Anti-Fraud Bill Clears Judiciary Committee
WASHINGTON (Thursday,
March 5, 2009) – The Senate Judiciary Committee Thursday voted to report
the Fraud Enforcement and Recovery Act (FERA) to the full Senate for
consideration. The legislation would increase tools to help
prosecutors combat fraud.
The bill was
introduced by Committee Chairman Patrick Leahy (D-Vt.) and Committee
member Chuck Grassley (R-Iowa) on February 5. Freshman Senator and
Committee member Edward Kaufman (D-Del.) is an original cosponsor of the
legislation. Senators Chuck Schumer (D-N.Y.) and Amy Klobuchar
(D-Minn.) have also cosponsored the legislation.
The Fraud Enforcement
and Recovery Act will authorize funding and amend federal law to give
law enforcement enhanced tools for fighting fraud. More than
60,000 cases of mortgage fraud were reported in 2008, nearly 10 times as
many as in 2002. The bill authorizes funding to increase the
number of agents from the Federal Bureau of Investigation (FBI) working
on the mortgage fraud task force, increases funding to the U.S. Secret
Service to combat financial crimes, as well as funding to hire fraud
prosecutors for the Department of Justice and FBI.
Leahy said, “There
should be strong bipartisan support for this bill. The Fraud
Enforcement and Recovery Act will correct this serious problem by
strengthening the federal government’s capacity to investigate and
prosecute the kinds of financial frauds that have so severely undermined
our economy and hurt so many hard working people in this country.”
Grassley said,
“Today’s action by the Judiciary Committee is good news for
innocent victims that fell prey to shady
practices by unscrupulous individuals looking to line their own pockets.
We’re sending a message by revising our laws to ensure criminals are
brought to justice, law enforcement has
the tools to uncover these fraudulent schemes, and bad actors are taken
off the streets. We’re also ensuring
that the False Claims Act, which has recovered nearly $22 billion to the
federal treasury and remains the number one tool to recover Government
funds lost to fraud and abuse, applies to any false or fraudulent
claim.”
Kaufman said,
“Prosecuting bad people won't put an end to all bad behavior, but it
will make those people in the board rooms, at the trading desks, and in
the mortgage industry think twice before they look the other way.
When people rob banks, they know they’ll go to jail. When bankers rob
people, they should know they’ll go to jail, too.”
The Fraud Enforcement
and Recovery Act will:
-
Amend the definition
of “financial institution” to extend federal fraud laws to mortgage
lending business not directly regulated or insured by the Federal
government
-
Amend the major fraud
statute to protect funds expended under the Troubled Asset Relief
Program (TARP) and the economic stimulus package
-
Authorize funding to
hire fraud prosecutors and investigators at the Department of
Justice, the FBI, and other law enforcement agencies, and authorize
funding for U.S. Attorneys’ Offices to help staff FBI mortgage fraud
task forces.
-
Amend the federal
securities statute to cover fraud schemes involving commodities
futures and options
-
Amend the criminal
money laundering statute to make clear that the proceeds of
specified unlawful activity include the gross receipts of the
illegal activity, and not just the profits of the activity
-
Improve the False
Claims Act to clarify that the Act was intended to extend to any
false or fraudulent claim for government money or property, whether
or not the claim is presented to a government official or employee,
whether or not the government has physical custody of the money, and
whether or not the defendant specifically intended to defraud the
government.
Leahy and Grassley
worked closely with Schumer, Klobuchar, and Kaufman to improve the
legislation. Schumer introduced a complementary bill calling for
additional resources for FBI agents, Assistant U.S. Attorneys, and staff
at the Securities and Exchange Commission.
On February 11, Leahy
chaired a Judiciary Committee hearing to examine how to fight
financial fraud during a struggling economy.
Leahy’s statement for
the record follows.
# # # # #
Statement Of Senator Patrick Leahy (D-Vt.),
Chairman, Senate Judiciary Committee,
On S. 386, The Fraud Enforcement and Recovery Act Of 2009
Executive Business Meeting
March 5, 2009
Just last week, we
learned of the latest scandals in the financial industry, as the leading
money managers of WG Trading Co. and Westridge Capital, investment firms
in Connecticut, were charged with a $650 million dollar fraud scheme,
which may have been ongoing for more than a decade. According to
the charges, these men stole hundreds of millions of dollars invested by
colleges and pension funds, and just used it for their own lavish
lifestyles.
Sadly, this is just
the latest in a series of extraordinarily brash frauds, like the now
infamous $50 billion dollar Madoff “Ponzi” scheme, that have gone
undetected for years, exposing just how important it is for us to
rebuild and reform our fraud enforcement in this country.
The Fraud Enforcement
and Recovery Act of 2009 will correct this serious problem by
strengthening the Federal Government’s capacity to investigate and
prosecute the kinds of financial frauds that have so severely undermined
our economy and hurt so many hard working people in this country.
It would also provide the resources and legal tools needed to police and
deter fraud in connection with the massive bailout and recovery packages
now being implemented.
As we heard three
weeks ago at this Committee’s hearing on fraud enforcement, we need to
respond now the way we did following the Savings and Loan Crisis nearly
two decades ago by hiring more agents, analysts, and prosecutors and
allocating resources to catch those who have taken advantage of these
difficult times to profit from fraud.
I want to recognize
Senator Grassley, who joined me to introduce this bill and has continued
to work with me to improve this legislation even after its introduction.
Senator Grassley and I have also worked closely with Senator Schumer to
improve this bill. With his input, we have agreed to authorize
more funds for the FBI and the U.S. Secret Service in this complete
substitute. I also thank two of our newest Members for their
engagement on this issue. Senator Kaufman has been active and committed
from day one, and Senator Klobuchar is also a cosponsor of the bill.
Today, Senator
Grassley and I, together with Senator Schumer, Senator Klobuchar and
Senator Kaufman, are offering a complete substitute in Committee to make
several improvements to the bill, as well as to address several
technical corrections and clarifications offered by the Justice
Department. I want to thank Senator Schumer for his contributions,
as well as Senator Shelby, who has also been a leader on efforts to
combat fraud and has worked closely with Senator Schumer and with me.
I look forward to working with both of them to move this important
legislation, and other key anti-fraud initiatives, forward.
There should be
strong bipartisan support for this bill. The Justice Department is
supportive of this bill, as are the FBI, the Postal Inspection Service,
the HUD Inspector General, and the Secret Service. I hope all
Senators can join us to adopt this substitute amendment and report this
bill to the Senate without delay.
# # # # #