Washington is doing far too little to strengthen the government’s ability to investigate and prosecute the type of corporate and mortgage fraud that led to the economic collapse, The New York Times opined in an Editorial dated April 18, 2009. The Times points out that focus has shifted away from financial fraud to anti-terrorist activities, and that this has resulted in fewer fraud investigators to police the huge infusion of federal money into the economy.
Legislation in now pending which would begin to close the enforcement gap by significantly expanding the number of prosecutors, agents and analysts devoted to pursuing financial fraud. The bill, entitled the Fraud Enforcement and Recovery Act of 2009, was approved by the Senate Judiciary Committee and is now coming before the full Senate for a vote. The estimated $490 million needed to fund the new act for two years would be well worth the cost, according to the Times. “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, according to the Congressional Budget Office.”
We agree with this opinion. While protecting the homeland from those who threaten violence is obviously important, it is also important to take reasonable steps to protect our citizens and the economy from the terrible corrosive effects of criminal fraud. The bill, sponsored by Senators Patrick Leahy of Vermont and Edward Kaufman of Delaware, both Democrats, and Senator Charles Grassley, Republican of Iowa, 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.