[Senate Report 110-431]
[From the U.S. Government Publishing Office]
Calendar No. 899
110th Congress Report
SENATE
2d Session 110-431
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WARTIME ENFORCEMENT OF FRAUD ACT OF 2008
_______
July 25, 2008.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany S. 2892]
The Committee on the Judiciary, to which was referred the
bill (S. 2892), to promote the prosecution and enforcement of
frauds against the United States by suspending the statute of
limitations during times when Congress has authorized the use
of military force, having considered the same, reports
favorably thereon, without amendment, and recommends that the
bill do pass.
CONTENTS
Page
I. Background and Purpose of the Wartime Enforcement of Fraud Act of
2008.............................................................1
II. History of the Bill and Committee Consideration..................5
III. Section-by-Section Summary of the Bill...........................5
IV. Congressional Budget Office Cost Estimate........................6
V. Regulatory Impact Evaluation.....................................6
VI. Conclusion.......................................................6
VII. Additional Views of Senators Sessions and Coburn.................7
VIII.Changes to Existing Law Made by the Bill, as Reported............9
I. Background and Purpose of the Wartime Enforcement of Fraud Act of
2008
On April 18, 2008, Chairman Patrick Leahy introduced the
Wartime Enforcement of Fraud Act of 2008 (WEFA), which was
cosponsored by Senator Grassley. Senators Obama, Byrd, and
Cardin have since joined as cosponsors. This legislation will
protect American taxpayers from criminal contractor fraud by
giving investigators and auditors the time they need to
thoroughly review contracts related to the ongoing conflicts in
Iraq and Afghanistan.
The legislation makes current law extending the statute of
limitations during wartime applicable to the conflicts in Iraq
and Afghanistan. It amends the Wartime Suspension of
Limitations Act (18 U.S.C. 3287) to apply not only when the
United States is engaged in a declared war, but also when
Congress has authorized the used of military force pursuant to
the War Powers Resolution (50 U.S.C. 1544(b)). The legislation
also extends the statute of limitations to five years after the
end of a conflict, making the law consistent with the current
statute of limitations for criminal fraud offenses. See 18
U.S.C. Sec. 3282(a).
A. BACKGROUND
War contracting fraud and efforts to combat it have a long
history in this Nation. During World War II, President Franklin
Delano Roosevelt spoke out against ``war millionaires'' who
made excessive profits exploiting the calamity of war, and
President Harry S. Truman, when he served in the Senate,
crossed this country holding now-famous public hearings to
expose gross fraud, waste and abuse by military contractors. In
1942, President Roosevelt signed into law the Wartime
Suspension of Limitations Act, which extended the time
prosecutors had to bring charges relating to criminal fraud
offenses against the United States.\1\ Recognizing the extreme
difficulty in tracking down contracting fraud in the midst of a
war, Congress unanimously approved the 1942 law, which
temporarily suspended the statute of limitations. In 1948,
President Truman signed a new law making this change permanent.
The Wartime Suspension of Limitations Act proved to be vital in
pursuing war profiteers, as prosecutors used the law to pursue
contracting fraud after the war was over.\2\
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\1\A similar provision was passed after World War I, extending the
statute of limitations for conspiracy to defraud the Government from
three years to six years. Congress recognized that war contracts
required ``the most minute investigation'' and wanted to provide
prosecutors with the time necessary to discover fraud. H.R. Rep. No.
67-365, at 1 (1921). Congress restored the three-year statute of
limitations after the war once the Department of Justice announced that
it did not plan any further prosecution of contracting fraud related to
World War I.
\2\For example, this extension of the statute of limitations
allowed prosecutors to secure a 79-count indictment against a
subcontract employee who for three years falsified payroll records to
bill the government for the hours worked by nonexistent employees. See
United States v. Agnew, 6 F.R.D. 566 (E.D.Pa. 1947).
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In recent years, war contracting fraud has again plagued
this Nation during the engagement of U.S. forces in Iraq and
Afghanistan. Congress has appropriated more than $500 billion
to date for the wars in Iraq and Afghanistan, including more
than $50 billion for relief and reconstruction activities. The
investigations and audits conducted so far have uncovered how
billions in taxpayers' money has been lost to contract fraud,
waste, and abuse. The Department of Justice, however, has only
initiated a few cases involving less than $30 million lost to
fraud, while hundreds of investigations into contracts worth
billions remain pending, and new investigations based on
allegations of fraud are started every month. Unless the
statute of limitations is extended, these investigations may
well be shut down before they can be completed and wartime
fraud will go unpunished.
Private contractors have been used to a greater extent
during these war-time activities than at any time in our
history. The exigencies of war overseas, however, make
oversight of these contractors more difficult, and expenditures
are often made with fewer audit and other controls than during
normal Government procurement. Often, the Government does not
learn about serious fraud until years after the fact. As a
result, the provision of goods and services during these
military actions, as well as during relief and reconstruction
activities, are more vulnerable to acts of fraud and abuse.
Hearings in both the Judiciary and Appropriations
Committees have highlighted the difficulty of conducting
investigations and audits into contracting fraud as the war is
ongoing.\3\ Inspectors General from the Defense Department, the
State Department, and other agencies, as well as the Special
Inspector General for Iraq Reconstruction (SIGIR), have
consistently indicated that ongoing hostilities in Iraq and
Afghanistan have significantly hampered their ability to review
contracts and pursue investigations. For example, an audit by
the Department of Defense Inspector General in May 2008 found
that more than 90 percent of the $8.2 billion spent on
contractors in Iraq lacked adequate documentation, and the DoD
IG is still in the process of auditing billions spent on these
contracts. Similarly, a separate SIGIR audit of a $1.2 billion
State Department contract for security services in Iraq had to
be stopped because Government and contractor officials could
not find the invoices and documents showing how the money was
spent. The State Department estimates it will take three to
five years to find and organize the documentation for this
contract, just for the audit to be completed. At this point,
billions of dollars are unaccounted for, and it will take years
to fully investigate and audit these expenditures for fraud.
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\3\See Senate Judiciary Committee Hearing, ``Combating War
Profiteering: Are We Doing Enough to Investigate and Prosecute
Contracting Fraud and Abuse in Iraq'' (March 20, 2007); Senate
Appropriations Committee Hearing, ``The Effectiveness of U.S. Efforts
to Combat Corruption, Waste, Fraud and Abuse in Iraq (March 11, 2008);
Senate Appropriations Committee, ``Oversight Hearing on Fraud, Waste,
and Abuse in Defense Department Contracts Supporting Activities in Iraq
and Afghanistan'' (July 23, 2008).
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In response to this problem, the Deputy Secretary of
Defense Gordon England and the Acting Defense Department
Inspector General Gordon Hedell testified before the Senate
Appropriations Committee on July 23, 2008 that the bill would
help them complete their oversight of Iraq war contracts, and
they both supported the bill.\4\
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\4\In their views, Senators Sessions and Coburn express concern
that ``the Department of Defense should weigh in before the Senate
considers the bill'' and the legislation needs to be studied further.
In their testimony before the Appropriations Committee, the Deputy
Secretary of Defense and the Defense Department Inspector General both
weighed in supporting the bill. In addition, Senators Sessions and
Coburn claim that in passing the Wartime Suspension of Limitations Act
in 1942 and 1948, Congress ``intentionally limited'' the law to
declared wars, not authorizations for the use of military force. Since
the War Powers Resolution, which allows for congressional
authorizations for the use of military force, was not passed until
1973, nearly three decades after the Wartime Suspension of Limitations
Act, this contention is dubious at best. Even if there were anything to
this claim, that does not preclude this Congress from doing the right
thing and extending the wartime suspension of statutes of limitations
to war zones created by authorizations for the use of military force.
The point of the Wartime Suspension of Limitations Act and this bill is
the same, to ensure that the fog of war does not allow those who
defraud the United States from getting away with it because their
actions could not be investigated during hostilities.
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B. NEED FOR LEGISLATION
While the World War II provision suspending the statute of
limitations is still the law today, it applies only ``when the
United States is at war.'' 18 U.S.C. Sec. 3287. As a result,
the ongoing military operations in Iraq and Afghanistan are
likely exempt from this law because they were undertaken when
Congress authorized the use of military force, rather than by a
formal declaration of war.
The Wartime Enforcement of Fraud Act of 2008 (WEFA) would
correct this problem and extend the statute of limitations when
Congress has authorized the use of the Armed Forces pursuant to
the War Powers Resolution, as well as during declared wars. The
legislation would make three changes to current law.
First, it would extend the statute of limitations when
Congress enacts a specific authorization for the use of the
Armed Forces consistent with the War Powers Resolution. In
doing so, this language would apply current law to the ongoing
conflicts in Iraq and Afghanistan, and to similar actions in
the future. This amendment is not intended to apply to
peacekeeping missions under the auspices of the United Nations,
or military actions not specifically authorized by Congress
pursuant to the War Powers Resolution. This will give
investigators and auditors additional time to thoroughly review
all war contracts and bring those who have defrauded the
American taxpayers to justice.
Second, the legislation would extend the statute of
limitations for five years after the end of the conflict,
updating the provision to be consistent with the general
statute of limitations for criminal offenses. See 18 U.S.C.
Sec. 3282(a). The statute of limitations for criminal fraud
offenses was only three years when the law was passed during
World War II, but is five years today.\5\
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\5\Pub. L. No. 870-299, 68 Stat. 1145 (1961) amended 18 U.S.C. 3287
to change the statute of limitations to five years for noncapital
offenses.
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Third, it makes clear that a presidential proclamation
ending hostilities, and thus ending the tolling of the statute
of limitations period, must be a formal proclamation with
notice to Congress. This will provide a clear point in time at
which the statute of limitations will begin to run, providing
certainty to courts, prosecutors, and litigants interpreting
this provision.
Now, more than five years after the start of the Iraq war
and nearly seven years after the beginning of the Afghanistan
war, the statute of limitations has started to bar criminal
actions in investigations of contracting fraud early in these
conflicts. This bill will allow additional time for
investigators and auditors to thoroughly investigate and review
all war contracts and potentially save the U.S. taxpayers
untold millions of dollars. If the current law is left
unchanged, each passing day of the conflicts in Iraq and
Afghanistan would result in a grant of immunity for fraudulent
conduct by war contractors that has gone undiscovered or
unprosecuted during the conflicts.
II. History of the Bill and Committee Consideration
A. INTRODUCTION OF THE BILL
Chairman Patrick Leahy introduced the bill, S. 2892, on
April 18, 2008, with Senator Grassley.
B. COMMITTEE CONSIDERATION
The Committee voted at a June 26, 2008 executive business
meeting to report S. 2892 favorably to the Senate without
amendment by voice vote.
III. Section-by-Section Summary of the Bill
Section 1. Short title
This section provides that the legislation may be cited as
the ``Wartime Enforcement of Fraud Act of 2008.''
Section 2. Suspends the statute of limitations when Congress has
authorized the use of military force
This provision amends Section 3287 of title 18, which
suspends the statute of limitations ``when the United States is
at war,'' to include circumstances where Congress has
authorized the use of military force consistent with the War
Powers Resolution. Technically, Section 3287 only applies to
declared wars, not circumstances where Congress has authorized
the use of military force, as in the recent wars in Iraq and
Afghanistan. The amendment to Section 3287 specifically tracks
the text of the Congressional authorizations for the use of the
Armed Forces in Iraq and Afghanistan and refers only to those
authorizations described in the War Powers Resolution (50
U.S.C. 1544(b)). As a result, only significant military actions
requiring Congressional action would trigger this suspension of
the statute of limitations. This amendment is not intended to
apply to peacekeeping missions under the auspices of the United
Nations or military actions not specifically authorized by
Congress pursuant to the War Powers resolution. This language
is intended to apply the suspension of statute of limitations
to the wars in Iraq and Afghanistan.
The bill extends the statute of limitations for five years
from the termination of hostilities, as opposed to the three
years under current law. When the original Wartime Suspension
of Limitations Act was passed in 1942, the criminal statute of
limitations was only three years, and today it is five years.
This change is consistent with the standard statute of
limitations for all criminal fraud provisions and is necessary
to update the law for modern times. See 18 U.S.C. 3282(a).
The bill also makes clear that the act that ends the
tolling of the statute of limitations period must be an
official act of the President with notice to Congress, or a
concurrent resolution of Congress. This change is necessary so
that the date ending the authorization of military force is
clear, so courts, prosecutors, and litigants can be sure when
the statute of limitations starts to run. This change will
avoid any confusion or unnecessary litigation in enforcing
fraud cases in the future.
Lastly, the bill clarifies that for purposes of applying
the definitions in Section 103 of Title 41 in Section 3287 of
Title 18, the term ``war'' shall include Congressional
authorizations for the use of military force pursuant to the
War Powers resolution. This is just a conforming amendment so
the definitions in the law can properly be applied.
IV. Congressional Budget Office Cost Estimate
The cost estimate provided by the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974 was not available for inclusion in this report. The
estimate will be printed in either a supplemental report or the
Congressional Record when it is available.
V. Regulatory Impact Evaluation
In compliance with rule XXVI of the Standing Rules of the
Senate, the Committee finds that no significant regulatory
impact will result from the enactment of S. 2892.
VI. Conclusion
The Wartime Enforcement of Fraud Act, S. 2892, would close
a loophole in current law and give the government new power to
prosecute contracting fraud in Iraq and Afghanistan. If passed,
the government could recover taxpayers' money lost in no-bid
and cost-plus contracts awarded to companies that have
delivered defective products, overbilled the government, or
committed criminal fraud. The legislation would update a law
first passed by the Congress during World War II that suspends
the statute of limitations for contracting fraud offenses
during times of war. It will allow the government to punish war
profiteers and potentially save the U.S. taxpayers untold
millions.
VII. Additional Views
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ADDITIONAL VIEWS OF SENATORS SESSIONS AND COBURN ON S. 2892, ``THE
WARTIME ENFORCEMENT OF FRAUD ACT OF 2008''
The Wartime Enforcement of Fraud Act amends the Wartime
Suspension of Limitations Act, which currently extends the
statute of limitations for contracting fraud offenses committed
during a time of war. The bill would add any ``Congressional
enactment of a specific authorization for the use of the Armed
Forces'' as a trigger for suspension of the statute of
limitations for contracting fraud offenses. Additionally, the
bill provides that the statute of limitations is suspended
until 5 years after the termination of hostilities as
proclaimed by a Presidential proclamation with notice to
Congress.
Individuals who commit fraud against the government during
hostilities should be vigorously prosecuted. We have a history
of supporting legislation, such as the Military
Extraterritorial Jurisdiction Act, that ensures crimes and
frauds perpetrated in Iraq or other places overseas are rightly
brought to justice here in the United States. We support
efforts to provide the Department of Justice all the tools they
need to prosecute contractors who commit fraud against the
United States. However, we fear this approach would have the
unintended consequence of creating a potentially unlimited
statute of limitations period for defense contractors. This
goes against the great traditions of our American legal system
where statutes of limitation typically begin to run as soon as
a crime has been committed and are usually limited to a
specific number of years. In fact, prosecution for most federal
crimes must begin within five years of the commission of an
offense. Limited exceptions include murder and other offenses
punishable by death, and some federal terrorism and sex
offenses.
By including a Congressional authorization for the use of
Armed Forces as an event that triggers suspension of the
Statute of Limitations, the bill will directly impact conflicts
that fall short of declared war. The Wartime Suspension of
Limitations Act was enacted after World War II and we can only
assume that the language is intentionally limited to declared
wars. A declared war is of a different nature than an
undeclared military conflict which can be a much smaller affair
that does not similarly affect the government's ability to
build and prosecute war fraud cases. If, as is potentially the
case in the current conflicts with Iraq and Afghanistan, a
President is hesitant to officially announce the end of
hostilities, the statute of limitations will never start
running. This means contractors could remain subject to
potential liability for criminal offenses (or investigations)
for years, possibly a lifetime. Even if an official act
declaring an end to hostilities is made, it may not happen for
a very long time. The Supreme Court recently said in Boumediene
v. Bush, ``the duration of hostilities . . . may last a
generation or more.''\1\
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\1\128 S. Ct. 2229, at 2270 (2008) (the Court was expressing
concern for detainees, saying that the possibility of persons
wrongfully detained for such a long conflict ``is a risk too
significant to ignore'').
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Furthermore, providing a very long--potentially
indefinite--statute of limitations for a criminal offense
violates longstanding principles often articulated by the
Supreme Court. In Toussie v. United States, the Court held:
The purpose of a statute of limitations is to limit
exposure to criminal prosecution to a certain fixed
period of time following the occurrence of those acts
the legislature has decided to punish by criminal
sanctions. Such a limitation is designed to protect
individuals from having to defend themselves against
charges when the basic facts may have become obscured
by the passage of time and to minimize the danger of
official punishment because of acts in the far-distant
past. Such a time limit may also have the salutary
effect of encouraging law enforcement officials
promptly to investigate suspected criminal activity.\2\
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\2\Toussie v. United States, 397 U.S. 112 (1970).
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The Court has also held:
Passage of time, whether before or after arrest, may
impair memories, cause evidence to be lost, deprive the
defendant of witnesses, and otherwise interfere with
his ability to defend himself. . . . Possible prejudice
is inherent in any delay, however short; it may also
weaken the Government's case. . . . Such a [statute of]
limitation is designed to protect individuals from
having to defend themselves against charges when the
basic facts may have become obscured by the passage of
time and to minimize the danger of official punishment
because of acts in the far-distant past. Such a time
limit may also have the salutary effect of encouraging
law enforcement officials promptly to investigate
suspected criminal activity.\3\
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\3\U.S. v. Marion, 404 U.S. 307, 321-323 (1971) (emphasis added).
We believe this bill creates two disturbing disincentives
at a time where contractors are vital to national security and
American efforts during armed conflicts: (1) it could make it
more difficult to recruit contractors needed during conflict,
and (2) it could make it more difficult for the government to
prove these cases if too much time goes by. We believe the
statute of limitations issue should be studied closely and that
the Department of Defense should weigh in before the Senate
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considers the bill.
Jeff Sessions.
Tom Coburn.
VIII. Changes to Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 2892, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
UNITED STATES CODE
TITLE 18--CRIMES AND CRIMINAL PROCEDURE
* * * * * * *
PART II--CRIMINAL PROCEDURE
* * * * * * *
CHAPTER 213--LIMITATIONS
* * * * * * *
Sec. 3287. Wartime suspension of limitations
When the United States is at war or Congress has enacted a
specific authorization for the use of the Armed Forces, as
described in section 5(b) of the War Powers Resolution (50
U.S.C. Sec. 1544(b)), the running of any statute of limitations
applicable to any offense (1) involving fraud or attempted
fraud against the United States or any agency thereof in any
manner, whether by conspiracy or not, or (2) committed in
connection with the acquisition, care, handling, custody,
control or disposition of any real or personal property of the
United States, or (3) committed in connection with the
negotiation, procurement, award, performance, payment for,
interim financing, cancelation, or other termination or
settlement, of any contract, subcontract, or purchase order
which is connected with or related to the prosecution of the
war or directly connected with or related to the authorized use
of the Armed Forces, or with any disposition of termination
inventory by any war contractor or Government agency, shall be
suspended until [three] five years after the termination of
hostilities as proclaimed by [the President] Presidential
proclamation, with notice to Congress, or by a concurrent
resolution of Congress.
Definitions of terms in section 103 of title 41 shall apply
to similar terms used in this section. For purposes of applying
such definitions in this section, the term `war' includes a
specific authorization for the use of the Armed Forces, as
described in section 5(b) of the War Powers Resolution (50
U.S.C. Sec. 1544(b)).