Saturday, May 21, 2011

Bi-Partisan Legislation Enhancing Fight against Financial Fraud Favorably Reported to Senate Floor

The Senate Judiciary Committee has favorably reported out bi-partisan legislation to the Senate floor that would enhance the federal government’s ability to prosecute financial fraud cases and other types of fraud. The Fighting Fraud to Protect Taxpayers Act, S890, would ensure that prosecutors and investigators have the tools they need to combat fraud. It would also extend the international money laundering bill statute to tax evasion crimes in order to deter individuals from evading US tax laws by hiding their money overseas. The legislation was reported out of committee by a strong 16-2 bi-partisan vote and stands an excellent chance of passing the full Senate.

The legislation is sponsored by Committee Chair Patrick Leahy (D-VT) and Ranking Member Charles Grassley (R-Iowa). The legislation would build on the Leahy-Grassley Fraud Enforcement and Recovery Act (FERA), PL No. 111-21 enacted by the 111th Congress, which gave federal authorities additional tools and resources to better hold those who commit fraud accountable. FERA strengthened enforcement of securities and commodities fraud, financial institution fraud involving asset-backed securities, and fraud related to federal assistance and relief programs. Specifically, FERA expanded the scope of securities fraud provisions to include commodities and derivatives fraud and extended the prohibition against defrauding the federal government to the TARP program.

While Senator Leahy noted the significant success that has already resulted from the Fraud Enforcement and Recovery Act, he also emphasized that the job is not yet done since the scourges of financial fraud and mortgage fraud continue. Senator Leahy is especially troubled by ongoing reports about inaccurate, forged, or fraudulent documents in the housing foreclosure process. S890 reflects the ongoing need to invest in enforcement to better protect taxpayers from all of these insidious types of fraud, emphasized the Judiciary Committee Chair. Cong. Record, May 5, 2011, pS2733

Major financial fraud cases take time to investigate and prosecute, emphasized Senator Leahy, and law enforcement agencies must have the tools and resources necessary to root out fraud so that they can continue to recoup losses and protect taxpayer funds. At the same time, US taxpayers deserve to know that the federal government is doing all it can to hold responsible those who commit fraud and to prevent future fraud.

In the last fiscal year, the Department of Justice recovered well over $6 billion through fines, penalties, and recoveries from fraud cases, noted the Senator, far more than it costs to investigate and prosecute these matters. In his view, the recovery of these vast sums of money demonstrates that investment in fraud enforcement pays for itself many times over.
The Fighting Fraud to Protect Taxpayers Act capitalizes on this rate of return by ensuring that a percentage of money recovered by the Government through fines and penalties in fraud cases is reinvested in the investigation and prosecution of fraud cases. The legislation is intended to ensure more fraud enforcement, more returns to the government, and more savings to taxpayers, all without spending new taxpayer money.

The Secret Service has responsibility for investigating a variety of complex financial fraud crimes, including identity theft. This legislation would give the Secret Service additional tools to conduct critical undercover investigations. Fraud cases are often complex and difficult to prove, noted Senator Leahy, so undercover investigations can be a key way to ferret out criminal activity.

Finally, the bill promotes accountability within Government. Along with requiring reporting, it takes modest steps to ensure that the resources already entrusted to the Justice Department are used responsibly by strengthening oversight of the Department's Working Capital Fund.