Feds reportedly making novel use of civil bank fraud law to pursue new Volkswagen probe
Already facing a multibillion-dollar Clean Air Act suit over admitted cheating on vehicle emission test software, Volkswagen AG may soon have to worry about potential liability under a civil banking law.
In a novel application of the Financial Institutions Reform, Recovery and Enforcement Act, the Department of Justice issued a subpoena under the statute against the automaker, the Wall Street Journal (sub. req.) reports, relying on unidentified sources.
Used by the Obama administration to win record settlements from banks after the 2008 financial crisis, Firrea is now being employed for what may be the first time in a case of claimed corporate wrongdoing that is not simply financial, the newspaper says.
Employing Firrea as a tool in such a probe “is pushing the legal theory to its outermost limits, against a defendant that is not particularly sympathetic,’’ said law professor John Coffee of Columbia University.
It also appears the feds may also be looking at whether Volkswagen should be legally and financially responsible for car-buyers who, before 2011, received $1,300 tax credits when they bought the Volkswagens that emitted more pollutants than they were led to believe.
