Grassley, Leahy Introduce Anti-Fraud Legislation

   WASHINGTON (Thursday, Feb. 5, 2009) – Senator Patrick Leahy (D-Vt.) and Senator Chuck Grassley (R-Iowa) introduced legislation Thursday to provide the federal government with more tools to investigate and prosecute financial fraud.  The Fraud Enforcement and Recovery Act makes necessary changes to federal criminal laws, including criminal fraud, securities law, and money laundering laws, increases the funding available to the federal law enforcement agencies to combat mortgage fraud and predatory lending, and also revises the False Claims Act to ensure that the government can recover taxpayer dollars lost to fraud and abuse.

The Federal Bureau of Investigation has seen a 100 percent increase in the number of fraud investigations opened since 2005.  The Treasury Department has also reported that more than 60,000 cases alleging mortgage fraud were filed in 2008, 10 times as many as were reported in 2002.  The legislation introduced Thursday by Leahy and Grassley aims to provide federal investigators and prosecutors the tools and resources needed to unravel complex criminal frauds and bring criminals to justice.

Leahy said, “The federal government has spent hundreds of billions of dollars to stabilize our banking system, and Congress will soon spend even more to restart our economic recovery.  But to date, we have paid far too little attention to investigating and prosecuting the mortgage and corporate frauds that has so dramatically contributed to this economic collapse.  Congress should move quickly to pass this legislation so the American taxpayers can be confident that those who are criminally responsible for contributing to this economic disaster are caught and held fully accountable and to ensure that the money we are now spending to restore America is protected from fraud in the future.”

Grassley said, “Unfortunately, throughout the housing crisis we’ve seen innocent homeowners who have been victims of shady mortgage lenders and unscrupulous individuals who have used a down market to line their own pockets at the expense of others.  This bill is designed to send a message by revising our laws to ensure criminals are brought to justice and that law enforcement has the tools to uncover these fraudulent schemes and go after the bad actors.  Criminals should be put on notice that ripping off homeowners and taxpayers won’t be tolerated.”

The Leahy-Grassley bill will: 

• Amend the definition of “financial institution” to extend federal fraud laws to mortgage lending business not directly regulated or insured by the Federal government
• Amend the major fraud statute to protect funds expended under the Troubled Asset Relief Program (TARP) and the economic stimulus package
• Authorize funding to hire fraud prosecutors and investigators at the Department of Justice, the FBI, and other law enforcement agencies, and authorize funding for U.S. Attorneys’ Offices to help staff FBI mortgage fraud task forces.
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  Amend the federal securities statute to cover fraud schemes involving commodities futures and options
• Amend the criminal money laundering statute to make clear that the proceeds of specified unlawful activity include the gross receipts of the illegal activity, and not just the profits of the activity
• Improve the False Claims Act to clarify that the Act was intended to extend to any false or fraudulent claim for government money or property, whether or not the claim is presented to a government official or employee, whether or not the government has physical custody of the money, and whether or not the defendant specifically intended to defraud the government.

A hearing on financial fraud is scheduled in the Senate Judiciary Committee for Wednesday, February 11.  Leahy is the Chairman of the Committee, and Grassley is a senior member of the panel.

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