[Congressional Record (Bound Edition), Volume 153 (2007), Part 19]
[House]
[Pages 26892-26899]
[From the U.S. 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 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

[[Page 26893]]

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 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. 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.

[[Page 26894]]

       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 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.

[[Page 26895]]

     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 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

[[Page 26896]]

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 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

[[Page 26897]]

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 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

[[Page 26898]]

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 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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