cross Guaranty Provision,” press release, October 30, 2009, https://www.fdic.gov/news/news/press/2009/pr09195b.html. 

20 
to recuse himself from matters in which he had a conflict of interest. Before the hearing, the former director stipulated to a 

prohibition action and $1,000 CMP. After the hearing, the FDIC Board issued a prohibition order and $85,000 CMP against the 

former CEO. 

Table 4 

Enforcement Actions Against IAPs Pertaining to 465 Failed Institutions 

Sanction Regulator 

EA Activity Totals: 

 All Regulators by EA Type 

IAPs (adjusted for duplication) 

Associated 

Institutions 

Removal/ 

Prohibition 

Order 

FDIC 86a 53a 128 EAs issued to IAPs 

FRB 4 2 associated with 75 institutions. 

OCC 19b 14b 

OTSd 19 7 

Civil Money 

Penalty 

FDIC 63 for $4.1 million 26 120 EAs issued to IAPs 

FRB 0 0 associated with 42 institutions. 

OCC 28 for $1.69 millionb 12b 

OTSd 29 for $195,500 5 

Administrative 

Restitution 

FDIC 5 for $284,000 2 8 EAs issued to IAPs associated 

FRB 0 0 with 5 institutions. 

OCC 3 for $728,000 3 

OTSd 0 0 

Personal 

Cease and 

Desist Order 

Against an IAP 

FDIC 0 0 19 EAs issued to IAPs associated 

FRB 0 0 with 6 institutions. 

OCC 15 5 

OTSd 4 1 

Totals 

(adjusted for 

duplication) 

All Regulators There were a total of 275 EAs issued against 218 IAPs 

associated with 87 institutions. 

Sources: Generated by the FDIC Office of Inspector General (OIG) based on information from the FDIC, Board of Governors of the Federal 

Reserve System (FRB), and Office of the Comptroller of the Currency (OCC) management officials and the agencies’ public web sites. 

Note: The data in the table are as of September 30, 2013. This table appears as Table 2 on page 15 of “Enforcement Actions and 

Professional Liability Claims Against Institution-Affiliated Parties and Individuals Associated With Failed Institutions,” July 2014, 

https://oig.federalreserve.gov/reports/board-actions-claims-failed-institutions-jul2014.pdf. OTS is Office of Thrift Supervision, EA is 

enforcement actions, and IAPs are institution-affiliated parties. 

a

 Includes removal/prohibition orders issued by the FDIC to five former officers and directors of two institutions formerly supervised by 

the OTS. In issuing these orders, the FDIC exercised its back-up enforcement authority. 

b Includes one removal/prohibition order and one Civil Money Penalty issued by the OCC to an institution formerly supervised by the OTS. 

c

 We were unable to locate information pertaining to any administrative restitution orders issued by the OTS. 

d

 OTS activity from January 1, 2008 through July 21, 2011, when the OTS was abolished. 

The FDIC also exercised its backup authority on two occasions involving failed federally chartered thrifts for which the 

OCC, as successor to the OTS, was the primary federal regulator. In May 2012, the FDIC used its backup authority to issue 

Section 8(e) prohibition orders against four former officers and directors of Downey Savings and Loan Association (Downey), 

21 
a failed thrift that the FDIC took over as receiver in 2008. The respondents failed to adequately manage Downey’s Option 

Adjustable-Rate Mortgage (ARM) Program, a non-traditional loan program containing a variety of unacceptable risks, including 

a negative amortization option that, at its peak, was used by more than 95 percent of Option ARM borrowers, which put 

consumers at significant risk; origination by independent mortgage brokers; insufficient documentation or verification of 

borrower income or assets; and deficient underwriting.33 These actions were part of a global settlement with PLFCS that 

included payments by the respondents to the FDIC as receiver.34

Later in 2012, the FDIC used its backup authority again to issue a Section 8(e) prohibition order against Michael Perry, 

the former CEO and chairman of the board of IndyMac Bank, FSB (IndyMac), another failed thrift, and the fourth largest bank 

failure in U.S. history.35 Perry caused IndyMac to continue to originate and purchase Alt-A loans in the face of known risks 

without performing independent underwriting or establishing adequate internal controls.36 Like Downey, this action was part 

of a global settlement with PLFCS that included a $1 million payment by Perry to the FDIC as receiver. 

Conclusion 

As the nation’s financial system continues to innovate and grow in complexity, the FDIC has adapted to continually fulfill 

its mission to safeguard the health and stability of the banking system. The FDIC utilized judicial claims and administrative 

actions to meet this challenge during the 2008–2013 banking crisis. As receiver, the FDIC recovered on PL claims, not only 

through the use of legal tools and strategies successfully used in the prior crisis, but also by pursuing new claims developed 

to address losses caused by novel financial practices and products. A one-time change in tax law in 2009 provided the FDIC 

as receiver with a basis to pursue litigation to recover income tax refunds owed to failed banks. Continuing efforts to collect 

restitution and forfeiture orders resulted in recoveries that advanced the goal of holding wrongdoers accountable for losses 

caused to failed banks. And the FDIC in its corporate capacity pursued administrative enforcement claims involving failed 

banks to a greater extent than during the S&L crisis and used legislative tools enacted during the 2008–2013 banking crisis 

more extensively to make it easier to hold financial institutions accountable. Through these efforts, the FDIC demonstrated its 

ongoing ability to build on its experience in resolution, enforcement, and recovery work to address new developments in the 

banking system. 

33 Amortization means paying of a loan with regular payments so that the principal balance that a borrower owes reduces with each payment. Negative 

amortization means that, even when a borrower makes a payment toward his or her loan, the amount the borrower owes will still increase because the 

payment is not enough to cover the interest. 

34 Settlement and Release Agreement, Downey Savings and Loans, May 31, 2012, https://www.fdic.gov/foia/plsa/10023-downeysavingsandloanmcalister-2012.pdf. 

35 The collapse of IndyMac is considered one of the early events that ushered in the 2008–2013 banking crisis. The FDIC insurance fund paid $10.7 billion 

following the IndyMac collapse. See FDIC, “FDIC Closes Sale of Indymac Federal Bank, Pasadena, California,” press release PR-42-2009, March 19, 2009, 

https://www.fdic.gov/news/news/press/2009/pr09042.html. 

36 Alt-A loans are those made under expanded underwriting guidelines to borrowers with marginal to very good credit. Alt-A loans are riskier than prime loans 

because of the underwriting standards of the loans, not necessarily the credit quality of the borrowers. 

22