expanded the government's authority so that it could both regulate financial institutions in the future and investigate the past practices of financial institutions and their affiliated services that may have caused the financial institutions to fail.
In order to properly investigate bank failures, OTS must have the authority to subpoena information relating to activities that occurred before FIRREA's enactment. To hold otherwise, and follow Ernst & Young's retroactivity argument to its logical end, produces an absurd result; that OTS cannot subpoena information relating to the conduct that it was in part created to investigate.
There is another explanation for the holding that OTS's subpoena is not an impermissible retroactive application of FIRREA. The primary reason that the law does not favor retroactivity is to prevent Congress from altering substantive rights retroactively. See e.g. Bennett v. New Jersey, 470 U.S. 632, 639, 84 L. Ed. 2d 572, 105 S. Ct. 1555 (1985); United States v. Security Industrial Bank, 459 U.S. 70, 79, 74 L. Ed. 2d 235, 103 S. Ct. 407 (1982). Here, there is no such threat because in giving OTS the power to subpoena accountants Congress did not alter Ernst & Young's substantive rights.
As authority for its claim that FIRREA does not apply retroactively, Ernst & Young points to two "statutory" provisions. Ernst & Young cites 12 U.S.C. 1786 (note) and 12 U.S.C. § 93 (note). These provisions are not persuasive for two reasons. First, they are not substantive portions of the statute. Rather they appear in the "Historical and Statutory Notes" sections that follow the substantive portions of sections 1786 and 93. The Historical and Statutory Notes sections provide readers of the United States Code Annotated with information such as cites to legislative history, references to other statutes, and effective and termination dates of the statute's amendments.
More importantly, these note sections do not address the issue of whether OTS may subpoena information that existed before the enactment of FIRREA. The note that Ernst & Young refers to following Section 1786 appears five pages after the substantive portion of that section reads:
1989 Act. Section 903(e) of Pub.L. 101-73 provided that: "The amendments made by this section [amending subsec. 1818(g)(1) to (6) of this section and section 1818(e)(1) to (6), (f) and (g)(1)] shall apply with respect to violations committed and activities engaged in after the date of the enactment of this Act [August 9, 1989]."
None of the sections referred to in this note deal with OTS's authority to subpoena accountants or institution-affiliated parties. Subsection (g) deals with the suspension or removal of an institution-affiliated party charged with a felony, subsection (e) goes to a banking agency's ability to remove an institution-affiliated party and prohibit their further participation in the conduct or affairs of any insured depository institution, and subsection (f) goes to a suspended or prohibited institution-affiliated party's right to apply to the proper United States district court for a stay of such suspension and/or prohibition pending the completion of the administrative proceeding.
The note referred to by Ernst & Young which follows section 93 states:
1978 Act. Section 109 of Pub.L. 95-630 provided that: "Any amendment by this title which provides for the imposition of civil penalties [enacting sections 504 and 505 of this title and amending sections 93, 1464, 1730, 1730a, 786, 1818, 1828 and 1847 of this title] shall apply only to violations occurring after the date of its enactment [November 10, 1978].
It is apparent that this note goes to the government's authority to impose civil penalties and not to the question of OTS's power to subpoena pre-FIRREA information from Ernst & Young.
For the reasons stated above, the court shall enforce OTS's subpoena. A separate order shall issue this date.
Royce C. Lamberth
United States District Judge
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 786 F. Supp. 46.
DATE: MARCH 3, 1992
ORDER - March 3, 1992, Filed
This matter first came before the court on January 28, 1992, for a hearing on petitioner's petition for summary enforcement of an administrative subpoena duces tecum served upon Ernst & Young. Upon consideration of the petition, all other papers in support thereof and in opposition thereto, the arguments of counsel and for the reasons stated in the court's memorandum opinion of this date, it is hereby ORDERED that
1. The petition for summary enforcement of the administrative subpoena is GRANTED.
2. The parties shall seek to agree to conditions regarding the scope of this subpoena and shall, within 10 days of this date, submit a proposed stipulated order setting the parameters for the enforcement of this subpoena. If the parties cannot reach such an agreement, each party shall instead file, within 10 days of this date, a supplemental memorandum setting forth its proposed order, with its proposed conditions regarding the scope and implementation of the subpoena.
Royce C. Lamberth
United States District Judge
DATE: MAR 3 1992