04.27.09

Senate Crosses Procedural Hurdle, Set To Vote On Leahy-Authored Anti-Fraud Bill Tuesday

WASHINGTON (Monday, April 27, 2009) – The Senate Monday night overcame a procedural hurdle and moved closer to a final vote on a bill authored by Senators Patrick Leahy (D-Vt.) to strengthen the tools available to law enforcement to combat financial and mortgage fraud, and protect the economic recovery efforts.

The Senate Monday overwhelmingly voted to bring debate to a close on the Fraud Enforcement and Recovery Act, a bill introduced in March by Leahy and Senators Chuck Grassley (R-Iowa) and Senator Ted Kaufman (D-Del.).  The Senate Democratic Leader, Senator Harry Reid (D-Nev.) filed a cloture motion last Thursday.  The bipartisan legislation is cosponsored by almost 30 Senators.

“Reports of mortgage fraud are up 682 percent over the past five years, and more than 2,800 percent in the past decade,” said Leahy.  “By all accounts, this problem is getting worse, not better, and it is time for Congress and the American people to fight back.  The victims of these frauds must be protected, now more than ever.  The bipartisan Fraud Enforcement and Recovery Act of 2009, S.386, will strengthen the Federal government’s capacity to investigate and prosecute the kinds of financial frauds that have severely undermined our economy and hurt so many hard working people in this country.  I hope the Senate will pass this legislation tomorrow.”

The Obama administration, the Department of Justice and several other executive agencies have endorsed the Fraud Enforcement and Recovery Act.  The Senate has scheduled a vote on final passage of the anti-fraud legislation for 12:00 p.m., on Tuesday, April 28.

Leahy Statement On Cloture On The Fraud Enforcement And Recovery Act is below.

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Fraud Enforcement and Recovery Act (S.386)

Protecting and Recovering Taxpayers’ Money

The Obama administration supports passage of the Fraud Enforcement and Recovery Act, and has committed to dedicating resources to combat financial fraud.

“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.”  ~Statement of Administration Policy, April 20, 2009

The Fraud Enforcement and Recovery Act is supported by top law enforcement coalitions and anti-fraud experts.

“This bill will strengthen our ability to investigate and prosecute the kinds of financial crimes that have so severely undermined our economy by providing law enforcement with the tools they need to investigate fraudulent activity in connection with bailout and recovery legislation.” ~ National Fraternal Order of Police

“In light of the economic crisis our country is facing, and the rampant fraud being committed against programs designed to assist Americans, it is imperative that the FBI receives the proper funding and resources to investigate criminals who seek to steal from our government.” ~ Federal Law Enforcement Officers Association

“Congress should move quickly to pass this legislation so American taxpayers can be confident that those who are criminally responsible for contributing to the present economic disaster, as well as those who may attempt to exploit federal efforts to promote recovery, are apprehended and held fully accountable for their wrongs.” ~ National Association of Assistant U.S. Attorneys

“This is an important piece of legislation that will make a significant impact on reducing the impact of fraud and restoring public confidence in our financial markets.” ~ Association of Certified Fraud Examiners

“Taxpayers Against Fraud is dedicated to eradicating fraud against the United States government.  We strongly believe that this well-reasoned legislation will serve that end, and will greatly benefit the American people during this trying time.” ~ Taxpayers Against Fraud

The Fraud Enforcement and Recovery Act is supported by Justice Department, the FBI, the U.S. Postal Inspection Service, the Inspector General for the Department of Housing and Urban Development and the U.S. Secret Service.

“The Department strongly supports enactment of FERA.  The provisions of the legislation would provide federal investigators and prosecutors with significant new tools and resources…to combat mortgage fraud, securities and commodities fraud and related offenses.” ~ U.S. Department of Justice

“…in the stimulus package, the Senate had recommended adding 165 agents.  That was not adopted by the House, but, of that, additional complement of resources would have been exceptionally helpful.  And those resources that are in the Fraud Enforcement and Recovery Act will be put to good use.  Also, the re-definition of…financial institution, expanding securities fraud provisions to include fraud relating to options, futures and commodities and a number of the other provisions of the FERA will be tremendously helpful in giving us the tools to investigate, ultimately to help prosecutors prosecute, and finally to obtain the convictions and the jail sentences that are the deterrent to this activity taking place in the future.”  ~ FBI Director Robert Mueller

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Statement Of Senator Patrick Leahy (D-Vt.),
Chairman, Senate Judiciary Committee,
On Cloture On S. 386, The Fraud Enforcement And Recovery Act Of 2009
April 27, 2009

The bipartisan Fraud Enforcement and Recovery Act of 2009, S.386, will strengthen the Federal government’s capacity to investigate and prosecute the kinds of financial frauds that have severely undermined our economy and hurt so many hard working people in this country.  These frauds have robbed people of their savings, their retirement accounts, their children’s college funds, their equity, and have cost too many their homes. These are serious matters that should not be delayed.  This bill will help provide the resources and legal tools needed to police and deter fraud and to protect taxpayer-funded economic recovery efforts now being implemented.  

I was disappointed that last week our efforts to enact this legislation were stalled.  This is a bipartisan bill to strengthen the tools available to law enforcement to combat financial and mortgage fraud.  Once we were able to get the bill before the Senate last week, we began to work on 18 amendments that were offered to the bill.  By Thursday afternoon, we had voted on all of the germane amendments.  We also worked in good faith on a number of amendments not related to the underlying fraud enforcement legislation. 

By Thursday afternoon, we had adopted five amendments to the bill that was reported by the Judiciary Committee, and rejected one after a roll call vote.  We had a dozen other pending amendments that were all extraneous to the underlying fraud enforcement bill.  Nonetheless, working with the Democratic leadership we proposed to proceed to votes on each of those pending amendments.  When the offer was rejected, the Majority Leader was forced to file for cloture to conclude consideration of this bipartisan legislation.  The Majority leader did the only thing he could responsibly do. 

This is timely legislation needed to protect people from losing their retirement funds, their homes, and their savings for their children to go to college.  Americans are seeing their life savings taken from them by unscrupulous criminals.  It is time for the Senate to act.

The Fraud Enforcement and Recovery Act will make necessary changes to criminal laws, including criminal fraud, securities law, and money laundering laws; increase the funding available to Federal law enforcement agencies to combat mortgage fraud and financial fraud; and revise the False Claims Act to ensure that the government can recover taxpayer dollars lost to fraud.

As I have throughout this debate, I commend Senator Grassley, our lead cosponsor, for his contributions to the bill and the debate, and for his dedication to protecting taxpayer funds by deterring, investigation and prosecuting fraud.  I thank our many cosponsors for their steadfast support.  Our cosponsors now include Senators Kaufman, Klobuchar, Schumer, Murray, Bayh, Specter, Snowe, Harkin, Levin, Dorgan, Whitehouse, Rockefeller, Shaheen, Stabenow, Sanders, Bennet, Durbin, Mikulski, Gillibrand, Begich, Burris, Mikulski, Dodd, Menendez, Cardin, Reid and Pryor.  They come from across the political spectrum – Democrats, Republicans and an Independent.  What we share is a commitment to fight fraud and the horrible cost it is imposing on hard-working Americans.  

I believe that our effort is supported by most Americans.  No one should want to delay this bill.  No one should want to see taxpayer money intended to fund economic recovery efforts diverted by fraud.  No one should want to see those who engaged in mortgage fraud escape accountability.   That is what will happen unless we vote to conclude the debate on this bill, pass it, and give law enforcement the resources and tools they desperately need. 

During the first months of this year, the Judiciary Committee has concentrated on what we can do legislatively to assist in the economic recovery.  Already we have considered and reported this fraud enforcement bill and the patent reform bill, and worked to ensure that law enforcement assistance was included in the economic recovery legislation. 

The recovery efforts are generating signs of economic progress.  That is good.  That is necessary. But that is not enough.  We need to make sure that we are spending our public resources wisely and that they are not being dissipated by fraud.  We need to ensure that those responsible for the downturn through fraudulent acts in financial markets and the housing market are held to account.  That is why we need to enact the Fraud Enforcement and Recovery Act. 

Two decades ago we responded during the savings and loan crisis by hiring more agents, analysts and prosecutors and allocating the resources needed to catch those who took advantage to profit through fraud.  We need to do so, again. 

At our February hearing, we heard from the FBI, the Special Inspector General for the Troubled Assets Relief Program, and the Justice Department.  All of our law enforcement witnesses testified of the need for this legislation and these additional law enforcement resources. 

Deputy Director John Pistole of the FBI warned that the losses of this economic crisis dwarf those of the Savings and Loan debacle, and the need for more enforcement is even greater now than it was then.

Special Inspector General Neil Barofsky described how law enforcement resources had understandably been diverted from traditional white collar crime to terrorism, but that had left the Justice Department's capacity to respond to financial and securities fraud significantly weakened.  He warned that with trillions of dollars being spent under TARP and other associated programs, “it is essential that the appropriate resources be dedicated to meet the challenges of both deterring and prosecuting fraud.”  I agree.

Acting Assistant Attorney General Rita Glavin of the Justice Department testified that our bill would provide the Justice Department with needed tools “to aggressively fight fraud in the current economic climate” and “provide key statutory enhancements that will assist in ensuring that those who have committed fraud are held accountable.” 

We then held a hearing with FBI Director Robert Mueller.  Director Mueller reiterated law enforcement’s message.  Here is what he said: “[The bill] will be tremendously helpful in giving us the tools to investigate . . . to help prosecutors prosecute, and finally to obtain the convictions and the jail sentences that are the deterrent to this activity taking place in the future.” 

Each week we learn of additional scandals in the financial industry, as leading money managers are charged with multimillion dollar fraud schemes carried out over years. We need to clean up the mess.  That means providing the tools and resources that law enforcement needs to get to the bottom of this, restore order, and exact accountability. 

Reports of mortgage fraud are up 682 percent over the past five years, and more than 2,800 percent in the past decade.  By some estimates, we are losing more than $4 billion each year to mortgage fraud alone.  And massive, new corporate frauds, like the $65 billion Ponzi scheme perpetrated by Bernard Madoff, are being uncovered as the economy has turned worse, exposing many investors to massive losses. 

By all accounts, this problem is getting worse, not better, and it is time for Congress and the American people to fight back.  The victims of these frauds must be protected, now more than ever.  These victims include homeowners who have been fleeced by unscrupulous mortgage brokers. They include retirees who have lost their life savings in stock scams and Ponzi schemes, which have come to light as the markets have fallen and corporations have collapsed.  They also include American taxpayers who have invested billions of dollars to restore our economy and support our banking system, and who expect us to protect that investment and make sure those funds are not exploited by fraud.

I urge all Senators to support our efforts and work with us to pass this bill without further delay.  That means to vote for cloture so that we can conclude the amendment process and vote on the bill.

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