04.22.09

Broad Support For Fraud Enforcement Legislation

WASHINGTON (Wednesday, April 22, 2009) – Senator Patrick Leahy (D-Vt.) Wednesday urged the Senate to pass the bipartisan Fraud Enforcement and Recovery Act (FERA) without delay, citing broad support from law enforcement, the White House, and the Department of Justice.

Leahy introduced FERA with Senators Chuck Grassley (R-Iowa) and Ted Kaufman (D-Del.) on February 5.  The Judiciary Committee, which Leahy chairs and of which Grassley and Kaufman are members, overwhelmingly voted to report the legislation on March 5.

“The Justice Department, the FBI, the Secret Service and the Special Inspector General for the TARP, law enforcement officers and good government advocates support the bill,” said Leahy.  “The official Statement of Administration Policy makes clear the Obama administration’s strong support for this fraud enforcement bill.  Investing resources in detecting and deterring fraud yields dividends for the American people.  That is what this bill will do.  We should pass it without further delay.”

The Fraud Enforcement and Recovery Act would reinvest funds to fight white collar crime, including financial fraud.  At an oversight hearing on March 25, Federal Bureau of Investigation Director Robert Mueller testified that the FBI could use the additional resources included in the Fraud Enforcement and Recovery Act.  On April 20, the Obama administration released a Statement of Administration Policy indicating that it “strongly supports enactment” of the anti-fraud legislation.  The bill has also received support from the Secret Service, the Postal Inspection Service, the Inspector General of the Department of the Housing and Urban Development.  It is also supported by the Fraternal Order of Police, the Federal Law Enforcement Officers Association, the National Association of Assistant U.S. Attorneys, and Taxpayers Against Fraud.

The bill is sponsored by more than 15 senators.  The Senate is debating the measure during Wednesday’s session.

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Statement of Senator Patrick Leahy (D-Vt.),
Chairman, Senate Judiciary Committee,
S. 386, the Fraud Enforcement and Recovery Act of 2009
April 22, 2009

I said Monday at the outset of the debate on the motion to proceed to the fraud enforcement bill that I hoped the objection to proceeding and any filibuster effort against this bill would be short-lived.  I am glad to see that cooler heads have prevailed and that after being delayed two days we have agreement to turn to the Leahy-Grassley Fraud Enforcement and Recovery Act.  I thank the Majority Leader for his persistence.  I regret that the weeks and weeks we spent reaching across the aisle for a time agreement on this bill were unavailing and that the Majority Leader was required to file for cloture to get us to this point. 

I commend Senators Grassley, Kaufman, Klobuchar, Dorgan, and Shaheen for their statements to the Senate on Monday in support of this fraud enforcement bill. Their strong statements no doubt contributed to the reversal of position that now allows us to proceed to this bipartisan fraud enforcement bill.  In total, six Senators spoke in favor of the bill on Monday and no one spoke against it.  Each of us who spoke on Monday has cosponsored this measure.  The bipartisan group of 16 Senators who have cosponsored this bill also include Senators Schumer, Murray, Bayh, Specter, Snowe, Harkin, Levin, Whitehouse, Rockefeller and Sanders.     

On Monday as the Senate debated the motion to proceed to the Leahy-Grassley Fraud Enforcement bill, the Obama administration issued its Statement of Administration Policy on the bill.  I ask that a copy be included in the Record at this point.

The Statement begins:  “The Administration strongly supports enactment of S. 386.  Its provisions would provide Federal investigators and prosecutors with significant new criminal and civil tools and resources that would assist in holding accountable those who have committed financial fraud.”  I thank the President and the administration for their strong support. 

The Statement continues:

 “[T]his legislation would benefit U.S. taxpayers by both addressing existing fraud and deterring waste, fraud and abuse of public funds.  Moreover, S. 386 would provide needed resources to strained law enforcement agencies and prosecutors that would enable the Department and its partners to advance the pace and reach of the enforcement response to the current economic crisis.   These additional resources will provide a return on investment through additional fines, penalties, restitution, damages, and forfeitures.” 

I said on Monday that the Justice Department, the FBI, the Secret Service and the Special Inspector General for the TARP, law enforcement officers and good government advocates support the bill.  This official Statement of Administration Policy makes clear the Obama Administration’s strong support for this fraud enforcement bill.

As we continue our debate of the Fraud Enforcement and Recovery Act, I also ask to include in the Record at the end of my statement certain editorials and news articles.  They show why we should pass this bill without further delay. 

Just this weekend, The New York Times wrote that fraud enforcement must be one of our priorities as we rebuild our economy-- not only to hold accountable those who committed fraud that is contributing to these hard times, but also to protect our efforts to stabilize the banking system and to jump start the economy. 

In its April 18 editorial, The New York Times wrote:

“While Washington is spending billions to shore up the financial system, it is doing far too little to strengthen the federal government’s ability to investigate and prosecute the sort of corporate and mortgage frauds that helped cause the economic collapse.”

“Those efforts — never fully adequate — have suffered in recent years as money and people were shifted from white-collar fraud to anti-terrorist activities.  Over time, the ranks of fraud investigators and prosecutors were dramatically thinned, leaving the F.B.I. and the larger Justice Department ill prepared to keep pace with a skyrocketing number of serious fraud allegations. Now they are ill equipped to police the vast infusion of federal money into the economy.”

This is precisely what law enforcement officials from the Justice Department, the FBI, and the Special Inspector General for the Troubled Asset Relief Program told us in their testimony before the Judiciary Committee.  The New York Times called on Congress to pass this bill this week. 

Referring to the Fraud Enforcement and Recovery Act, the Times wrote:

 “A bipartisan measure newly approved by the Senate Judiciary Committee and now coming before the full Senate would begin to close the enforcement gap. . . .”

“It would strengthen existing federal fraud and money-laundering provisions, updating the definition of ‘financial institution’ in federal fraud statutes to include largely unregulated mortgage businesses, for example, and reversing flawed court decisions that have undermined the effectiveness of the False Claims Act, one of the most potent weapons against government fraud.”

“Like a similar enforcement buildup in response to the savings and loan crisis of the 1980s, this one will contribute far more than it costs to the federal Treasury through restitutions and asset recoveries . . . .  Senators should not be asking if the expenditure is affordable, but whether it is enough.”

The New York Times is not the only voice raising concerns about whether we are doing enough to fight this new wave of fraud we have seen amidst this economic downturn. 

Across the political spectrum, The Washington Times raised very similar concerns about the need to fight fraud and protect the taxpayers’ money being spent on the economic stimulus.   In an editorial on March 26 entitled “Stimulus Spending Ripe for Fraud,” The Washington Times called for fraud enforcement.  In commenting on an Energy Department official who was concerned with waste, fraud, and abuse in stimulus funding, The Washington Times wrote:

“The same attitude must be adopted by all agencies overseeing the implementation of the massive spending measure.  What is true, or likely, at Energy is very likely true or likely at other departments and agencies as well.  Exhibit ‘A’ is the continued lax oversight and lack of transparency seen with the Treasury Department's handling of the banking industry bailout.”

The Washington Times went on to say that simply establishing websites to provide greater transparency, while a good thing, is not enough:

            “[E]ven an unprecedented level of post-spending transparency will only do so much to ensure waste is kept to a minimum. …  It will take more than a new Web site and the sort of staff training the administration has implemented to turn an understanding of the problem into real accountability. . . .”

“We can only hope their rhetoric translates into additional action that defies history and saves billions.”

The Obama administration is, in fact, doing more than creating the most transparent government in history.  They are also supporting this bill and its aggressive response to fraud enforcement.  This bill will translate rhetoric into action that can save billions.  This bill is just the kind of action that The Washington Times called for in its editorial.  It will allow us to take on the problems of fraud, waste, and abuse more aggressively.

I hope all Senators can see that stronger fraud enforcement is not a Democratic issue, or a Republican issue, it is an issue that all Americans can and should support.

These editorials follow a series of news articles raising concerns.  In a front page article on March 12 entitled “Financial Fraud is the Focus of Prosecutors,” The New York Times reported that fraud was surging, particularly mortgage fraud cases, and that the Justice Department would be making fraud enforcement a top priority.  In talking about the need for tougher enforcement, the Chairman of the House Banking Committee, Barney Frank, said:  “Rules don’t work if people have no fear of them.”  That is what this bill is about: making it clear that no one should be able to get away with fraud in these tough times.

And just this week, Neil Barofsky, the Special Inspector General for the Troubled Assets Relief Program, released a 250-page report warning yet again that the bank bailout funds are particularly vulnerable to fraud and raising more concerns about protecting American taxpayers.  Mr. Barofsky testified about similar concerns when he appeared before the Judiciary Committee and supported this bill.    

Strengthening fraud enforcement is a key priority for President Obama.  During the campaign, President Obama promised to “crack down on mortgage fraud professionals found guilty of fraud by increasing enforcement and creating new criminal penalties.”  And the President made good on this promise in his budget to Congress by calling for additional FBI agents “to investigate mortgage fraud and white collar crime,” as well as hiring more Federal prosecutors and civil attorneys “to protect investors, the market, and the Federal Government’s investment of resources in the financial crisis, and the American public.”  The initial Senate-passed recovery package included additional money for the FBI for this purpose, but it was cut during the negotiations that led to its passage.  This bill, the bipartisan Fraud Enforcement and Recovery Act, is our chance to authorize the necessary additional resources to detect, fight and deter fraud that robs the American people and American taxpayers of their funds. 

Investing resources in detecting and deterring fraud yields dividends for the American people.  That is what this bill will do.  We should pass it without further delay.  

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David Carle: 202-224-3693

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