[House Report 111-95]
[From the U.S. Government Publishing Office]
111th Congress Rept. 111-95
HOUSE OF REPRESENTATIVES
1st Session Part 1
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FIGHT FRAUD ACT OF 2009
_______
May 4, 2009.--Ordered to be printed
_______
Mr. Conyers, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1748]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 1748) to amend title 18, United States Code, to enhance
the investigation and prosecution of mortgage fraud and
financial institution fraud, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 1
Purpose and Summary.............................................. 5
Background and Need for the Legislation.......................... 6
Hearings......................................................... 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 7
Committee Oversight Findings..................................... 7
New Budget Authority and Tax Expenditures........................ 7
Congressional Budget Office Cost Estimate........................ 8
Performance Goals and Objectives................................. 10
Constitutional Authority Statement............................... 10
Advisory on Earmarks............................................. 10
Section-by-Section Analysis...................................... 11
Changes in Existing Law Made by the Bill, as Reported............ 13
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fight Fraud Act of 2009''.
SEC. 2. AMENDMENTS TO IMPROVE MORTGAGE, SECURITIES, AND FINANCIAL FRAUD
RECOVERY AND ENFORCEMENT.
(a) Definition of Financial Institution Amended To Include Mortgage
Lending Business.--Section 20 of title 18, United States Code, is
amended--
(1) in paragraph (8), by striking ``or'' after the semicolon;
(2) in paragraph (9), by striking the period and inserting
``; or''; and
(3) by inserting at the end the following:
``(10) a mortgage lending business or any person or entity
that makes in whole or in part a federally related mortgage
loan as defined in section 3 of the Real Estate Settlement
Procedures Act of 1974.''.
(b) Mortgage Lending Business Defined.--
(1) In general.--Chapter 1 of title 18, United States Code,
is amended by inserting after section 26 the following:
``Sec. 27. Mortgage lending business defined
``In this title, the term `mortgage lending business' means an
organization which finances or refinances any debt secured by an
interest in real estate, including private mortgage companies and any
subsidiaries of such organizations, and whose activities affect
interstate or foreign commerce.''.
(2) Clerical amendment.--The table of sections at the
beginning of chapter 1 of title 18, United States Code, is
amended by adding at the end the following:
``27. Mortgage lending business defined.''.
(c) False Statements in Mortgage Applications Amended To Include
False Statements by Mortgage Brokers and Agents of Mortgage Lending
Businesses.--Section 1014 of title 18, United States Code, is amended--
(1) by striking ``or'' after ``the International Banking Act
of 1978),''; and
(2) by inserting after ``section 25(a) of the Federal Reserve
Act'' the following: ``, or a mortgage lending business, or any
person or entity that makes in whole or in part a federally
related mortgage loan as defined in section 3 of the Real
Estate Settlement Procedures Act of 1974''.
(d) Major Fraud Against the Government Amended To Include Economic
Relief and Troubled Asset Relief Program Funds.--Section 1031(a) of
title 18, United States Code, is amended--
(1) by striking ``in any procurement'' and inserting ``in any
Federal assistance in the form of financial relief or stimulus
provided by the Government, including through the Troubled
Assets Relief Program, whether through grant, contract,
subcontract, subsidy, loan, guarantee, insurance, purchase of
preferred stock, or otherwise, or any procurement''; and
(2) by striking ``the contract, subcontract'' and inserting
``such grant, contract, subcontract, subsidy, loan, guarantee,
insurance, purchase, or other form of financial relief or
stimulus''.
(e) Securities Fraud Amended To Include Fraud Involving Options and
Futures in Commodities.--
(1) In general.--Section 1348 of title 18, United States
Code, is amended--
(A) in the caption, by inserting ``and commodities''
after ``Securities'';
(B) in paragraph (1), by inserting ``any commodity
for future delivery, or any option on a commodity for
future delivery, or'' after ``any person in connection
with''; and
(C) in paragraph (2), by inserting ``any commodity
for future delivery, or any option on a commodity for
future delivery, or'' after ``in connection with the
purchase or sale of''.
(2) Clerical amendment.--The item relating to section 1348 in
the table of sections at the beginning of chapter 63 of title
18, United States Code, is amended by inserting ``and
commodities'' after ``Securities''.
SEC. 3. AUTHORIZATION OF ADDITIONAL RESOURCES FOR INVESTIGATORS AND
PROSECUTORS FOR MORTGAGE FRAUD, SECURITIES AND
COMMODITIES FRAUD, AND OTHER CRIMES OF FRAUD.
(a) Authorizations for the Department of Justice.--
(1) In general.--There is authorized to be appropriated to
the Attorney General, $185,000,000 for fiscal year 2010 and
$175,000,000 for fiscal year 2011, for the purposes of
investigations, prosecutions, and civil enforcement actions
against possible fraud (including mortgage fraud and securities
and commodities fraud) relating to a financial institution,
including financial institutions receiving Federal assistance
under the Troubled Assets Relief Program or otherwise.
(2) Allocations.--The amounts authorized to be appropriated
under paragraph (1) shall be allocated as follows:
(A) Federal Bureau of Investigation: $75,000,000 for
fiscal year 2010 and $65,000,000 for fiscal year 2011,
an appropriate percentage of which amounts shall be
used to investigate mortgage fraud.
(B) The offices of the United States Attorneys:
$50,000,000.
(C) The criminal division of the Department of
Justice: $20,000,000.
(D) The civil division of the Department of Justice:
$15,000,000.
(E) The tax division of the Department of Justice:
$5,000,000.
(F) The Director of the Administrative Office of the
United States Courts: $20,000,000.
(b) Authorizations for the Postal Inspection Service.--There is
authorized to be appropriated to the Postal Inspection Service of the
United States Postal Service, $30,000,000 for each of the fiscal years
2010 and 2011 for investigations into possible fraud described in
subsection (a)(1).
(c) Authorizations for the Inspector General for the Department of
Housing and Urban Development.--There is authorized to be appropriated
to the Inspector General of the Department of Housing and Urban
Development, $30,000,000 for each of the fiscal years 2010 and 2011 for
investigations into possible fraud described in subsection (a)(1).
(d) Authorizations for the United States Secret Service.--There is
authorized to be appropriated to the United States Secret Service of
the Department of Homeland Security, $20,000,000 for each of the fiscal
years 2010 and 2011 for investigations into possible fraud described in
subsection (a)(1).
(e) Additional Authorizations; Availability.--The amounts authorized
under this section are in addition to amounts otherwise authorized in
other Acts, and shall remain available until expended.
(f) Defense Services.--Funds made available under this section by the
recipient described in subsection (a)(2)(F) shall be used to cover
costs associated with providing defense services to defendants
investigated for or charged with an offense described in subsection
(a)(1).
(g) Report to Congress.--Following the final expenditure of all funds
appropriated pursuant to authorization under this section, the Attorney
General, in consultation with the United States Postal Inspection
Service, the Inspector General for the Department of Housing and Urban
Development, and the Secretary of Homeland Security, shall submit a
report to Congress identifying--
(1) the amounts expended under each of subsections (a), (b),
(c), and (d) and a certification of compliance with the
requirements listed in subsection (e); and
(2) the amounts recovered as a result of criminal or civil
restitution, fines, penalties, and other monetary recoveries
resulting from criminal, civil, or administrative proceedings
and settlements undertaken with funds authorized by this Act.
SEC. 4. GRANTS FOR STATE AND LOCAL LAW ENFORCEMENT.
(a) In General.--Subject to the availability of amounts provided in
advance in appropriations Acts, the Attorney General is authorized to
award grants to States to establish and develop programs to increase
and enhance enforcement against mortgage fraud, securities and
commodities fraud, and financial institution fraud, including
enforcement against the use of computers in committing such fraud.
(b) Application.--To be eligible to be considered for a grant under
subsection (a), a State shall submit an application to the Attorney
General at such time, in such manner, and containing such information,
including as described in subsection (d), as the Attorney General may
require.
(c) Use of Grant Amounts.--A grant awarded to a State under
subsection (a) shall be used by the State to establish and develop
programs to--
(1) assist State and local law enforcement agencies in
enforcing State and local criminal laws relating to criminal
activity described in subsection (a);
(2) assist State and local law enforcement agencies in
educating the public to prevent and identify such criminal
activity;
(3) educate and train State and local law enforcement
officers and prosecutors to conduct investigations, forensic
analyses of evidence, and prosecutions relating to such
criminal activity;
(4) assist State and local law enforcement officers and
prosecutors in acquiring computer and other equipment to
conduct investigations and forensic analyses of evidence
relating to such criminal activity;
(5) assist public defenders with providing defense services
to defendants in cases in which the defendant is charged with
any such criminal activity; and
(6) facilitate and promote communication between Federal,
State, and local law enforcement to improve the sharing of
Federal law enforcement expertise and information about the
investigation, forensic analysis of evidence, and prosecution
relating to such criminal activity, with State and local law
enforcement officers and prosecutors, including through the use
of multi-jurisdictional task forces.
(d) Assurances and Eligibility.--To be eligible to receive a grant
under subsection (a), a State shall provide assurances to the Attorney
General that the State--
(1) will provide an assessment of the resource needs of the
State and units of local government within that State,
including criminal justice resources being devoted to the
investigation and enforcement of laws related to criminal
activity described in subsection (a);
(2) will develop a plan for coordinating the programs funded
under this section with other federally funded technical
assistance and training programs; and
(3) will submit to the Attorney General applicable reports in
accordance with subsection (f).
(e) Matching Funds.--The Federal share of a grant received under this
section may not exceed 75 percent of the total cost of a program or
proposal funded under this section unless the Attorney General waives,
wholly or in part, the requirements of this subsection.
(f) Reports.--For each year that a State receives a grant under
subsection (a) for a program, the State shall submit to the Attorney
General a report on the results, including the effectiveness, of such
program during such year.
(g) Definition of State.--For the purposes of this section, the term
``State'' means each of the several States, the District of Columbia,
the Commonwealth of Puerto Rico, the United States Virgin Islands,
American Samoa, Guam, and the Northern Mariana Islands.
(h) Authorization of Appropriations.--
(1) In general.--There is authorized to be appropriated to
carry out this section $100,000,000 for each of the fiscal
years 2010 through 2011.
(2) Limitations.--Of the amount made available to carry out
this section in any fiscal year, not more than 3 percent may be
used for salaries and administrative expenses for the
Department of Justice.
(3) Minimum amount.--Each State submitting an application
for, and eligible to receive, a grant under this section for a
fiscal year shall be allocated under this section, in each such
fiscal year, not less than 0.75 percent of the total amount
appropriated in such fiscal year for grants pursuant to this
section, except that not less than 0.25 percent of such total
amount shall be allocated to the United States Virgin Islands,
American Samoa, Guam, and the Northern Mariana Islands,
collectively.
(4) Grants to indian tribes.--Subject to paragraph (3), the
Attorney General may use amounts made available pursuant to
authorizations under this section to make grants to Indian
tribes for use in accordance with this section.
SEC. 5. AUTHORIZATION AND EXPANSION OF NATIONAL WHITE COLLAR CRIME
CENTER.
(a) In General.--Title I of the Omnibus Crime Control and Safe
Streets Act of 1968 (42 U.S.C. 3711 et seq.) is amended--
(1) by redesignating part JJ, as added by section 952 of
Public Law 110-315 (relating to Loan Repayment for Prosecutors
and Public Defenders), as part LL, and moving such part so that
such part follows part KK;
(2) in part LL, as so redesignated and moved by paragraph
(1), by redesignating section 3001 as section 3021; and
(3) by adding at the end the following new part:
``PART MM--NATIONAL WHITE COLLAR CRIME CENTER GRANTS
``SEC. 3031. ESTABLISHMENT OF GRANTS PROGRAM.
``(a) Authorization.--The Attorney General is authorized to award
grants and enter into contracts with State and local criminal justice
agencies and nonprofit organizations for the purpose of improving the
detection, investigation, and prosecution of covered criminal
activities.
``(b) Covered Criminal Activities Defined.--For purposes of this
part, the term `covered criminal activity' means a criminal conspiracy
or activity or a terrorist conspiracy or activity that spans
jurisdictional boundaries, including the following:
``(1) Terrorism.
``(2) Economic crime, including financial fraud and mortgage
fraud.
``(3) High-tech crime, also known as cybercrime or computer
crime, including internet-based crime against children and
child pornography.
``(c) Criminal Justice Agency Defined.--For purposes of this part,
the term `criminal justice agency', with respect to a State or a unit
of local government within such State, includes a law enforcement
agency, a State regulatory body with criminal investigative authority,
and a State or local prosecution office to the extent that such agency,
body, or office, respectively, is involved in the prevention,
investigation, and prosecution of covered criminal activities.
``SEC. 3032. AUTHORIZED PROGRAMS.
``Grants and contracts awarded under this part may be made only for
the following programs, with respect to the prevention, investigation,
and prosecution of covered criminal activities:
``(1) Programs to provide a nationwide support system for
State and local criminal justice agencies.
``(2) Programs to assist State and local criminal justice
agencies to develop, establish, and maintain intelligence-
focused policing strategies and related information sharing.
``(3) Programs to provide training and investigative support
services to State and local criminal justice agencies to
provide such agencies with skills and resources needed to
investigate and prosecute such criminal activities and related
criminal activities.
``(4) Programs to provide research support, to establish
partnerships, and to provide other resources to aid State and
local criminal justice agencies to prevent, investigate, and
prosecute such criminal activities and related problems.
``(5) Programs to provide information and research to the
general public to facilitate the prevention of such criminal
activities.
``(6) Programs to establish National training and research
centers regionally, including within Virginia, Texas, and
Michigan, to provide training and research services for State
and local criminal justice agencies.
``(7) Any other programs specified by the Attorney General as
furthering the purposes of this part.
``SEC. 3033. APPLICATION.
``To be eligible to be considered for an award of a grant or contract
under this part, an entity shall submit to the Attorney General an
application in such form and manner, and containing such information,
as required by the Attorney General.
``SEC. 3034. RULES AND REGULATIONS.
``The Attorney General shall promulgate such rules and regulations as
are necessary to carry out this part, including rules and regulations
for submitting and reviewing applications under section 3033.''.
(b) Authorization of Appropriation.--Section 1001(a) of such Act (42
U.S.C. 3793) is amended by adding at the end the following new
paragraph:
``(27) There is authorized to be appropriated to carry out part MM--
``(A) $25,000,000 for fiscal year 2010;
``(B) $28,000,000 for fiscal year 2011;
``(C) $31,000,000 for fiscal year 2012;
``(D) $34,000,000 for fiscal year 2013;
``(E) $37,000,000 for fiscal year 2014; and
``(F) $40,000,000 for fiscal year 2015.''.
Purpose and Summary
H.R. 1748, the ``Fight Fraud Act of 2009,'' introduced by
Chairman Conyers and Ranking Member Lamar Smith, will amend
relevant criminal statutes and authorize additional funding for
Federal, state, and local agencies to combat corporate fraud,
mortgage fraud, securities and commodities fraud, and other
financial frauds that have significantly contributed to the
recent economic crisis, and other specified crimes.
Background and Need for the Legislation
BACKGROUND
For more than a year, this Nation has been experiencing the
worst economic crisis since the Great Depression.\1\ Millions
of Americans have lost their homes, their savings, and their
jobs.\2\ While there are many factors which contributed to this
crisis, fraud has played a significant role--including fraud on
the part of unscrupulous mortgage lenders and brokers, who
lured consumers into buying homes that they could not afford,
by aggressively marketing subprime loans with low teaser
rates.\3\ Now, as the initial teaser rates have gone up and
many homeowners have lost their jobs, many of those homes have
fallen into foreclosure.\4\
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\1\See Jon Hilsenrath, Serena Ng, & Damian Paletta, Worst Crisis
Since '30's, With No End Yet in Sight, Wall St. J., Sept. 18, 2008.
\2\See Peter S. Goodman & Jack Healy, 663,000 Jobs Lost in March;
Total Tops 5 Million, N.Y. Times, Apr. 4, 2009.
\3\See Fraud Factor, N.Y. Times, Apr. 18, 2009.
\4\See Phillip R. Robinson, The Worst Mortgages, Baltimore Sun,
Apr. 13, 2009.
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This subprime mortgage fraud, in turn, contributed to the
collapse of the wider financial industry. The financial
services industry had skimmed billions of dollars from the
rising tide of real estate values, by marketing mortgage-backed
securities to investors around the world. When the real estate
bubble burst, the securities became toxic. In the past year,
banks and financial institutions in this country have suffered
more than $500 billion in losses that can be traced to the
collapse of the mortgage industry.\5\
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\5\See Hon. Patrick Leahy, Statement of Introduction of Fraud
Enforcement and Recovery Act of 2009, Feb. 5, 2009, available at http:/
/leahy.senate.gov/press/200902/020509b.html.
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During this time, the number of fraud investigations and
enforcement actions has dramatically increased. The number of
open FBI mortgage fraud investigations, for example, has risen
from 881 in fiscal year 2006 to more than 2000 currently.\6\
There has not, however, been a commensurate increase in
available resources. For example, the FBI currently has more
than 1,800 mortgage fraud investigations open, but only 240
agents specifically assigned to these cases.\7\ Investigators
and agents at the Inspector General's Office for Housing and
Urban Development (HUD), the U.S. Secret Service, and the U.S.
Postal Inspector Service have also seen an increase in their
financial fraud investigations, but not a corresponding
increase in their budgets.\8\ States and localities likewise
struggle to handle the mounting tide of fraud and other
financial crimes they are investigating.
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\6\Proposals to Fight Fraud and Protect Taxpayers, Hearing Before
the H. Comm. on the Judiciary, 111th Cong. (2009) (written statement of
John Pistole).
\7\See Need for Increased Fraud Enforcement in the Wake of the
Economic Downturn, Hearing Before the Subcomm. on Crime, Terrorism, and
Homeland Security of the H. Comm. on the Judiciary, 111th Cong. (2009)
(testimony of John Pistole).
\8\See, e.g., The Role of FHA in Addressing the Housing Crisis,
Hearing Before the S. Comm. on Appropriations Subcomm. on
Transportation, Housing and Urban Development & Related Agencies, 111th
Cong. (2009) (testimony of Kenneth Donohue, Inspector General, Dept. of
Housing and Urban Development).
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NEED FOR THE LEGISLATION
This legislation will amend and clarify current criminal
fraud statutes and provide resources to more effectively
address the magnitude of financial crimes associated with the
current economic crisis. While general fraud statutes may reach
some of the fraud that has occurred in recent years, clarifying
the Federal criminal fraud statutes will better ensure that
they are able to reach the variety of these fraudulent schemes
and deter future fraud against the newly created economic
recovery programs. Additional resources are also needed for the
agencies in the front lines of combating this wave of fraud and
other financial crimes.
During Committee mark-up, the bill was amended to address
other priorities such as additional resources for Federal
public defenders, authorizing grants to States and localities
to investigate and prosecute fraud, and authorizing new grants
through the National White Collar Crime Center for States and
localities to combat economic crimes, as well as terrorism, and
cyber-crime involving child exploitation.
Hearings
On April 1, 2009, the full Committee on the Judiciary held
1 day of hearings on H.R. 1748, along with other legislative
proposals to fight fraud. Testimony was received from
Representative Elijah Cummings (D-MD); Representative Neil
Abercrombie (D-HI); Representative Judy Biggert (R-IL); Mr.
Jonathan Mintz, Commissioner, New York City Department of
Consumer Affairs; Mr. Ira Rheingold, Executive Director,
National Association of Consumer Advocates (NACA); Jeb White,
President, Taxpayers Against Fraud; Barry Pollack, Chair, White
Collar Crime Committee, National Association of Criminal
Defense Lawyers (NACDL) and Partner, Miller & Chevalier; Ms.
Rita Glavin, Acting Assistant Attorney General, Criminal
Division, U.S. Department of Justice, Mr. John Pistole, Deputy
Director, Federal Bureau of Investigation; and Ms. Marcia
Madsen, Institute for Legal Reform, Chamber of Commerce, and
partner, Mayer, Brown, and Platt.
Committee Consideration
On April 28, 2009, the Committee met in open session and
ordered the bill, H.R. 1748, favorably reported with amendment,
by voice vote, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
H.R. 1748.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
With respect to the requirement in clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives, and 308(a)
of the Congressional Budget Act of 1974, the Committee
references the report of the Congressional Budget Office
included in the report.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 1748, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 29, 2009.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1748, the ``Fight
Fraud Act of 2009.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz, who can be reached at 226-2860.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure
cc: Honorable Lamar S. Smith.
Ranking Member
H.R. 1748--the ``Fight Fraud Act of 2009.''
SUMMARY
H.R. 1748 would broaden the coverage of current laws
against financial crimes, including fraud affecting mortgages,
securities, and Federal assistance and relief programs. The
bill would authorize the appropriation of $520 million over the
2010-2011 period for the Department of Justice (DOJ), the
Postal Inspection Service, and other Federal agencies to
investigate and prosecute violators of the bill's provisions.
The bill also would authorize the appropriation of $395 million
over the 2010-2015 period for DOJ to make grants to states and
other entities to combat financial and other crimes.
CBO estimates that implementing H.R. 1748 would cost $805
million over the 2010-2014 period, assuming appropriation of
the authorized amounts. Enacting H.R 1748 could affect direct
spending and revenues; CBO has no basis for estimating the
timing or magnitude of any such effects, but we estimate that
there would be no net change in costs over time.
H.R. 1748 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
ESTIMATED COST TO THE FEDERAL GOVERNMENT
The estimated budgetary impact of H.R. 1748 is shown in the
following table. The costs of this legislation fall within
budget functions 370 (commerce and housing credit), 450
(community and regional development), and 750 (administration
of justice).
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------------------------
2010 2011 2012 2013 2014 2010-2014
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Funding for DOJ and Other Federal Agencies
to Combat Financial Crimes
Authorization Level 265 255 0 0 0 520
Estimated Outlays 228 252 34 5 1 520
DOJ Grants
Authorization Level 125 128 31 34 37 355
Estimated Outlays 28 66 70 61 60 285
Total
Authorization Level 390 383 31 34 37 875
Estimated Outlays 256 318 104 66 61 805
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BASIS OF ESTIMATE
For this estimate, CBO assumes that the bill will be
enacted during fiscal year 2009, that the authorized amounts
will be appropriated each year, and that spending will follow
historical patterns for the authorized activities.
Spending Subject to Appropriation
H.R. 1748 would authorize the appropriation of $265 million
for fiscal year 2010 and $255 million for fiscal year 2011 for
DOJ and other Federal agencies to investigate and prosecute
financial crimes. Of those totals, the bill would authorize $75
million for 2010 and $65 million for 2011 for the Federal
Bureau of Investigation. In addition, for each of fiscal years
2010 and 2011, the bill would authorize:
L$90 million for offices of the United States
Attorneys and DOJ's criminal, civil, and tax divisions;
L$30 million for the Postal Inspection
Service;
L$30 million for the Inspector General for the
Department of Housing and Urban Development;
L$20 million for the Administrative Office of
the United States Courts; and
L$20 million for the United States Secret
Service.
In addition, H.R. 1748 would authorize the appropriation of
$100 million for each of fiscal years 2010 and 2011 for DOJ to
make grants to states to combat financial crimes, including
fraud affecting mortgages, securities, and financial
institutions. The bill also would authorize an appropriation
totaling $155 million over the 2010-2014 period (and $40
million for 2015) for DOJ to make grants to state and local
governments and nonprofit organizations to combat terrorist
acts, economic crimes (including financial and mortgage fraud),
and cybercrimes.
Revenues and Direct Spending
H.R. 1748 could increase collections of civil and criminal
fines for violations of the bill's provisions. Civil fines are
recorded as revenues and deposited in the U.S. Treasury.
Criminal fines are recorded as revenues, deposited in the Crime
Victims Fund, and subsequently spent without further
appropriation.
CBO has no basis for estimating the magnitude of any
additional collections of civil and criminal fines. However, we
estimate that any such effects would have no net costs over
time.
INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT
H.R. 1748 contains no intergovernmental or private-sector
mandates as defined in UMRA and would impose no costs on state,
local, or tribal governments. Assuming the appropriation of
authorized amounts, those governments would receive $285
million over the 2010-2014 period to investigate and prosecute
fraud and computer crimes. Any costs would be incurred
voluntarily as a condition of receiving Federal assistance.
PREVIOUS CBO ESTIMATE
On March 18, 2009, CBO transmitted a cost estimate for S.
386, the Fraud Enforcement on Recovery Act of 2009, as reported
by the Senate Committee on the Judiciary on March 5, 2009. That
bill would broaden the coverage of current laws against
financial crimes and would authorize the appropriation of $245
million for each of fiscal years 2010 and 2011 for DOJ and
other Federal agencies to investigate and prosecute violators
of the bill's provisions. The CBO cost estimates reflect the
differences between those bills.
ESTIMATE PREPARED BY:
Federal Costs: Mark Grabowicz
Impact on State, Local, and Tribal Governments: Melissa Merrell
Impact on the Private Sector: Marin Randall
ESTIMATE APPROVED BY:
Theresa Gullo
Deputy Assistant Director for Budget Analysis
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
1748 is intended to (1) amend title 18 U.S.C. to clarify laws
designed to combat fraud, (2) authorize funding for additional
resources to Federal agencies to investigate, prosecute, and
otherwise enforce against fraud, and (3) authorize funding for
grants to states and localities to fight fraud and other
specified crimes.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8, of the Constitution.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 1748 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.
Section-by-Section Analysis
The following discussion describes the bill as reported by
the Committee:
Sec. 1. Short Title. Section 1 sets forth the short title
of this Act as the ``Fight Fraud Act of 2009.''
Sec. 2. Amendments to Improve Mortgage, Securities, and
Financial Fraud Recovery and Enforcement. This section augments
and clarifies the reach of federal criminal fraud statutes to
ensure that they cover the various types of financial fraud
that have recently occurred with respect to financial
institutions and that could potentially occur in connection
with the Troubled Asset Relief Program or other federal
assistance being provided to financial institutions.
Section 2(a) amends the definition in 18 U.S.C. 20 for a
``financial institution'' to include a ``mortgage lending
business,'' which section 2(b) adds a new definition of, in 18
U.S.C. 27, as ``an organization . . . which finances or
refinances any debt secured by an interest in real estate,
including private mortgage companies and any subsidiaries''
whose activities affect interstate or foreign commerce. The new
definition also includes ``any person or entity that makes in
whole or in part a federally-regulated mortgage loan as defined
in 12 U.S.C. Sec. 2602(1).''
These new definitions for ``financial institution'' and
``mortgage lending business'' will better ensure that private
mortgage brokers and companies can be held fully accountable
under Federal fraud laws for fraudulent actions against
financial institutions, including mortgage lending businesses,
particularly where they are dealing in federally-regulated or
federally-insured mortgages. For example, the bank fraud
statute, 18 U.S.C. Sec. 1344, prohibits defrauding ``a
financial institution,'' which will now include mortgage
lending businesses in addition to traditional banks and
financial institutions.
In addition, the expanded definition of ``financial
institution'' would also apply to the following criminal
provisions: 18 U.S.C. Sec. 215 (financial institution bribery);
18 U.S.C. Sec. 225 (continuing financial crimes enterprise); 18
U.S.C. Sec. 1005 (false statement/entry/record for financial
institution); and 18 U.S.C. Sec. 1344 (bank/ financial
institution fraud). The new definition would also provide for
enhanced penalties for mail and wire fraud affecting a
financial institution, including a mortgage lending business,
pursuant to 18 U.S.C. Sec. Sec. 1341, 1343. Expanding the term
``financial institution'' to include mortgage lending
businesses will also strengthen penalties for mortgage frauds.
It would also extend the statute of limitations in
investigations of mortgage fraud to be consistent with bank
fraud investigations.
This definition of ``financial institution'' would not
apply to the Suspicious Activity Reports (SARs) that banks and
other financial institutions are required to file, as
``financial institution'' is defined separately under the Bank
Secrecy Act, 31 U.S.C. Sec. 5312(a)(2).
Section 2(c) would amend the false statement in mortgage
application statute (18 U.S.C. Sec. 1014) to include making a
materially false statement or willfully overvaluing a property
in order to influence any action by a mortgage lending
business. The current offense applies only to Federal agencies,
banks, and credit associations, and does not extend to private
mortgage lending businesses, even if they are handling
federally-regulated or federally-insured mortgages.
Similar to expanding the definition of ``financial
institution'' in sections 2(a) and 2(b), this provision will
better ensure that private mortgage brokers and companies are
held fully accountable for fraud--including false appraisal
fraud, an especially problematic type of mortgage fraud during
the recent financial crisis.
Section 2(d) amends the Federal major-fraud-against-the-
United-States statute (18 U.S.C. Sec. 1031) to include and
cover economic relief and TARP funds, ``whether through grant,
contract, subcontract, subsidy, loan, guarantee, insurance,
purchase of preferred stock, or otherwise.'' This will ensure
that Federal prosecutors have jurisdiction to use one of their
most potent fraud statutes to protect the Government assistance
provided during the recent economic crisis, including money
from the TARP. These amendments, however, apply only to major
frauds against the Government, where the value exceeds
$1,000,000.
Section 2(e) amends the Federal securities fraud statute
(18 U.S.C. Sec. 1348) to clarify that it includes fraud in
commodities futures or options, in addition to securities
fraud--this will more clearly include some of the derivatives
and other financial products that were part of the financial
collapse.
Sec. 3. Authorization of Additional Resources for
Investigators and Prosecutors for Mortgage Fraud, Securities
and Commodities Fraud, and Other Crimes of Fraud. This section
authorizes $185 million for fiscal year 2010 and $175 million
for the fiscal year 2011 to be allocated to the FBI ($75
million in 2010; $65 million in 2011), U.S. Attorney's offices
($50 million each year), and the Criminal, Civil, and Tax
Divisions of the Justice Department ($40 million each year).
The section also authorizes additional appropriations for the
Postal Inspection Service ($30 million each year), the
Inspector General for HUD ($30 million each year), the U.S.
Secret Service ($20 million each year), and the Director of the
Administrative Office of the United States Courts ($20 million
each year). The bill directs that these authorized funds may
only be used for fighting mortgage, securities and commodities,
and other crimes of fraud, and the Department must certify that
funds were used for those purposes, after expended.
Sec. 4. Grants for State and Local Law Enforcement. This
section authorizes the Attorney General to award grants to
States and Indian Tribes to establish and develop programs to
increase enforcement against mortgage fraud, securities and
commodities fraud, and financial institution fraud, including
enforcement against the use of computers in committing such
fraud. Such programs include initiatives to assist State and
local law enforcement in providing public education, officer
training, and equipment to combat these crimes. The term
``mortgage fraud'' as used in this section is intended to
include schemes to defraud homeowners through fraudulent
promises to modify the terms of existing loans. This section
also sets forth requirements for grant applications. Finally,
the section authorizes appropriations for fiscal years 2010 and
2011 in the amount of $100,000,000 for each year.
Sec. 5. Authorization and Expansion of National White
Collar Crime Center. This section amends the Omnibus Crime
Control and Safe Streets Act of 1968 to authorize the Attorney
General to award grants and enter into contracts with State and
local criminal justice agencies and nonprofit organizations for
the purpose of improving the detection, investigation, and
prosecution of covered criminal activities, including
terrorism, economic crime (including financial and mortgage
fraud), and high-tech crimes, also known as cyber-crime. The
funds are authorized to be appropriated in the following
manner: $25,000,000 for fiscal year 2010, $28,000,000 for
fiscal year 2011, $31,000,000 for fiscal year 2012, $34,000,000
for fiscal year 2013, $37,000,000 for fiscal year 2014, and
$40,000,000 for fiscal year 2015.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 18, UNITED STATES CODE
* * * * * * *
PART I--CRIMES
* * * * * * *
CHAPTER 1--GENERAL PROVISIONS
Sec.
1. Repealed.
* * * * * * *
27. Mortgage lending business defined.
* * * * * * *
Sec. 20. Financial institution defined
As used in this title, the term ``financial institution''
means--
(1) * * *
* * * * * * *
(8) an organization operating under section 25 or
section 25(a) of the Federal Reserve Act; [or]
(9) a branch or agency of a foreign bank (as such
terms are defined in paragraphs (1) and (3) of section
1(b) of the International Banking Act of 1978)[.]; or
(10) a mortgage lending business or any person or
entity that makes in whole or in part a federally
related mortgage loan as defined in section 3 of the
Real Estate Settlement Procedures Act of 1974.
* * * * * * *
Sec. 27. Mortgage lending business defined
In this title, the term ``mortgage lending business'' means
an organization which finances or refinances any debt secured
by an interest in real estate, including private mortgage
companies and any subsidiaries of such organizations, and whose
activities affect interstate or foreign commerce.
* * * * * * *
CHAPTER 47--FRAUD AND FALSE STATEMENTS
* * * * * * *
Sec. 1014. Loan and credit applications generally; renewals and
discounts; crop insurance
Whoever knowingly makes any false statement or report, or
willfully overvalues any land, property or security, for the
purpose of influencing in any way the action of the Federal
Housing Administration, the Farm Credit Administration, Federal
Crop Insurance Corporation or a company the Corporation
reinsures, the Secretary of Agriculture acting through the
Farmers Home Administration or successor agency, the Rural
Development Administration or successor agency, any Farm Credit
Bank, production credit association, agricultural credit
association, bank for cooperatives, or any division, officer,
or employee thereof, or of any regional agricultural credit
corporation established pursuant to law, or a Federal land
bank, a Federal land bank association, a Federal Reserve bank,
a small business investment company, as defined in section 103
of the Small Business Investment Act of 1958 (15 U.S.C. 662),
or the Small Business Administration in connection with any
provision of that Act, a Federal credit union, an insured
State- chartered credit union, any institution the accounts of
which are insured by the Federal Deposit Insurance Corporation,
the Office of Thrift Supervision, any Federal home loan bank,
the Federal Housing Finance Agency, the Federal Deposit
Insurance Corporation, the Resolution Trust Corporation, the
Farm Credit System Insurance Corporation, or the National
Credit Union Administration Board, a branch or agency of a
foreign bank (as such terms are defined in paragraphs (1) and
(3) of section 1(b) of the International Banking Act of 1978),
[or] an organization operating under section 25 or section
25(a) of the Federal Reserve Act, or a mortgage lending
business, or any person or entity that makes in whole or in
part a federally related mortgage loan as defined in section 3
of the Real Estate Settlement Procedures Act of 1974, upon any
application, advance, discount, purchase, purchase agreement,
repurchase agreement, commitment, loan, or insurance agreement
or application for insurance or a guarantee, or any change or
extension of any of the same, by renewal, deferment of action
or otherwise, or the acceptance, release, or substitution of
security therefor, shall be fined not more than $1,000,000 or
imprisoned not more than 30 years, or both. The term ``State-
chartered credit union'' includes a credit union chartered
under the laws of a State of the United States, the District of
Columbia, or any commonwealth, territory, or possession of the
United States.
* * * * * * *
Sec. 1031. Major fraud against the United States
(a) Whoever knowingly executes, or attempts to execute, any
scheme or artifice with the intent--
(1) * * *
* * * * * * *
[in any procurement] in any Federal assistance in the form of
financial relief or stimulus provided by the Government,
including through the Troubled Assets Relief Program, whether
through grant, contract, subcontract, subsidy, loan, guarantee,
insurance, purchase of preferred stock, or otherwise, or any
procurement of property or services as a prime contractor with
the United States or as a subcontractor or supplier on a
contract in which there is a prime contract with the United
States, if the value of [the contract, subcontract] such grant,
contract, subcontract, subsidy, loan, guarantee, insurance,
purchase, or other form of financial relief or stimulus, or any
constituent part thereof, for such property or services is
$1,000,000 or more shall, subject to the applicability of
subsection (c) of this section, be fined not more than
$1,000,000, or imprisoned not more than 10 years, or both.
* * * * * * *
CHAPTER 63--MAIL FRAUD
Sec.
1341. Frauds and swindles.
* * * * * * *
1348. Securities and commodities fraud.
* * * * * * *
Sec. 1348. Securities and commodities fraud
Whoever knowingly executes, or attempts to execute, a scheme
or artifice--
(1) to defraud any person in connection with any
commodity for future delivery, or any option on a
commodity for future delivery, or any security of an
issuer with a class of securities registered under
section 12 of the Securities Exchange Act of 1934 (15
U.S.C. 78l) or that is required to file reports under
section 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78o(d)); or
(2) to obtain, by means of false or fraudulent
pretenses, representations, or promises, any money or
property in connection with the purchase or sale of any
commodity for future delivery, or any option on a
commodity for future delivery, or any security of an
issuer with a class of securities registered under
section 12 of the Securities Exchange Act of 1934 (15
U.S.C. 78l) or that is required to file reports under
section 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78o(d)); shall be fined under this title, or
imprisoned not more than 25 years, or both.
* * * * * * *
----------
OMNIBUS CRIME CONTROL AND SAFE STREETS ACT OF 1968
* * * * * * *
TITLE I--JUSTICE SYSTEM IMPROVEMENT
* * * * * * *
Part J--Funding
AUTHORIZATION OF APPROPRIATIONS
Sec. 1001. (a)(1) * * *
* * * * * * *
(27) There is authorized to be appropriated to carry out part
MM--
(A) $25,000,000 for fiscal year 2010;
(B) $28,000,000 for fiscal year 2011;
(C) $31,000,000 for fiscal year 2012;
(D) $34,000,000 for fiscal year 2013;
(E) $37,000,000 for fiscal year 2014; and
(F) $40,000,000 for fiscal year 2015.
* * * * * * *
PART [JJ] LL--LOAN REPAYMENT FOR PROSECUTORS AND PUBLIC DEFENDERS
SEC. [3001.] 3021. GRANT AUTHORIZATION.
(a) * * *
* * * * * * *
PART MM--NATIONAL WHITE COLLAR CRIME CENTER GRANTS
SEC. 3031. ESTABLISHMENT OF GRANTS PROGRAM.
(a) Authorization.--The Attorney General is authorized to
award grants and enter into contracts with State and local
criminal justice agencies and nonprofit organizations for the
purpose of improving the detection, investigation, and
prosecution of covered criminal activities.
(b) Covered Criminal Activities Defined.--For purposes of
this part, the term ``covered criminal activity'' means a
criminal conspiracy or activity or a terrorist conspiracy or
activity that spans jurisdictional boundaries, including the
following:
(1) Terrorism.
(2) Economic crime, including financial fraud and
mortgage fraud.
(3) High-tech crime, also known as cybercrime or
computer crime, including internet-based crime against
children and child pornography.
(c) Criminal Justice Agency Defined.--For purposes of this
part, the term ``criminal justice agency'', with respect to a
State or a unit of local government within such State, includes
a law enforcement agency, a State regulatory body with criminal
investigative authority, and a State or local prosecution
office to the extent that such agency, body, or office,
respectively, is involved in the prevention, investigation, and
prosecution of covered criminal activities.
SEC. 3032. AUTHORIZED PROGRAMS.
Grants and contracts awarded under this part may be made only
for the following programs, with respect to the prevention,
investigation, and prosecution of covered criminal activities:
(1) Programs to provide a nationwide support system
for State and local criminal justice agencies.
(2) Programs to assist State and local criminal
justice agencies to develop, establish, and maintain
intelligence-focused policing strategies and related
information sharing.
(3) Programs to provide training and investigative
support services to State and local criminal justice
agencies to provide such agencies with skills and
resources needed to investigate and prosecute such
criminal activities and related criminal activities.
(4) Programs to provide research support, to
establish partnerships, and to provide other resources
to aid State and local criminal justice agencies to
prevent, investigate, and prosecute such criminal
activities and related problems.
(5) Programs to provide information and research to
the general public to facilitate the prevention of such
criminal activities.
(6) Programs to establish National training and
research centers regionally, including within Virginia,
Texas, and Michigan, to provide training and research
services for State and local criminal justice agencies.
(7) Any other programs specified by the Attorney
General as furthering the purposes of this part.
SEC. 3033. APPLICATION.
To be eligible to be considered for an award of a grant or
contract under this part, an entity shall submit to the
Attorney General an application in such form and manner, and
containing such information, as required by the Attorney
General.
SEC. 3034. RULES AND REGULATIONS.
The Attorney General shall promulgate such rules and
regulations as are necessary to carry out this part, including
rules and regulations for submitting and reviewing applications
under section 3033.