DoJ Presses for More Tools to Fight Contract Fraud in Wake of Recession, Stimulus
February 11, 2009
The Obama Administration’s push for quick returns on the economic stimulus may have an adverse effect: more fraud.
The Department of Justice (DoJ) expects an uptick in fraud prosecutions in the wake of the economic recession, successive bailouts, and stimulus spending – especially by those in the finance and health care industries, and contractors receiving economic stimulus funds. The FBI has already reported a 100% increase in the number of fraud investigations opened since 2005.
DoJ has called for more tools to aid in the prosecution of contract fraud. “The financial crisis demands an aggressive and comprehensive law enforcement response, including vigorous fraud investigations…” said Rita Glavin, Acting Assistant Attorney General – Criminal Division, before the Senate Judiciary Committee on February 11, 2009. Her entire statement is available here.
Glavin testified in support of the Fraud Enforcement and Recovery Act of 2009 (FERA), sponsored by Senators Patrick Leahy (D-Vt.) and Chuck Grassley (R-Iowa), which proposes significant changes to federal criminal law including amending the False Claims Act (see February 5 post ' Congress Amending the False Claims Act' for more information). Some of the highlights of the FERA legislation include:
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Expanding the definition of “financial institution” to include mortgage lending businesses and any person or entity that makes in whole or in part a federally-related mortgage loan;
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Expanding the prohibition on making false statements to financial institutions to include mortgage lending businesses;
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Amending the money laundering statute to clarify that the proceeds of specified unlawful activity include the gross receipts of the illegal activity, and not just the profits of the activity;
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Amending the major fraud statute to explicitly cover transactions falling under the Troubled Asset Relief Program (TARP); and
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Amending the federal securities statute to cover fraud schemes involving commodities futures and options.