New Anti-Financial Fraud Legislation Rolled Out

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and Ranking Member Chuck Grassley (R-Iowa) have introduced legislation to bolster law enforcement’s ability to investigate and prosecute fraud.

The Fighting Fraud to Protect Taxpayers Act will enhance existing efforts to investigate fraud, including the scourge of mortgage, foreclosure, financial and health care fraud that has victimized thousands of unsuspecting Americans.  The legislation will fill key statutory gaps to account for modern types of fraud, strengthening computer fraud and identity theft.

The bill also gives the Secret Service the needed authority to more effectively investigate fraud.  The Fighting Fraud to Protect Taxpayers Act also increases accountability by requiring the Justice Department to better manage and account for key spending.

“Combating fraud is a vital issue on which Senator Grassley and I have a long track record of working together, and with great success,” said Leahy.  “In these trying economic times, cracking down on the fraud which has harmed so many hardworking Americans is more important than ever.  Americans are worried about their budgets at home.  We need to protect their investment in their government.  Fighting fraud and protecting taxpayer dollars are issues Democrats and Republicans have worked together to address in the past, and in these difficult economic times, we need to continue in that spirit of bipartisanship.”

“Fighting fraud and protecting taxpayer dollars transcends politics and Senator Leahy and I have worked together on this matter for years. One of the most important parts of this new legislation is the transparency and accountability it brings to the Justice Department. Without transparency and accountability the fight to combat fraud often falls short.  To ensure that the funds and manpower are being used most effectively, and False Claims Act lawsuits aren’t being settled for pennies on the dollar, the transparency provisions included in this bill are an important way to hold the department accountable for its actions,” Grassley said.

The Fighting Fraud to Protect Taxpayers Act will direct a small portion of funds collected by the government in fines and penalties to investigating, prosecuting, and litigating fraud cases.  In the last fiscal year alone, the Department of Justice recovered well over $6 billion through fines and penalties.  The Leahy-Grassley legislation calls for approximately $15 million a year to be reinvested in anti-fraud efforts.  After the terrorist attacks of September 11, 2001, some law enforcement resources to investigate and prosecute fraud were redirected to anti-terrorism efforts.  The Fighting Fraud to Protect Taxpayers Act will help restore some of these resources.

In 2009, Leahy and Grassley authored the Fraud Enforcement and Recovery Act, which strengthened tools and increased resources available to federal prosecutors to find, prosecute and jail those who commit financial fraud. The bill was among the first signed into law by President Obama in 2009.

This bill was considered in committee which has recommended it be considered by the Senate as a whole.

The Office of Sen. Leahy issued the following background information about the proposed legislation:

Sec. 1 – Short Title
This section designates the title of the bill as the “Fighting Fraud to Protect Taxpayers Act.”

Sec. 2 – Department of Justice Working Capital Fund Reforms to Support Fraud Enforcement
Currently, the Department of Justice is authorized to keep in its Working Capital Fund up to 3 percent of the money it collects pursuant to its civil debt collection litigation activities. This section increases that amount to 3.5 percent and directs that the additional .5 percent must be spent on the investigation and prosecution of fraud. This should result in approximately $15 million additional dollars spent on fraud enforcement each year. The section also increases accountability by capping the amount of the 3.5 percent collected each year that the Justice Department can carry over to spend in subsequent years and requiring the Justice Department to report to Congress on how the Working Capital Fund operates each year.

Sec. 3 – Reimbursement of Costs Awarded if False Claims Act Prosecutions
Civil False Claims Act recoveries are deposited in the General Fund of the Treasury after relators are paid, victim agencies are refunded for their loss and 3 percent is deducted for the Department of Justice’s Working Capital Fund.  This section authorizes an additional deduction to allow the Department of Justice or any other investigating agency to recoup its investigation and prosecution costs related to the False Claims Act matter being resolved.

Sec. 4– Interlocutory Appeals of Suppression or Exclusion of Evidence
This section amends 18 U.S.C. § 3731 to expressly permit Assistant Attorneys General, the Deputy Attorney General, and the Attorney General to certify interlocutory appeals from district court orders suppressing or excluding evidence.  As it is currently written, section 3731 requires a certification by the Unites States Attorney, and at least one appellate court has held that the language does not permit certification by others.  This creates a vacuum in cases that are handled by Department of Justice components other than the United States Attorneys’ Offices, including the litigating units that handle fraud cases.

Sec. 5 – Extension of the International Money Laundering Statute to Tax Evasion Crimes
This section extends the money laundering statute to cover tax evasion crimes.  Doing so will allow criminals who hide money overseas to be charged with money laundering, which can result in increased sentences, which in turn acts as a deterrent to fraud crimes.

Sec. 6 - Strengthening the Prohibition Against Trafficking in Passwords
Currently, it is criminal to knowingly traffic in passwords that can be used to access computers without authorization.  The current prohibition applies, however, only where the trafficking itself affects interstate or foreign commerce, or where the passwords could access a government computer.  This section amends 18 U.S.C. 1030(a)(6) to criminalize trafficking in passwords that could access any protected computer as defined by 1030(e)(2) (computers for the use of a financial institution or the government, or which are used in or affecting interstate or foreign commerce or communication).

Sec. 7 – Clarifying Venue for Federal Mail Fraud Offenses
This section amends the general venue statute, 18 U.S.C § 3237, to clarify that, in the context of mail fraud schemes, venue exists in any district in which any act in furtherance of the offense is committed.  This fix permits venue in the district where the bulk of the fraudulent conduct occurs, regardless of where a letter is mailed.

Sec. 8 – Expansion of Authority of the Secret Service
The U.S. Secret Service is one of the only federal law enforcement agencies that lacks the permanent authority to use either appropriated funds or proceeds received from criminal investigations for some activities to advance undercover operations.  This section grants the Secret Service the same permanent authority to conduct undercover operations that is given to other law enforcement entities.

Sec. 9 – False Claims Act Settlements
This Section requires the Attorney General to submit an annual report to Congress that describes in detail each settlement the Justice Department enters into that relates to an alleged violation of the False Claims Act.

Sec. 10 – Amending the Title of Aggravated Identity Theft
This section amends the title of the identity theft statute, changing it from “Aggravated Identity Theft” to “Aggravated Identity Theft and Fraud” to better reflect the nature of the conduct charged under the provision.

Sec. 11 - Expanding Identity Theft to Include Corporate Identity Theft
Currently, the regular identity theft offense codified at 18 U.S.C. § 1028(a)(7) does not cover the unlawful use of a corporation’s name.  This is problematic because criminals routinely engage in the unauthorized use of legitimate companies’ names and logos. This section amends the identity theft statute to cover the unlawful use of legitimate corporate names and logos.

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