Leahy-Authored Provisions To Address Wartime Fraud Set To Become Law

 

WASHINGTON (Saturday, September 27, 2008) – A provision authored by Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) to suspend the statute of limitations for prosecuting wartime contracting fraud will become law when the President signs a continuing resolution that includes the fiscal year 2009 defense appropriations bill, which was passed by the Senate Saturday.

 

The language, introduced by Leahy in April as the Wartime Enforcement of Fraud Act (WEFA), has received bipartisan support.  The bill was reported by the Senate Judiciary Committee in July, and Leahy successfully worked to adopt the bill as an amendment to the defense appropriations bill earlier this year.  The provisions will give the government the ability to prosecute cases of fraud during a time of war, and close a loophole in a World War II-era law that has prevented the government from seeking criminal prosecution for individuals and companies who have delivered defective products or overbilled for their services.

 

“With passage of this bill today, Congress has taken action, as it has in the past, to protect the American taxpayer and make sure the money spent to support the troops is not wasted by fraud and corruption,” said Leahy.  “The President should now sign this bill to show the American people that we will do all we can to investigate and prosecute those who would undermine our troops and steal from the taxpayer during times of war.”

 

Closing the loophole in the 1942 law will allow the government to prosecute wartime fraud in Congressional-authorized conflicts, including those in Iraq and Afghanistan.  The Leahy-authored provisions will:

 

• Suspend the statute of limitations for war contracting fraud when Congress has authorized the use of military force consistent with the War Powers Resolution, and apply current law suspending the statute of limitations to the wars in Iraq and Afghanistan
• Extend the statute of limitations from three to five years after the end of a war, consistent with the current statute of limitations for criminal offenses
• Mandate that 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
• Clarify that the term “war” includes Congressional authorizations for the use of military force consistent with the War Powers Resolution

 

Billions of dollars have been awarded to companies that failed to deliver satisfactory products in the ongoing conflicts in Iraq and Afghanistan, including faulty ammunition and unsafe bullet proof vests, potentially endangering the lives of American troops.  Leahy also added provisions of the Wartime Enforcement of Fraud Act in the National Defense Authorization Act.  The funding bill and the Leahy-authored extension on the statute of limitations for wartime fraud will now be sent to the President for signature.

 

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Statement of Senator Patrick Leahy,

Chairman, Senate Judiciary Committee,

On the Passage of “The Wartime Enforcement of Fraud Act of 2008”

In the Consolidated Security, Disaster Assistance and Continuing Appropriations Act
September 27, 2008

 

It is encouraging that Congress today passed the Wartime Enforcement of Fraud Act of 2008 as part of the Consolidated Security, Disaster Assistance and Continuing Appropriations Act.  This is a modest but important commonsense measure that will help restore accountability and deter fraud in the many billions of dollars worth of contracts in connection with the two wars we continue to fight.

 

The failed legacy of the Bush administration is clearer today than ever before, as our Nation faces unprecedented crises at home and abroad.  The financial markets are in turmoil as a result of mismanagement of the economy and neglect of the regulatory process that helps maintain confidence in the market.  Americans are losing their homes to foreclosure at record rates.  Our country remains mired in Iraq, fighting a war that President Bush should never has started, that continues to cost too many lives and billions of dollars each month, with no end in sight.

 

As part of this legacy, the Bush administration has further failed to meet one of its most important obligations during wartime – to protect American taxpayers from losses due to fraud and corruption in war contracting.  Fraud and corruption in contracting are all too common in times of war, and these problems have been particularly pervasive in Iraq. 

 

New reports just this week have confirmed that corruption and fraud have robbed billions from the American taxpayers during the Iraq war.  The former chief investigator of the Iraqi Commission on Public Integrity, Salam Adhoob, testified before Congress this week that $9 billion in U.S. taxpayer funds have been lost to corruption and fraud in Iraq. 

 

Mr. Adhoob described how senior Iraqi defense officials set up fraudulent front companies that were supposed to buy airplanes, armored vehicles, and guns with $1.7 billion in U.S. funds.  But these companies failed to deliver most of the military equipment, and what they did provide was mostly junk, including defective ammunition and unsafe bulletproof vests.   These companies also overcharged for military helicopters and aircraft, delivering useless decades-old equipment.  Most of the money ended up in German bank accounts controlled by these Iraqi defense officials.

 

The Iraqi chief investigator prepared a full report based on this investigation, and thousands of others, and submitted the documentation to the Iraqi government, as well as to U.S. investigators.  Yet so far, neither the Bush administration nor the Iraqi government has taken action in these cases.  Instead, the Iraqi government has passed laws giving immunity to many of its corrupt officials, and the U.S. investigators have too often stalled trying to find witnesses and review documents in the midst of a war zone.    

 

These examples of fraud and corruption are not isolated, or new.  Over the past two years, I have chaired hearings in the Appropriations and Judiciary Committees focused on the billions of dollars that have been lost to contracting fraud, waste, and abuse during this war.  The testimony at those hearings has also exposed the Bush administration’s failure to take aggressive action to enforce and punish wartime fraud.  These hearings have shown how difficult it can be for investigators to uncover and prosecute fraud amidst the chaotic environment of war. 

 

These persistent problems have been made worse by the Bush administration’s use of “no-bid” and “cost-plus” contracts that have been awarded with little, if any, oversight or accountability.  Billions in cash – physical, paper money – have been flown to Iraq and handed out in paper bags, often without records of who received what, and when.  Billion-dollar contracts for training services cannot be audited because the records are incomplete, lost, or in disarray.  As a result, time and time again, the government has paid for services that were never needed or never provided and for equipment that was too often substandard or actually defective.    

 

But as we found again this week, too often we do not learn about wartime fraud and corruption until years after the fact.  What we do know is that billions of dollars are unaccounted for, and likely lost to war profiteers and corrupt officials.  Fraud investigators from the offices of several Inspectors General, as well as the Special Inspector General for Iraq Reconstruction and the Federal Bureau of Investigation, are working to figure out where the money has gone and who has taken it.  But they have told us it will take a long time, in some cases years, to figure out exactly what has happened with the billions of dollars in fraud related to war contracts.  

 

In the meantime, the statute of limitations that bars Federal fraud prosecutions after five years threatens to make this work meaningless and essentially immunize those who are responsible.  The wars in Iraq and Afghanistan have gone on for far more than five years, and with each passing day, we are losing the authority to prosecute fraud committed early on in the wars.  As time passes, we are effectively granting immunity to these criminals and letting them get away with taxpayers’ money. 

 

I introduced the Wartime Enforcement of Fraud Act of 2008 to correct this problem once and for all.  Passage of this legislation today is an important step forward to make sure all those who have committed fraud will be held to account.  Put simply, this bill will give the government more time to continue investigating these massive wartime frauds and, in time, this provision should save American taxpayers untold millions and help punish those responsible for the fraud. 

 

Our country has faced this same problem in past wars and taken similar action.  During World War II, President Franklin Delano Roosevelt spoke out against "war millionaires" who made excessive profits exploiting the calamity of war.  President Harry Truman, when he served in the Senate, held historic public hearings to expose gross fraud and waste by military contractors during the war. 

 

In 1942, President Roosevelt signed the Wartime Suspension of Limitations Act, which made it possible for criminal fraud offenses against the United States to be prosecuted after the war was over.  President Truman made that law permanent in 1948. 

 

Everyone understood then that it was unrealistic to believe that all wartime fraud could be tracked down immediately in the midst of a war.  The law provided an extension of the statute of limitations until the war was over.  Congress supported this law overwhelmingly, as they had with a similar provision during World War I.  President Roosevelt wrote: "The crisis of war should not be used as a means of avoiding just penalties for wrongdoing."   

 

Unfortunately, this Roosevelt-era law does not appear to apply to the ongoing conflicts in Iraq and Afghanistan.  Current law only applies "when the United States is at war," but the military operations in Iraq and Afghanistan were undertaken without formal declarations of war.  As a result, this law technically does not apply to these ongoing conflicts.

 

This bill simply amends current law to make clear that extending the statute of limitations during wartime applies to the wars in Iraq and Afghanistan.  In doing so, we will give investigators and auditors the time necessary to continue their efforts to uncover the wartime frauds and prosecute those who are responsible.  Without this bill, fraudulent conduct by war contractors and corrupt officials will go unpunished, and the government will have no ability to recover taxpayer money lost to these criminals.     

 

The statute of limitations is an important check on the proper use of government power, and we should suspend it only in extraordinary circumstances.  Wars provide exactly such circumstances, as Congress and Presidents have recognized in the past.  It would be wrong to exempt the wars in Iraq and Afghanistan from this common sense law, and passage of this bill will close that loophole for the Iraq and Afghanistan wars, as well as any future wars.    

 

With passage of this bill today, Congress has taken action, as it has in the past, to protect the American taxpayer and make sure the money spent to support the troops is not wasted through fraud and corruption.  The President should now sign this bill to show the American people that we will do all we can to investigate and prosecute those who would undermine our troops and steal from the taxpayer during times of war. 

 

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