[Congressional Record Volume 153, Number 152 (Tuesday, October 9, 2007)]
[House]
[Pages H11356-H11363]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1730
WAR PROFITEERING PREVENTION ACT OF 2007
Mr. SCOTT of Virginia. Mr. Speaker, I move to suspend the rules and
pass
[[Page H11357]]
the bill (H.R. 400) to prohibit profiteering and fraud relating to
military action, relief, and reconstruction efforts, and for other
purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 400
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 ``War Profiteering Prevention
Act of 2007''.
SEC. 2. PROHIBITION OF PROFITEERING.
(a) Prohibition.--
(1) In general.--Chapter 47 of title 18, United States
Code, is amended by adding at the end the following:
``Sec. 1040. War profiteering and fraud
``(a) Prohibition.--Whoever, in any matter involving a
contract with, or the provision of goods or services to, the
United States or a provisional authority, in connection with
a mission of the United States Government overseas,
knowingly--
``(1)(A) executes or attempts to execute a scheme or
artifice to defraud the United States or that authority; or
``(B) materially overvalues any good or service with the
intent to defraud the United States or that authority;
shall be fined not more than $1,000,000 or imprisoned not
more than 20 years, or both; or
``(2) in connection with the contract or the provision of
those goods or services--
``(A) falsifies, conceals, or covers up by any trick,
scheme, or device a material fact;
``(B) makes any materially false, fictitious, or fraudulent
statements or representations; or
``(C) makes or uses any materially false writing or
document knowing the same to contain any materially false,
fictitious, or fraudulent statement or entry;
shall be fined not more than $1,000,000 or imprisoned not
more than 10 years, or both.
``(b) Extraterritorial Jurisdiction.--There is
extraterritorial Federal jurisdiction over an offense under
this section.
``(c) Venue.--A prosecution for an offense under this
section may be brought--
``(1) as authorized by chapter 211 of this title;
``(2) in any district where any act in furtherance of the
offense took place; or
``(3) in any district where any party to the contract or
provider of goods or services is located.''.
(2) Table of sections.--The table of sections for chapter
47 of title 18, United States Code, is amended by adding at
the end the following:
``1040. War profiteering and fraud.''.
(b) Criminal Forfeiture.--Section 982(a)(2)(B) of title 18,
United States Code, is amended by striking ``or 1030'' and
inserting ``1030, or 1040''.
(c) Money Laundering.--Section 1956(c)(7)(D) of title 18,
United States Code, is amended by inserting ``section 1040
(relating to war profiteering and fraud),'' after
``liquidating agent of financial institution),''.
(d) RICO.--Section 1961(1) of title 18, United States Code,
is amended by inserting ``section 1040 (relating to war
profiteering and fraud),'' after ``in connection with access
devices),''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Virginia (Mr. Scott) and the gentleman from Florida (Mr. Keller) each
will control 20 minutes.
The Chair recognizes the gentleman from Virginia.
General Leave
Mr. SCOTT of Virginia. Mr. Speaker, I ask unanimous consent that all
Members have 5 legislative days to revise and extend their remarks and
to include material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Virginia?
There was no objection.
Mr. SCOTT of Virginia. Mr. Speaker, I yield myself such time as I may
consume.
Reconstruction fraud has run rampant during the engagement of the
U.S. forces in Iraq and Afghanistan. The United States has devoted more
than $50 billion to relief and reconstruction activities there, and at
least $8.8 billion cannot be accounted for.
Some of the reports of excessive profiteering are simply appalling.
For example, one contractor was hired to build the Baghdad Police
College, a facility to house and train more than 4,000 police recruits.
After spending $72 million of U.S. taxpayer money, the contractor
delivered an engineering nightmare with so many plumbing problems that
auditors from the Special Inspector General for Iraq Reconstruction
said that during the visit a substance dripped from the ceiling onto an
assessment team member's shirt.
It's not only construction. There are widely reported stories of
contractors double-charging taxpayers for sodas and overcharging the
government 600 percent for fuel shipments.
Another report has a company running convoys of empty trucks back and
forth across an insurgent-laden desert, pointlessly risking the lives
of soldiers and drivers so the company could charge the taxpayer for
phantom deliveries. Truckers referred to their cargo as sailboat fuel.
Inspector Generals have opened hundreds of investigations into fraud
and waste in Iraq and Kuwait and Afghanistan involving illegal
kickbacks, bid-rigging, embezzlement and fraudulent overbilling.
The Special Inspector General for Iraq Reconstruction has more than
70 open and active investigations in contracting fraud and abuse in the
war. In addition, private whistleblowers have filed numerous civil
claims involving Iraq fraud under the False Claims Act.
Despite the breadth of all of these investigations and civil claims,
the Department of Justice has chosen to pursue a relatively small
number of cases. To promote a more vigorous Department of Justice
prosecution of reconstruction fraud, the gentleman from Hawaii (Mr.
Abercrombie) has introduced H.R. 400, the War Profiteering Prevention
Act of 2007.
Although there are anti-fraud laws to protect against waste of U.S.
taxpayers' money at home, no law specifically prohibits war
profiteering or expressly confers jurisdiction of U.S. courts to hear
the fraud cases when our forces and reconstruction efforts are deployed
overseas.
To clarify the full reach of the U.S. jurisdiction to appropriately
punish this conduct wherever it may occur, H.R. 400 would criminalize
overcharging taxpayers to profit excessively with the intent to defraud
the United States Government or any provisional authority, such as the
former Coalition Provisional Authority in Iraq.
This crime would be a felony, with criminal penalties up to $1
million in fines and up to 20 years in prison. In addition to
prohibiting fraud, H.R. 400 also criminalizes false statements in
providing goods and services in connection with the war or
reconstruction effort. This crime would also be a felony, subject to
criminal penalties up to $1 million and up to 10 years in prison.
The bill before us makes a few technical changes to the bill that was
reported out of committee. Among them is a deletion of a provision
providing for an alternative fund of twice the gross profits or other
proceeds of the crime.
This alternative fund essentially duplicates and would possibly
displace a stronger current provision in the law, section 3571(d) of
title 18 of the U.S. code, which applies to all crimes.
But also note that the bill explicitly provides for an
extraterritorial jurisdiction. The inclusion of this provision is meant
to make it abundantly clear that this statute reaches war profiteering
crimes wherever they may occur. However, it is not intended and should
not be interpreted to undermine the extraterritorial reach of any other
Federal criminal statute.
H.R. 400 sends a resounding warning, which I hope would be heard and
taken to heart by all relief and reconstruction contractors doing
business with the U.S. Government or any provisional authority
operating under our control, that is, that contracting fraud not only
undercuts our missions overseas, it is illegal. If you engage in it,
you can expect to be vigorously prosecuted.
I urge my colleagues to support the bill.
Mr. Speaker, I reserve the balance of my time.
Mr. KELLER of Florida. Mr. Speaker, I yield myself as much time as I
may consume.
Mr. Speaker, I rise in support of H.R. 400, the War Profiteering
Prevention Act of 2007. If a contractor in Iraq decides to engage in
the corrupt business practice of overbilling the U.S. military to
maximize his profits, he will now face 20 years in a Federal prison
cell and a fine of $1 million.
Those bad apples who defraud the American taxpayer must be held
accountable, regardless of whether the sleazy, fraudulent practice
occurred in the United States, Afghanistan, or Iraq. This is especially
true when the
[[Page H11358]]
fraud relates to our military and reconstruction activities in Iraq and
Afghanistan, because such schemes could directly harm our country's
global war against terrorism.
Moreover, corruption by a handful of individuals who are ostensibly
engaged in supporting our military and reconstruction efforts in Iraq
and Afghanistan unfairly tarnishes the reputation of the many honorable
military and civilian contractors, the overwhelming majority of whom
risk their lives daily and professionally perform their duties.
Fortunately, according to the testimony of Stuart Bowen, Jr., the
Special Inspector General for Iraq Reconstruction, most contractors are
good apples, and the incidence of corruption within the U.S.
reconstruction program constitutes a small component of the overall
American financial contribution to Iraq's reconstruction.
These cases often require extensive investigative resources and
documentation. Having to gather such evidence in a dangerous setting
like Iraq or Afghanistan makes it difficult to build a successful
criminal case.
Nevertheless, the U.S. Government has brought many successful
prosecutions, and it will likely bring more. For example, Philip Bloom
was sentenced earlier this year to 46 months in prison as a result of
his scheme to defraud the Coalition Provisional Authority by rigging
contract bids in excess of $8.6 million.
In addition, Robert Stein, the former Coalition Provisional Authority
comptroller and funding officer, was sentenced to 9 years in prison
earlier this year. He was prosecuted and convicted of funneling
numerous contracts to Bloom in exchange for kickbacks and bribes.
Overall, the Special Inspector General for Iraq Reconstruction has
opened over 300 criminal and civil investigations, leading to 10
arrests, five persons indicted, five convicted, and two imprisoned. The
Inspector General continues to work on 79 live investigations, and
these investigations may involve one or more targets. Twenty-eight of
these investigations are currently being prosecuted by the Department
of Justice, 23 of these are criminal cases, and five are civil.
In short, this legislation creates a new crime with a maximum term of
imprisonment of 20 years, which is double the existing crime of fraud
against the government, and deservedly so.
I urge my colleagues to vote ``yes'' on H.R. 400.
Mr. Speaker, I reserve the balance of my time.
Mr. SCOTT of Virginia. Mr. Speaker, I yield such time as he may
consume to the author of the bill, the gentleman from Hawaii (Mr.
Abercrombie).
(Mr. ABERCROMBIE asked and was given permission to revise and extend
his remarks.)
Mr. ABERCROMBIE. Mr. Speaker, I submit for the Record a statement
from Stuart W. Bowen, Jr., Special Inspector General for Iraq
Reconstruction.
Statement of Stuart W. Bowen Jr., Special Inspector General for Iraq
Reconstruction, Before the United States House of Representatives
Committee on the Judiciary Subcommittee on Crime, Terrorism, and
Homeland Security
War Profiteering and Other Contractor Crimes Committed Overseas
(Tuesday, June 19, 2007, Washington, DC)
Chairman Scott, Ranking Member Forbes, and members of the
Subcommittee, thank you for this opportunity to address you
today on the work of the Office of the Special Inspector
General for Iraq Reconstruction.
To ensure accurate context, permit me to outline several
points essential to understanding the challenges of
investigating and prosecuting fraud in Iraq.
First, corruption within the Iraqi government, indeed
within the fabric of Iraqi society, is a serious problem that
inhibits progress on many fronts in Iraq. This is widely
recognized by the Government of Iraq and the international
community. In our quarterly reports, SIGIR has called Iraq's
endemic corruption problem a ``second insurgency.''
I returned last month from my 16th trip to Iraq and, during
my visit, I met with the Commissioner of Public Integrity,
who heads the institution created by the CPA to increase
accountability for public corruption in Iraq--and the
President of the Board of Supreme Audit, the analogue to the
Government Accountability Office, which has existed in Iraq
for many decades. The Iraqi anti-corruption authorities again
emphasized to me the widespread nature of the problem of
corruption, which stretches across the government, afflicting
virtually every ministry. And they outlined for me the
difficulties they face in implementing their respective anti-
corruption mandates.
The CPI Commissioner told me that he currently has 2,000
cases involving $5 billion in alleged corruption. And the
President of the Board of Supreme Audit has hundreds of
audits ongoing. In virtually every case, he is uncovering a
lack of accountability. Let me emphasize that the CPI and the
BSA oversee Iraqi money--not U.S. money--that is missing or
has been stolen from Iraqi programs.
During my visit, I was informed about political
interference with the work of Iraqi investigators and
prosecutors. For example, I learned that Ministers and former
Ministers are exempt from prosecution unless the assent of
the Prime Minister is obtained; and each Minister is
entitled, under an Iraqi criminal code provision, to immunize
selectively ministry employees from being held accountable
for corruption.
Iraq must make progress on rule of law enforcement, in
general, and corruption, in particular; political
interference with fighting corruption remains a problem,
undermining the effectiveness of the developing rule of law
system and consequently eroding the Iraqi people's confidence
in their government.
Iraq is a sovereign state. The role of the United States
thus is to encourage the development of an efficient Iraqi
justice system. We do this for its own sake and for the sake
of maintaining and building upon the efforts made, at great
cost in blood and treasure, by Americans and Iraqis since the
liberation of Iraq.
SIGIR's specific role in this process has been to review
the effectiveness of United States efforts to improve the
rule of law system and to build up the corruption-fighting
capacity of the Iraqi government.
On July 28, 2006, SIGIR released a survey on this subject
and found that American efforts were funded at a very modest
level, given the scope of the problem, receiving about $65
million (about three-tenths of 1 percent of our total
reconstruction spending). My auditors found that American
efforts have not been sufficiently coordinated and focused
and that more adequate leadership and organization was
needed. The U.S. Embassy has responded to some of these
concerns since the review was released. SIGIR will soon
release another review on the issue, updating our previous
report.
SIGIR has a continuing investigative responsibility to
detect and investigate malfeasance in American relief and
reconstruction programs in Iraq. As part of this effort, we
have developed good working-level and leadership-level
relationships with the CPI and the BSA. We coordinate with
these Iraqi agencies whenever we come across evidence of
potential wrongdoing by Iraqis. SIGIR, of course,
concentrates its law enforcement efforts on American targets
and works with the Department of Justice in their effective
prosecution.
My second point is that the incidence of corruption within
the U.S. reconstruction program--judging from those cases
that we have uncovered thus far--appears to constitute a
relatively small component of the overall American
financial contribution to Iraq's reconstruction. Based on
the work of our 18 career investigators on SIGIR staff, I
believe that losses to American taxpayers from fraud
within reconstruction programs will likely amount to a
relatively small component of the overall investment in
Iraq, totaling in the tens of millions (rather than
hundreds of millions or billions, as is sometimes
imagined). However, the fact that the fraud we have
detected is relatively small (to date) does not diminish
the aggressiveness with which SIGIR pursues allegations of
fraud in Iraq. We have found egregious incidents of fraud.
And in partnership with the Department of Justice, SIGIR
has produced clear results in prosecutions and
convictions.
For example, in January, two individuals were sentenced to
prison as a result of SIGIR investigations. In early
February, indictments were announced of five more
individuals, resulting from SIGIR investigations. To date,
SIGIR has opened over 300 cases, and we have over 70 ongoing
investigations. Thirty-two of those cases are under
prosecution at the Department of Justice.
We believe that the publicity our enforcement actions have
received has helped to deter misconduct in the U.S.
reconstruction program. And we also believe that enforcement
will be an increasingly important part of SIGIR's mission
over the next 18 months. Moreover, in the course of this
year, we expect to produce concrete investigative results as
significant current cases come to fruition.
SIGIR remains committed to a robust, deterrent presence in
Iraq as long as our temporary organization exists. Today, I
have five investigators on the ground in Iraq investigating
fraud. Although there are other law enforcement agencies
fighting fraud in Iraq, SIGIR has maintained over the past 3
years the largest contingent of fraud investigators in Iraq.
My investigators travel the country under dangerous
conditions, pursuing leads, interviewing witnesses, and
piecing together evidence on a wide variety of cases. Their
work also takes them to other countries in the region. Of
note, SIGIR is currently reducing its overall personnel
``footprint'' in Baghdad in conjunction with the reduction in
spending of appropriated dollars on Iraq reconstruction.
One of the most important aspects of our investigative
efforts is the development of
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task-force relationships with other agencies involved in
oversight in Iraq, including may colleagues from the Office
of Inspector General of the Department of Defense and the
Defense Criminal Investigative Service, as well as the
Federal Bureau of Investigation. SIGIR has 16 investigators
in Arlington, and we are participating in the new Joint
Operations Center located at the FBI to coordinate and
enhance fraud investigations in Iraq.
SIGIR's first task force was the Special Investigative Task
Force for Iraq Reconstruction (SPITFIRE), and it combined the
efforts of the Internal Revenue Service, the Department of
Homeland Security, Immigrations and Customs enforcement
office, the FBI and the Department of State Office of
Inspector General. That task force was able to effectively
pursue the Bloom-Stein conspiracy that my auditors
uncovered in Hillah, Iraq--a very egregious kickback and
bribery scheme involving over $10 million in
reconstruction funds that Philip Bloom, the contractor,
and Robert Stein, the Coalition Provisional Authority
comptroller for that region, engineered for their own
criminal ends. SPITFIRE continues its work today; and we
continue to pursue a number of leads that arose from the
Bloom-Stein case.
The other major task-force initiative that SIGIR has
initiated with the FBI is the International Contract
Corruption Task Force (ICCTF). ICCTF prompted the creation of
the Joint Operations Center mentioned above, which is
producing the effective collection and coordination of
investigative leads and source development. Although I am not
at liberty to discuss details of these cases, I am very
pleased with the very significant progress the JOC
investigators have made, news of which I expect to be
forthcoming later this year.
Along with SIGIR, the ICCTF includes the U.S. Army's
Criminal Investigative Division's Major Procurement Fraud
Unit, the Defense Criminal Investigative Service, the FBI,
and the inspectors general of the Department of State and the
Agency for International Development.
SIGIR is also part of the DOJ National Procurement Fraud
Task Force. We continue to work closely with DOJ in the
investigation and prosecution of our cases.
Finally, to coordinate efforts in oversight in Iraq, I
formed the Iraq Inspector Generals' Council, IIGC, 3 years
ago, which brings together every agency with oversight
authority in Iraq for a meeting every quarter. The IIGC
exists to deconflict and coordinate the member agencies'
oversight efforts in Iraq.
SIGIR is not limiting its efforts just to addressing
contractor misconduct through the criminal justice system. We
also refer cases to the U.S. government's administrative
debarment and suspension processes. To date, the competent
oversight authorities have, through established rules that
preserve due process, suspended 17 companies and individuals,
debarred ten, and have another nine pending debarments.
To date, SIGIR has produced 13 quarterly reports, 86 audit
reports, and 90 inspection reports. Our auditors and
inspectors regularly refer investigative leads to our
investigators some of which have developed into very
significant cases. The Bloom-Stein case is just one example.
SIGIR's three lessons-learned reports produced to date have
provided recommendations on policies designed to improve
economy, efficiency and effectiveness for the Iraq program
and for future reconstruction and stabilization operations.
The reports have prompted the introduction of reform measures
in the Congress that will improve contracting processes.
SIGIR is at work on a lessons-learned capping report, which
will be produced at the end of this year. It is my hope that
our lessons learned reports will prompt reforms that will
improve the capacity of law enforcement to deter crime.
Mr. Chairman, with respect to H.R. 400, Representative
Abercrombie's bill entitled the ``War Profiteering Prevention
Act of 2007,'' our position is essentially what it was when
we were asked to reflect on its counterpart at a Senate
hearing this past March. SIGIR remains a strong proponent of
legislation that would strengthen efforts to punish fraud or
abuse in contracting programs in Iraq or elsewhere. We look
forward to working with the Department of Justice to enforce
H.R. 400, should it become law. We are, however, unaware of
instances where the Justice Department was unable to
prosecute, under existing law, on the facts we developed in
our investigations.
One of our responsibilities in Iraq is to encourage
efficiency in the reconstruction effort. In that role, we
have prompted management to seek the widest possible
participation by business enterprises (especially Iraqi
firms) in reconstruction. The security risks in Iraq are
self-evident, and thus the risks to any business enterprise
operating in such an environment are mammoth. International
companies likely will not get into the business of
reconstruction in Iraq without incentives that render the
risk-taking worthwhile. This reality should figure in the
development of legislation that affects contracting in Iraq
or similarly insecure environments.
Whether H.R. 400 becomes law, SIGIR will continue to
aggressively pursue investigations, provide robust oversight
through audits and inspections, and will press for more
efforts to improve contract administration, quality
assurance, and quality control. It is my hope that our
continuing efforts will help promote an aim we all share--a
reconstruction program that is administered and executed
honestly, and is as well-managed and efficient as possible
under very challenging circumstances.
Mr. Chairman, members of the Committee, thank you for your
time and attention to these important matters, and I look
forward to answering your questions.
Mr. ABERCROMBIE. I want to pay a special thank you, a big mahalo, to
Mr. Scott and to the Judiciary Committee for their hard work. I am very
grateful to the ranking members, the Republicans and Democrats. We
cannot resolve this without seeing to it that we have a bipartisan
approach on this.
I am particularly grateful to Senator Pat Leahy, who is the Judiciary
Chairman in the Senate, for entrusting this bill to our care here in
the House and allowing me to introduce it as a companion bill to the
one that has passed in the Senate. I am very hopeful that we can get a
vote in the Senate and move this to the President's desk.
When the wrong computer equipment arrived in Iraq, the contractor
ordered it dumped into a mammoth burn pit and placed an order for
replacements, rather than sending it back. The government paid for both
the wrong computers and the replacements. The contractor collected a
fee for each, thanks to a cost-plus contract.
Halliburton had drivers driving empty trucks between bases in Iraq,
unnecessarily exposing the drivers to danger, because the company was
paid by the trip, not by the amount of materiel hauled or a flat fee;
$186 million was spent over 2 years to build 142 health care centers,
yet only 15 have been completed and only eight are open. According to
testimony, the contractor lacked qualified engineers, hired incompetent
subcontractors, failed to supervise construction work, and failed to
enforce quality control.
A large U.S. construction company was paid tens of millions of
dollars to repair Iraq's schools. Many of the schools were never
touched, and several that were repaired, and I say that in quotes, were
left in shambles, one filled with unflushed sewage.
At least 10 companies with billions of dollars in contracts have
already been forced to pay up to $300 million in penalties to resolve
allegations of bid-rigging, fraud, gross overcharging, delivery of
faulty military parts and environmental damage, $300 million in
penalties. Some of these same companies have faced such allegations
during past military operations in other countries, but have had no
problem receiving new contracts in Iraq.
Despite millions of dollars in payments to U.S. companies, key pieces
of Iraq's infrastructure, power plants, telephone exchanges, sewage and
sanitation systems, have either not been repaired or have been fixed so
poorly that they still don't function.
How has this been allowed to happen? The United States Government
directly and through the late Coalition Provisional Authority have
outsourced the war in Iraq like no other in our history, spending more
than $50 billion on private contractors to provide food, water,
gasoline and other supplies, guard bases, drive trucks, and many other
activities in support of our troops.
But consistent with the administration's overall attitude toward
spending public money with private companies, little or no thought was
given to contract oversight or accountability. As a result, some of
these contractors have declared the U.S. occupation of Iraq open season
on the taxpayer. Cleaning up this mess has been hampered by the fact
that while anti-fraud laws protect against the waste or theft of U.S.
taxpayers in the United States, there have been no statutes prohibiting
sleazy business practices by American companies overseas.
As we have learned in the investigation of the Blackwater USA
contract, the Coalition Provisional Authority issued order number 17,
which specifically exempted U.S. contractors from Iraqi law.
In fact, one contractor was found guilty of 37 counts of fraud,
including false billing, and was ordered to pay more than $10 million
in damages, but the decision was overturned because the contracts were
let through the Coalition Provisional Authority, and it was found that
U.S. laws against fraud did not apply.
Despite the fact that the Coalition Provisional Authority was created
by the Bush administration under the Department of Defense; despite the
fact
[[Page H11360]]
that L. Paul Bremer, the overseer in Iraq, subsequent to the initial
attack on Iraq, had an office literally across the hall from Secretary
Rumsfeld, the Coalition Provisional Authority was not considered part
of the U.S. Government, and, therefore, U.S. laws were unenforceable.
These practices are a flagrant abuse of the public's trust and the
public's money during a time of war and cannot be allowed to continue.
H.R. 400, the War Profiteering Prevention Act of 2007, will, one,
criminalize war profiteering defined as contract fraud or overcharging
for goods and services in connection with the mission of the United
States Government overseas; two, violations of law will be a felony and
punishable up to 20 years in prison and fines up to $1 million or twice
the illegal profits of the crime; three, jurisdiction for such cases,
no matter where the alleged crimes are committed, will be in the United
States Federal court.
H.R. 400 was heard and considered by the House Judiciary Subcommittee
on Crime, Terrorism and Homeland Security and ordered reported to the
full Judiciary Committee by a voice vote on August 1. Among the many
significant consequences of the decision to invade and occupy Iraq
marked by a complete dismissal of the need for intelligent planning and
stunning incompetence in the conduct of the war, this problem has
received too little attention from the news media, the public, and the
Congress.
{time} 1745
Most of the cases of fraud, questionable business practices and
outright corruption have been uncovered and investigated through the
efforts of the Special Inspector General for Iraq Reconstruction, Mr.
Stuart Bowen, Jr. Mr. Bowen and his super staff both here in the U.S.
and on the ground in Iraq have provided oversight and insight under the
most difficult conditions imaginable for billions of American taxpayer
dollars intended to rebuild Iraq and support our troops in combat. They
deserve our gratitude. They deserve the gratitude of the Congress and
the Nation for a tough job well done.
Mr. Speaker, this bill, together with H.R. 2740, legislation passed
by this House last week to expand the reach of the Uniform Code of
Military Justice to private civilian security operatives in the region
are two important steps this Congress is taking to clean up the mess in
Iraq.
H.R. 400, in conclusion, Mr. Speaker, the War Profiteering Prevention
Act will help end the open season declared on American taxpayers.
Mr. KELLER of Florida. Mr. Speaker, at this time I yield 5 minutes to
the gentleman from Virginia (Mr. Tom Davis).
Mr. TOM DAVIS of Virginia. Mr. Speaker, I rise today to oppose this
bill, not because I oppose punishing war profiteers or punishing
corruption in contracting. I think these are critical, important
laudable goals.
I oppose this bill because creating a new law ``involving a contract
or the provision of goods or services to the United States'' is a
matter which must be considered in relation to the existing Federal
acquisition systems, which this bill is not. Any attempt to legislate
without considering the current system can have disastrous, albeit
unintended, consequences which in this case include serious criminal
penalties.
As others have said today, we all agree that fraud against the United
States undermines national security and there must be severe penalties
for it. And of course we all agree corruption of any kind is
unacceptable. Our committee in the last Congress held several hearings
on contracting in Iraq and the difficulties that were faced there. And
if the current law is inadequate to punish wrongdoers for these
offenses, Congress should act.
But taking up this bill in this way at this time proves to me that
some of my colleagues on the other side of the aisle are caring about
passing a bill so that they can take political potshots at contractors.
Hundreds of contractors' lives have been lost over in Iraq, and I think
the widows and the mothers of these sons and daughters who have been
killed in Iraq would be, I think, chagrined to hear their sons referred
to as profiteers. In many cases the contractors are more in harm's way
than our troops. They don't get the body armor. Many of them don't
operate in the Green Zone or on bases. This is, in fact, a substitute,
a proxy, if you will, because the majority can't put together a plan to
end the war in Iraq so we go after contracting in Iraq. I think there
are some things we could do, but I don't think this bill is the
appropriate way to get through it. The words in this case don't make
sense. It's not good law. What you care about is contractor bashing,
consequences be damned.
It is hard to get good companies to do business in Iraq. It is
dangerous, it is expensive, it has all kinds of contingencies, and a
lot of the best companies say we don't want to have anything to do
with.
The relationship between the government and the contractor is an
arms-length business one, with many laws outlining how this
relationship should proceed. Adding additional language to the criminal
code regarding certain aspects of this relationship will have
unintended consequences which have to be considered before moving this
legislation forward.
For example, the bill makes it a crime to materially overvalue a good
or service. Under the Truth in Negotiation Act, a detailed process is
already set out in which to address claims of defective pricing in
Federal contracts. To those who don't know this government contract
lingo, this might sound like fraudulent behavior.
But defective pricing occurs when a company's contract price is
significantly increased because the company submitted pricing data that
was not accurate, complete and current. That's 10 U.S.C. 2306(a). In
these cases, the government is generally entitled to a price reduction
to remedy any overcharge by the submission of defective pricing data.
The government takes seriously overpayments based on defective
pricing and aggressively pursues contractors found to have engaged in
these practices, in some cases including debarment. A contractor's
liability can extend beyond the repayment of any overcharges, and under
current law, can include fraud claims against the contractor.
But under H.R. 400, would an overzealous prosecutor be able to go
after a company with a defective pricing claim against it as materially
overvaluing a good or service? Maybe. Maybe not. But we, on the
Oversight and Government Reform Committee with jurisdiction over
Federal procurement should have the opportunity to consider this
language and its impact on the Federal acquisition system.
The interrelationship of procurement law and the criminal law can be
complicated. We have to be careful not to criminalize procurement
management matters just because you can. Careful study is required to
separate criminal behavior from management issues.
I see other problems as well. Allowing a Federal prosecutor to enter
post hoc determinations on whether a contract provides appropriate
value to the government would have a chilling effect on a contracting
officer's decisionmaking.
Contractors would be discouraged from providing innovative solutions
to government problems for fear that their solutions would subject them
to charges of material overvaluation if the solution didn't work out as
planned.
Competition would be discouraged, which is the cornerstone of getting
the best price and value because prospective contractors could be
subjected to harsh penalties at the whim of a prosecutor who probably
doesn't understand the acquisition system.
In fixed price contracts, the price which the government buys would
likely increase because contractors would have to include the
possibility of these penalties in their pricing, costing the taxpayers
money.
In commercial contracts the market dictates what is a fair value, not
a post hoc prosecutor's determination whether the government got
appropriate value from the contract.
I support strong penalties for war profiteering. I support strong
penalties for corruption. I do not support H.R. 400 because I don't
believe it has been given appropriate consideration by this House and
numerous unintended consequences.
Mr. SCOTT of Virginia. Mr. Speaker, I yield myself such time as I may
consume, just to point out that the standard in the bill on page 2,
line 10, it says
[[Page H11361]]
that you have to execute or attempt to execute a scheme or artifice to
defraud the United States or materially overvalues any good or service
with the intent to defraud. That's a very high standard, not just
overcharging, but overcharging with the intent to defraud or, in the
second part, tries to cover up the deed. Those are high standards, and
people will know that they're committing a crime when, in fact, they do
that.
Mr. ABERCROMBIE. Mr. Speaker, will the gentleman yield?
Mr. SCOTT of Virginia. I yield to the gentleman from Hawaii.
Mr. ABERCROMBIE. Mr. Speaker, I find it very unfortunate that my good
friend from Virginia has taken a position that the bill in any way
encourages the whims of prosecutors. As Mr. Scott has pointed out, the
standard is very high and applies to any contract, whether it's in the
United States or overseas. There is nothing applied to the contracts
overseas that is not applied to a contract here in the United States
when it comes to the question of fraud or overcharging or deliberate
deception with regard to the contract. That standard has to be met in
any court and has to come before any judge meeting such a standard.
There is no differentiation whatsoever.
The reason the bill is here, and the reason we're bringing the
legislation, is the courts have ruled that there is, at best, an
ambiguous situation, if not an outright gap between the capacity for
prosecution of such a crime, should the standard for the crime be
sustained by a prosecutorial investigation, and what is possible in
Iraq. It can't be prosecuted in Iraq, and the courts found that it
wasn't. We did not have legislation sufficiently clear in the United
States in order to prosecute it. Thus, far from arbitrary or capricious
prosecution, we have the opportunity for arbitrary defrauding of the
United States taxpayer with no consequences. That's why the legislation
is here.
Mr. SCOTT of Virginia. Mr. Speaker, I reserve the balance of my time.
Mr. KELLER of Florida. Mr. Speaker, I yield myself as much time as I
may consume, and then I will turn and yield 30 seconds to Mr. Davis of
Virginia. I will go ahead and respond as Mr. Davis is gathering his
thoughts.
One of the concerns Mr. Davis raised was what if there was some
inadvertent overpricing by a contractor based on a mistake and later
went back and corrected it. My reading of the bill is that person
wouldn't be prosecuted because there's a three-prong standard. First,
you have to knowingly, materially overvalue goods or service with the
intent to defraud. And the intent-to-defraud prong would not be met
under the analogy or the example Mr. Davis gave because ``intent to
defraud'' is a term of art which requires that the actor possesses the
specific intent to cheat the government. And you would not have that
element of the crime proven if you had inadvertent overpricing based on
a mistake.
Now, it doesn't mean you may not have what he's concerned about, an
overzealous prosecutor try to prosecute someone without having the
prongs or the factual basis for it. We can ask the prosecutor from the
Duke case what happens when you're overzealous in your prosecutions.
But I believe under that particular example that person wouldn't be
prosecuted.
However, before I yield to Mr. Davis, let me just say, he does have a
great deal of experience dealing with Government reform issues as the
ranking member and represents a lot of government employees. And so I
certainly am empathetic to his concerns that perhaps his committee
might have had some insight into this bill that was worth looking at.
Mr. Speaker, I yield 30 seconds to the gentleman from Virginia (Mr.
Tom Davis).
Mr. TOM DAVIS of Virginia. Mr. Speaker, I think the key here is that
this legislation is needed. You have defective pricing legislation. You
have Qui Tam actions. You have the Procurement Integrity Act. The
language in this bill that concerns me is not the fact that its intent
to defraud; that's in a lot of legislation. It's materially overvalues
any good. And I can't find any precedent for that in the federal
acquisition regulations. I can't find any precedent in terms of what
this means and how a prosecutor could take this from materially
overvaluing any good. That is a very subjective measurement. There are
a lot of unintended consequences. And I suspect this bill will pass
today, although not with my vote. But I hope we can improve it if we're
going to make this actual law.
Mr. SCOTT of Virginia. Mr. Speaker, I yield such time as he may
consume to the gentleman from Missouri, the chairman of the Armed
Services Committee, Mr. Skelton.
Mr. SKELTON. Mr. Speaker, I think this is a very important piece of
legislation.
Let me take this opportunity to compliment my friend from Hawaii for
introducing it and for bringing it to the floor. Mr. Abercrombie is
indeed to be commended for this work.
What this does is merely closes some loopholes that are presently in
the United States law. Defrauding the Federal taxpayer should be a
felony, and it is subject to considerable years in prison and a fine up
to $1 million or twice the illegal profits of the crime.
When we're in a war situation, you want people to work hard. We
expect a great deal from those in uniform. And we expect those who are
supplying and building and reconstructing in the war-torn area to also
play by the rules as we demand of those young men and young women in
our United States military.
So this bill does the right thing. It goes after the war
profiteering, that is the overcharging in order to defraud or profit
excessively from the war. And this bill also confers jurisdiction
within the Federal courts to hear and try such cases. It's the right
thing. It's the right action for us to take in this Congress.
I, again, compliment the gentleman from Hawaii (Mr. Abercrombie), and
I thank the gentleman from Virginia (Mr. Scott).
Mr. KELLER of Florida. Mr. Speaker, I yield myself as much time as I
may consume and am prepared to yield back as we have no further
speakers.
Mr. Speaker, this is a bipartisan bill. We agree on a bipartisan
basis that when a corrupt contractor overbills our U.S. military, it
rips off the taxpayers, it hurts our national security, and it unfairly
stains the reputation of the many honorable military and civilian
contractors who risk their lives every day and do a professional and
honest job.
{time} 1800
This bill appropriately says that if you plan on overbilling or
ripping off the U.S. military in terms of these contracts to do
reconstruction work or military-related work in Iraq or Afghanistan,
you are going to be sitting in a prison cell for 20 years and you are
going to pay a fine of $1 million. We think that is an appropriate
message to accept in light of this problem. And I urge my colleagues on
both sides of the aisle to vote ``yes'' on H.R. 400.
Mr. Speaker, I yield back the balance of my time.
Mr. SCOTT of Virginia. Mr. Speaker, I yield myself such time as I may
consume.
I thank the gentleman from Florida for his support for the bill. And
as he has indicated when my distinguished colleague from Virginia
pointed out all of the different acts that apply, one of the major
problems was that there is no jurisdiction to actually prosecute those
claims without this legislation. The standard is high. There is an
intent to defraud.
I would hope that the House would pass the bill.
Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise today in support of
H.R. 400, the ``War Profiteering Prevention Act of 2007.'' I support
this bill because it strengthens the tools available to Federal law
enforcement to combat contracting fraud during times of war, military
action, or relief or reconstruction activities.
Mr. Speaker, H.R. 400 creates a new criminal offense in title 18 of
the United States Code for fraudulent acts involving contracts or the
provision of goods and services in connection with war, military
actions, and relief or reconstruction activities. This new offense
provides a significant new tool for federal law enforcement, as well as
creating a strong deterrent to those who would contemplate exploiting
the exigencies of war, military actions, relief or reconstruction
activities to commit fraud and profit thereby.
The new offense may be committed in two ways: (1) By committing fraud
or (2) by making a materially false statement. The fraud provisions
would make it a crime to execute or attempt to execute a scheme or
artifice to defraud the United States or to materially overvalue any
good or service with the specific intent to defraud. These provisions
are designed
[[Page H11362]]
to prohibit schemes to defraud the United States, including efforts to
exploit ``cost plus'' or ``no-bid'' contracts by materially overvaluing
goods or services with the specific intent to defraud.
These provisions are not intended to prohibit or punish contractors
providing goods or services in the normal course of business, and the
legislation specifically requires that violators may only be criminally
liable if they materially overvalue any good or service ``with the
specific intent to defraud.'' This provision is intended to ensure that
no contractor will be prosecuted under this offense for mere negligent
or mistaken conduct.
The material false statement provisions would make it a crime to: (1)
Falsify, conceal, or cover up by any trick, scheme or device a material
fact; (2) make any materially false, fictitious, or fraudulent
statements or representations; or (3) make or use any materially false
writing or document knowing they contain a false, fictitious, or
fraudulent statement. This language is consistent with other material
false statement provisions under Federal law, such as sections 1001 and
1035 of title 18 of the U.S. Code. The new offense also requires that
conduct be done knowingly and willfully to constitute a criminal
violation.
The new offense would require that the fraud or material false
statement be in connection with any war, military action, or relief or
reconstruction activities. This would include circumstances where war
was declared, or where the executive branch was engaged in any military
action with or without congressional authorization. This would also
include relief or reconstruction activities, whether or not a war or
military action was undertaken. This new offense is intended to deter
fraud and material false statements committed in connection with any of
these exigencies.
The new offense also requires that the conduct be subject to the
jurisdiction of the United States. This term is to be interpreted
broadly consistent with the jurisdictional scope of the federal
material false statement statute, 18 U.S.C. Sec. 1001. In addition, the
new offense explicitly provides extraterritorial jurisdiction and is
intended to extend jurisdiction for this offense to the full extent of
U.S. law. This provision has been included to ensure that offenses
occurring outside the United States, even by non-U.S. nationals, may be
prosecuted. Furthermore, consistent with other federal fraud
provisions, the U.S. Government need not be a victim or suffer a loss
from this offense provided the conduct meets the other elements of the
offense. The bill also establishes venue for the offense as authorized
by existing federal statutes (see 18 U.S.C. Sec. Sec. 3231-3244)
including extradition, or in any district where any act in further of
the offense took place, or where any party to the contract or the
provider of goods or services is located.
Violations of the fraud provisions in this bill would be punishable
by imprisonment for up to 20 years, and violations of the material
false statement provisions would be punishable by imprisonment for up
to 10 years. All violations of this new offense would be subject to
fines of up to $1,000,000 or twice the gross profits or other proceeds
of the offense. The offense provides for criminal and civil forfeiture
of any unlawful proceeds, and makes the new offense a predicate crime
for money laundering (18 U.S.C. Sec. 1956(c)(7)) and for racketeering
offenses (18 U.S.C. Sec. 1961(1)).
Let us strengthen the tools available to federal law enforcement to
combat contracting fraud during times of war, military action, or
relief or reconstruction activities. I urge my colleagues to vote in
favor of H.R. 400, the ``War Profiteering Prevention Act of 2007.''
Ms. HIRONO. Mr. Speaker, I rise in support of H.R. 400, the War
Profiteering Prevention Act of 2007. I am a proud cosponsor of this
legislation, introduced by my colleague from Hawaii Neil Abercrombie.
This bill would prohibit profiteering and fraud relating to contracts
executed by the United States Government or a provisional authority for
the provision of goods and services in support of U.S. missions
overseas. This long overdue legislation will help correct the
unconscionable and unpatriotic defrauding of the United States
government, our armed services, and American taxpayers. Unfortunately,
the problem of contractor fraud has proliferated in the past 4 years.
The United States has spent over $50 billion on contracts thus far in
Iraq to provide for support services, security, infrastructure
construction, and reconstruction work. Much of this spending has been
under no-bid or cost-plus contracts. As a result of inadequate
planning, control, enforcement, and prosecution, the free-spending,
former Coalition Provisional Authority could not account for $8.8
billion of that money. Allegations about rampant waste, over-billing,
and outright fraud have been reported time and time again, but no
action has been taken to correct this waste of taxpayer dollars.
Unfortunately, current law does not explicitly extend
extraterritorial jurisdiction for contract fraud on contracts executed
by the U.S. Government or any provisional authority supporting a U.S.
mission abroad. As a result, numerous instances of fraud have been
committed and inspectors general have initiated hundreds of
investigations of alleged fraudulent practices, including illegal
kickbacks, bid-rigging, embezzlement, faulty construction, and
fraudulent over-billing.
We need to toughen the laws which apply to individuals and
corporations who have placed personal profit and greed over the
interests of American taxpayers and our men and women serving in the
armed services. While most private contractors are not overcharging the
government and are providing good value with their goods and services,
others are engaged in fraud and waste, costing the American taxpayers
billions of dollars that could be spent on domestic needs, including
funds that could have gone to our underfunded schools, health clinics,
infrastructure, and environmental programs.
Even when the government does act to enforce fraud statutes on the
books, it has been stymied by the inadequacy of current law. The
infamous case against Custer Battles, an American contractor in Iraq
found to have committed 37 acts of fraud, is a case in point. Custer
Battles was one of a few contractors that was actually prosecuted and
was ordered to pay $10 million in damages. However, it was allowed to
walk away scot-free when a federal judge overturned the verdict on a
technicality. The court found that United States fraud law did not
apply to this contractor since the contract went through the Coalition
Provisional Authority which the court held was not part of the United
States government. The incompetence of this administration not only
permitted fraud against the U.S. but allowed the perpetrator to escape
punishment.
To successfully prosecute these individuals and corporations, H.R.
400 provides clear and unambiguous legal authority to criminalize this
unconscionable behavior on the part of greedy, corrupt contractors and
provides a mechanism for successful prosecution. We are talking about
prosecuting contractors who willfully and intentionally defraud the
government, not those who merely make a business mistake. We should
have no sympathy or leniency for those who purposely defraud taxpayers.
This is not a partisan issue. As Americans, we should all stand
together to put an end to greed and corruption in our government
programs, which hurts the troops on the ground, undermines the efforts
of our armed forces, enriches the greedy and corrupt, and steals from
the American taxpayer. This must end, H.R. 400 is a major step to bring
accountability to the contracting process.
Mr. BLUMENAUER. Mr. Speaker, as part of our ongoing efforts to end
the war in Iraq, H.R. 400 is an important step in standing up against
those who defraud our troops or improperly profit at the expense of our
troops. We must be vigilant in prosecuting war profiteers, using every
tool available. The President should use his legal authority to cancel
contracts with those that defraud the government and be aggressive in
seeking to recover lost funds. If he is unwilling to do so, Congress
will hold him accountable.
Mr. SHAYS. Mr. Speaker, I support this legislation, and believe it is
important to clarify overseas contract fraud involving U.S. taxpayer
dollars is a crime that will not be tolerated and will be prosecuted.
Contractors have labored in Iraq under incredibly severe
circumstances; most have worked honestly and in good faith, and some
have even given their lives trying to improve the lives of Iraqi
citizens. During 18 trips to Iraq I have seen firsthand the incredible
work contractors have done--building schools, repairing power plants,
and working with the Iraqi people to restore critical infrastructure.
Unfortunately, a few bad actors have operated greedily and
dishonestly and in the end have defrauded not only the Iraqi people the
contracts were intended to assist, but have also defrauded their own
American government. Perhaps worst of all, the criminal actions of a
select few have tarnished the image and integrity of the United States.
This legislation will create a new criminal fraud offense to prohibit
fraudulent acts involving the provision of goods or services in
connection with a mission of the United States Government overseas. It
also makes this new offense a predicate crime for criminal forfeiture,
as well as for Federal money laundering and racketeering offenses. It
is my hope this legislation will provide more clarity regarding crimes
committed abroad, and not less. Ranking Member Tom Davis has identified
several important criticisms of this legislation, and I hope my friends
on the other side of the aisle will seriously consider and address
those as this bill moves forward.
Way back in 1988, I voted for the Major Fraud Act, which creates
criminal penalties of up to $1 million in fines and 10 years
imprisonment for anyone who knowingly defrauds the U.S. government.
There are numerous other statutes, such as the Criminal False
[[Page H11363]]
Claims Act and the Anti-Kickback Act, which criminalize acts of fraud.
Working with then-Government Reform Committee Chairman Tom Davis, the
Subcommittee on National Security, Emerging Threats and International
Relations, which I chaired from 1999 to 2006, had several hearings on
contracting concerns in Iraq. During the hearings, several DoD
witnesses with oversight responsibility for contracting in Iraq
testified about the challenges of coordinating the tremendous task of
rebuilding Iraq. While I recognize the tremendous task and difficult
challenges associated with the reconstruction of Iraq, the bottom line
is the Coalition Provisional Authority was under-staffed and
overburdened.
I appreciate this legislation being brought to the floor and hope it
will provide needed clarity about the United States' intention to
prosecute those who defraud our government.
Mr. SCOTT of Virginia. Mr. Speaker, I yield back the balance of my
time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Virginia (Mr. Scott) that the House suspend the rules
and pass the bill, H.R. 400, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. SCOTT of Virginia. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
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