Fraud Enforcement and Recovery Act of 2009, as Reported by the Senate Judiciary Committee - Senate Passes Fraud, Tax Evasion Bill
The Senate on April 28 approved, by a 92-4 margin, a measure that would apply the federal international money laundering statute to tax evasion in an effort to stem the spread of financial crimes. The Fraud Enforcement and Recovery Bill of 2009 (Sen 386) amends the federal international money laundering statute to create a new money laundering crime to cover moving money from or through the United States with the intent to engage in tax evasion. This amendment changes the previous understanding of the crime of money laundering, which has focused on punishing financial transactions designed to launder the proceeds of criminal activity.

Under Sen 386, the act of tax evasion itself, without the need or any subsequent financial transaction, would be treated as money laundering. This allows tax evasion to be punishable both under the Internal Revenue Code and under the federal money laundering statute, which carries far greater penalties.

The legislation was originally introduced on February 5, 2009 by Senate Finance Committee ranking member Charles E. Grassley, R-Iowa and Sen. Patrick J. Leahy, D-Vt. The Obama administration on April 20 released an official Statement of Administration Policy (SAP) indicating strong support for the bill and the House Judiciary Committee on April 28 approved a similar measure by voice vote.



Fraud Enforcement and Recovery Act of 2009, as Reported by the Senate Judiciary Committee

April 29, 2009

111th Congress

Calendar No. 28



111th CONGRESS



1st Session



S. 386

To improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds related to federal assistance and relief programs, for the recovery of funds lost to these frauds, and for other purposes.



IN THE SENATE OF THE UNITED STATES



February 5, 2009

Mr. LEAHY (for himself, Mr. GRASSLEY, Mr. KAUFMAN, Ms. KLOBUCHAR, and Mr. SCHUMER) introduced the following bill; which was read twice and referred to the Committee on the Judiciary



March 5, 2009



Reported by Mr. LEAHY, with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]



A BILL

To improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds related to federal assistance and relief programs, for the recovery of funds lost to these frauds, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,



SECTION 1. SHORT TITLE.

This Act may be cited as the `Fraud Enforcement and Recovery Act of 2009' or `FERA'.



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 (as defined in section 27 of this title) or any person or entity that makes in whole or in part a federally-related mortgage loan as defined in 12 U.S.C. 2602(1).'.

(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) CHAPTER ANALYSIS- The chapter analysis for 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 by --

(1) striking `or' after `the International Banking Act of 1978),'; and

(2) inserting after `section 25(a) of the Federal Reserve Act' the following: `or a mortgage lending business whose activities affect interstate or foreign commerce, or any person or entity that makes in whole or in part a federally-related mortgage loan as defined in 12 U.S.C. 2602(1)'.

(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 by --

(1) inserting after `or promises, in' the following: `any grant, contract, subcontract, subsidy, loan, guarantee, insurance or other form of Federal assistance, including through the Troubled Assets Relief Program, an economic stimulus, recovery or rescue plan provided by the Government, or the Government's purchase of any preferred stock in a company, or'; and

(2) striking `the contract, subcontract' and inserting `such grant, contract, subcontract, subsidy, loan, guarantee, insurance or other form of Federal assistance,'.

(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) by inserting `any commodity for future delivery, or any option on a commodity or a commodity for future delivery, or' after `any person in connection with' ; and

(C) by inserting `any commodity for future delivery, or any option on a commodity or a commodity for future delivery, or' after `in connection with the purchase or sale of'.

(2) CHAPTER ANALYSIS- The item for section 1348 in the chapter analysis for chapter 63 of title 18, United States Code, is amended by inserting `and commodities' after `Securities'.

(f) Money Laundering Amended To Define Proceeds of Specified Unlawful Activity- Section 1956(c) of title 18, United States Code, is amended --

(1) in paragraph (8), by striking the period and inserting `; and'; and

(2) by inserting at the end the following:

`(9) the term `proceeds' means any property derived from or obtained or retained, directly or indirectly, through the commission of a specified unlawful activity, including the gross receipts of such specified unlawful activity.'.

(g) Making the International Money Laundering Statute Apply to Tax Evasion- Section 1956(a)(2)(A) of title 18, United States Code, is amended by --

(1) inserting `(i)' before `with the intent to promote'; and

(2) adding at the end the following:

`(ii) with the intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or'.



SEC. 3. ADDITIONAL FUNDING FOR INVESTIGATORS AND PROSECUTORS FOR MORTGAGE FRAUD, SECURITIES FRAUD, AND OTHER CASES INVOLVING FEDERAL ECONOMIC ASSISTANCE.

(a) In General-

(1) AUTHORIZATION- There is authorized to be appropriated to the Attorney General, to remain available until expended, $155,000,000 for each of the fiscal years 2010 and 2011, for the purposes of investigations, prosecutions, and civil proceedings involving federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(2) ALLOCATIONS- With respect to fiscal years 2010 and 2011, the amount authorized to be appropriated under paragraph (1) shall be allocated as follows:

(A) Federal Bureau of Investigation: $65,000,000.

(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.

(b) Additional Appropriations 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 involving federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(c) Additional Appropriations for the Inspector General for the Housing and Urban Development Department- 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 involving Federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(d) Use of Funds- The funds authorized to be appropriated under subsections (a), (b), and (c), shall be limited to cover the costs of each listed agency or department for investigating possible criminal, civil, or administrative violations and for prosecuting criminal, civil, or administrative proceedings involving financial crimes and crimes against Federal assistance programs, including mortgage fraud, securities fraud, financial institution fraud, and other frauds related to Federal assistance and relief programs

(e) Report to Congress- Following the final expenditure of all funds appropriated under this section that were authorized by subsections (a), (b), and (c), the Attorney General, in consultation with the United States Postal Inspection Service and the Inspector General for the Department of Housing and Urban Development, shall submit a joint report to Congress identifying --

(1) the amounts expended under subsections (a), (b), and (c) and a certification of compliance with the requirements listed in subsection (d); 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. CLARIFICATIONS TO THE FALSE CLAIMS ACT TO REFLECT THE ORIGINAL INTENT OF THE LAW.

(a) Clarification of the False Claims Act- Section 3729 of title 31, United States Code, is amended --

(1) by striking subsection (a) and inserting the following:

`(a) Liability for Certain Acts-

`(1) IN GENERAL- Subject to paragraph (2), any person who --

`(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

`(B) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved;

`(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G) or otherwise to get a false or fraudulent claim paid or approved;

`(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

`(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

`(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

`(G) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, or knowingly conceals, avoids, or decreases an obligation to pay or transmit money or property to the Government,

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person.

`(2) REDUCED DAMAGES- If the court finds that --

`(A) the person committing the violation of this subsection furnished officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;

`(B) such person fully cooperated with any Government investigation of such violation; and

`(C) at the time such person furnished the United States with the information about the violation, no criminal prosecution, civil action, or administrative action had commenced under this title with respect to such violation, and the person did not have actual knowledge of the existence of an investigation into such violation,

the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of that person.

`(3) COSTS OF CIVIL ACTIONS- A person violating this subsection shall also be liable to the United States Government for the costs of a civil action brought to recover any such penalty or damages.';

(2) by striking subsections (b) and (c) and inserting the following:

`(b) Definitions- For purposes of this section --

`(1) the terms `knowing' and `knowingly' mean that a person, with respect to information --

`(A) has actual knowledge of the information;

`(B) acts in deliberate ignorance of the truth or falsity of the information; or

`(C) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required;

`(2) the term `claim' --

`(A) means any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that --

`(i) is presented to an officer, employee, or agent of the United States; or

`(ii) is made to a contractor, grantee, or other recipient if the United States Government --

`(I) provides or has provided any portion of the money or property requested or demanded; or

`(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded; and

`(B) does not include requests or demands for money or property that the Government has paid to an individual as compensation for Federal employment or as an income subsidy with no restrictions on that individual's use of the money or property; and

`(3) the term `obligation' means a fixed duty, or a contingent duty arising from an express or implied contractual, quasi-contractual, grantor-grantee, licensor-licensee, fee-based, or similar relationship, and the retention of any overpayment.';

(3) by redesignating subsections (d) and (e) as subsections (c) and (d), respectively; and

(4) in subsection (c), as redesignated, by striking `subparagraphs (A) through (C) of subsection (a)' and inserting `subsection (a)(2)'.



SECTION 1. SHORT TITLE.

This Act may be cited as the `Fraud Enforcement and Recovery Act of 2009' or `FERA'.



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 (as defined in section 27 of this title) or any person or entity that makes in whole or in part a federally related mortgage loan as defined in 12 U.S.C. 2602(1).'.

(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) CHAPTER ANALYSIS- The chapter analysis for 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 by --

(1) striking `or' after `the International Banking Act of 1978),'; and

(2) inserting after `section 25(a) of the Federal Reserve Act' the following: `or a mortgage lending business whose activities affect interstate or foreign commerce, or any person or entity that makes in whole or in part a federally related mortgage loan as defined in 12 U.S.C. 2602(1)'.

(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 by --

(1) inserting after `or promises, in' the following: `any grant, contract, subcontract, subsidy, loan, guarantee, insurance or other form of Federal assistance, including through the Troubled Assets Relief Program, an economic stimulus, recovery or rescue plan provided by the Government, or the Government's purchase of any preferred stock in a company, or'; and

(2) striking `the contract, subcontract' and inserting `such grant, contract, subcontract, subsidy, loan, guarantee, insurance or other form of Federal assistance,'.

(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) 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) 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) CHAPTER ANALYSIS- The item for section 1348 in the chapter analysis for chapter 63 of title 18, United States Code, is amended by inserting `and commodities' after `Securities'.

(f) Money Laundering Amended To Define Proceeds of Specified Unlawful Activity-

(1) MONEY LAUNDERING- Section 1956(c) of title 18, United States Code, is amended --

(A) in paragraph (8), by striking the period and inserting `; and'; and

(B) by inserting at the end the following:

`(9) the term `proceeds' means any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity.'.

(2) MONETARY TRANSACTIONS- Section 1957(f) of title 18, United States Code, is amended by striking paragraph (3) and inserting the following:

`(3) the terms `specified unlawful activity' and `proceeds' shall have the meaning given those terms in section 1956 of this title.'.

(g) Making the International Money Laundering Statute Apply to Tax Evasion- Section 1956(a)(2)(A) of title 18, United States Code, is amended by --

(1) inserting `(i)' before `with the intent to promote'; and

(2) adding at the end the following:

`(ii) with the intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or'.



SEC. 3. ADDITIONAL FUNDING FOR INVESTIGATORS AND PROSECUTORS FOR MORTGAGE FRAUD, SECURITIES FRAUD, AND OTHER CASES INVOLVING FEDERAL ECONOMIC ASSISTANCE.

(a) In General-

(1) AUTHORIZATION- There is authorized to be appropriated to the Attorney General, to remain available until expended, $165,000,000 for each of the fiscal years 2010 and 2011, for the purposes of investigations, prosecutions, and civil proceedings involving Federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(2) ALLOCATIONS- With respect to fiscal years 2010 and 2011, the amount 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.

(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.

(b) Additional Appropriations 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 involving Federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(c) Additional Appropriations 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 involving Federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(d) Additional Appropriations 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 involving Federal assistance programs and financial institutions, including financial institutions to which this Act and amendments made by this Act apply.

(e) Use of Funds- The funds authorized to be appropriated under subsections (a), (b), (c), and (d) shall be limited to cover the costs of each listed agency or department for investigating possible criminal, civil, or administrative violations and for prosecuting criminal, civil, or administrative proceedings involving financial crimes and crimes against Federal assistance programs, including mortgage fraud, securities fraud, financial institution fraud, and other frauds related to Federal assistance and relief programs

(f) Report to Congress- Following the final expenditure of all funds appropriated under this section that were authorized by subsections (a), (b), (c), and (d) 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 joint report to Congress identifying --

(1) the amounts expended under 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. CLARIFICATIONS TO THE FALSE CLAIMS ACT TO REFLECT THE ORIGINAL INTENT OF THE LAW.

(a) Clarification of the False Claims Act- Section 3729 of title 31, United States Code, is amended --

(1) by striking subsection (a) and inserting the following:

`(a) Liability for Certain Acts-

`(1) IN GENERAL- Subject to paragraph (2), any person who --

`(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

`(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

`(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);

`(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

`(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

`(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

`(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person.

`(2) REDUCED DAMAGES- If the court finds that --

`(A) the person committing the violation of this subsection furnished officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;

`(B) such person fully cooperated with any Government investigation of such violation; and

`(C) at the time such person furnished the United States with the information about the violation, no criminal prosecution, civil action, or administrative action had commenced under this title with respect to such violation, and the person did not have actual knowledge of the existence of an investigation into such violation,

the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of that person.

`(3) COSTS OF CIVIL ACTIONS- A person violating this subsection shall also be liable to the United States Government for the costs of a civil action brought to recover any such penalty or damages.';

(2) by striking subsections (b) and (c) and inserting the following:

`(b) Definitions- For purposes of this section --

`(1) the terms `knowing' and `knowingly' --

`(A) mean that a person, with respect to information --

`(i) has actual knowledge of the information;

`(ii) acts in deliberate ignorance of the truth or falsity of the information; or

`(iii) acts in reckless disregard of the truth or falsity of the information; and

`(B) require no proof of specific intent to defraud;

`(2) the term `claim' --

`(A) means any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that --

`(i) is presented to an officer, employee, or agent of the United States; or

`(ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government's behalf or to advance a Government program or interest, and if the United States Government --

`(I) provides or has provided any portion of the money or property requested or demanded; or

`(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded; and

`(B) does not include requests or demands for money or property that the Government has paid to an individual as compensation for Federal employment or as an income subsidy with no restrictions on that individual's use of the money or property;

`(3) the term `obligation' means a fixed duty, or a contingent duty arising from an express or implied contractual, quasi-contractual, grantor-grantee, licensor-licensee, statutory, fee-based, or similar relationship, and the retention of any overpayment; and

`(4) the term `material' means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.';

(3) by redesignating subsections (d) and (e) as subsections (c) and (d), respectively; and

(4) in subsection (c), as redesignated, by striking `subparagraphs (A) through (C) of subsection (a)' and inserting `subsection (a)(2)'.

(b) Effective Date and Application- The amendments made by this section shall take effect on the date of enactment of this Act and shall apply to conduct on or after the date of enactment, except that subparagraph (B) of section 3729(a)(1) of title 31, United States Code, as added by subsection (a)(1), shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after that date.



Calendar No. 28



111th CONGRESS



1st Session



S. 386



A BILL

To improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds related to federal assistance and relief programs, for the recovery of funds lost to these frauds, and for other purposes.

March 5, 2009

Reported with an amendment