[Senate Report 110-431]
[From the U.S. Government Publishing Office]






                                                       Calendar No. 899
110th Congress                                                   Report
                                 SENATE
 2d Session                                                     110-431

======================================================================



 
                WARTIME ENFORCEMENT OF FRAUD ACT OF 2008

                                _______
                                

                 July 25, 2008.--Ordered to be printed

                                _______
                                

Mr. Leahy, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 2892]

    The Committee on the Judiciary, to which was referred the 
bill (S. 2892), to promote the prosecution and enforcement of 
frauds against the United States by suspending the statute of 
limitations during times when Congress has authorized the use 
of military force, having considered the same, reports 
favorably thereon, without amendment, and recommends that the 
bill do pass.

                                CONTENTS

                                                                   Page
  I. Background and Purpose of the Wartime Enforcement of Fraud Act of 
     2008.............................................................1
 II. History of the Bill and Committee Consideration..................5
III. Section-by-Section Summary of the Bill...........................5
 IV. Congressional Budget Office Cost Estimate........................6
  V. Regulatory Impact Evaluation.....................................6
 VI. Conclusion.......................................................6
VII. Additional Views of Senators Sessions and Coburn.................7
VIII.Changes to Existing Law Made by the Bill, as Reported............9


 I. Background and Purpose of the Wartime Enforcement of Fraud Act of 
                                  2008

    On April 18, 2008, Chairman Patrick Leahy introduced the 
Wartime Enforcement of Fraud Act of 2008 (WEFA), which was 
cosponsored by Senator Grassley. Senators Obama, Byrd, and 
Cardin have since joined as cosponsors. This legislation will 
protect American taxpayers from criminal contractor fraud by 
giving investigators and auditors the time they need to 
thoroughly review contracts related to the ongoing conflicts in 
Iraq and Afghanistan.
    The legislation makes current law extending the statute of 
limitations during wartime applicable to the conflicts in Iraq 
and Afghanistan. It amends the Wartime Suspension of 
Limitations Act (18 U.S.C. 3287) to apply not only when the 
United States is engaged in a declared war, but also when 
Congress has authorized the used of military force pursuant to 
the War Powers Resolution (50 U.S.C. 1544(b)). The legislation 
also extends the statute of limitations to five years after the 
end of a conflict, making the law consistent with the current 
statute of limitations for criminal fraud offenses. See 18 
U.S.C. Sec. 3282(a).

                             A. BACKGROUND

    War contracting fraud and efforts to combat it have a long 
history in this Nation. During World War II, President Franklin 
Delano Roosevelt spoke out against ``war millionaires'' who 
made excessive profits exploiting the calamity of war, and 
President Harry S. Truman, when he served in the Senate, 
crossed this country holding now-famous public hearings to 
expose gross fraud, waste and abuse by military contractors. In 
1942, President Roosevelt signed into law the Wartime 
Suspension of Limitations Act, which extended the time 
prosecutors had to bring charges relating to criminal fraud 
offenses against the United States.\1\ Recognizing the extreme 
difficulty in tracking down contracting fraud in the midst of a 
war, Congress unanimously approved the 1942 law, which 
temporarily suspended the statute of limitations. In 1948, 
President Truman signed a new law making this change permanent. 
The Wartime Suspension of Limitations Act proved to be vital in 
pursuing war profiteers, as prosecutors used the law to pursue 
contracting fraud after the war was over.\2\
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    \1\A similar provision was passed after World War I, extending the 
statute of limitations for conspiracy to defraud the Government from 
three years to six years. Congress recognized that war contracts 
required ``the most minute investigation'' and wanted to provide 
prosecutors with the time necessary to discover fraud. H.R. Rep. No. 
67-365, at 1 (1921). Congress restored the three-year statute of 
limitations after the war once the Department of Justice announced that 
it did not plan any further prosecution of contracting fraud related to 
World War I.
    \2\For example, this extension of the statute of limitations 
allowed prosecutors to secure a 79-count indictment against a 
subcontract employee who for three years falsified payroll records to 
bill the government for the hours worked by nonexistent employees. See 
United States v. Agnew, 6 F.R.D. 566 (E.D.Pa. 1947).
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    In recent years, war contracting fraud has again plagued 
this Nation during the engagement of U.S. forces in Iraq and 
Afghanistan. Congress has appropriated more than $500 billion 
to date for the wars in Iraq and Afghanistan, including more 
than $50 billion for relief and reconstruction activities. The 
investigations and audits conducted so far have uncovered how 
billions in taxpayers' money has been lost to contract fraud, 
waste, and abuse. The Department of Justice, however, has only 
initiated a few cases involving less than $30 million lost to 
fraud, while hundreds of investigations into contracts worth 
billions remain pending, and new investigations based on 
allegations of fraud are started every month. Unless the 
statute of limitations is extended, these investigations may 
well be shut down before they can be completed and wartime 
fraud will go unpunished.
    Private contractors have been used to a greater extent 
during these war-time activities than at any time in our 
history. The exigencies of war overseas, however, make 
oversight of these contractors more difficult, and expenditures 
are often made with fewer audit and other controls than during 
normal Government procurement. Often, the Government does not 
learn about serious fraud until years after the fact. As a 
result, the provision of goods and services during these 
military actions, as well as during relief and reconstruction 
activities, are more vulnerable to acts of fraud and abuse.
    Hearings in both the Judiciary and Appropriations 
Committees have highlighted the difficulty of conducting 
investigations and audits into contracting fraud as the war is 
ongoing.\3\ Inspectors General from the Defense Department, the 
State Department, and other agencies, as well as the Special 
Inspector General for Iraq Reconstruction (SIGIR), have 
consistently indicated that ongoing hostilities in Iraq and 
Afghanistan have significantly hampered their ability to review 
contracts and pursue investigations. For example, an audit by 
the Department of Defense Inspector General in May 2008 found 
that more than 90 percent of the $8.2 billion spent on 
contractors in Iraq lacked adequate documentation, and the DoD 
IG is still in the process of auditing billions spent on these 
contracts. Similarly, a separate SIGIR audit of a $1.2 billion 
State Department contract for security services in Iraq had to 
be stopped because Government and contractor officials could 
not find the invoices and documents showing how the money was 
spent. The State Department estimates it will take three to 
five years to find and organize the documentation for this 
contract, just for the audit to be completed. At this point, 
billions of dollars are unaccounted for, and it will take years 
to fully investigate and audit these expenditures for fraud.
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    \3\See Senate Judiciary Committee Hearing, ``Combating War 
Profiteering: Are We Doing Enough to Investigate and Prosecute 
Contracting Fraud and Abuse in Iraq'' (March 20, 2007); Senate 
Appropriations Committee Hearing, ``The Effectiveness of U.S. Efforts 
to Combat Corruption, Waste, Fraud and Abuse in Iraq (March 11, 2008); 
Senate Appropriations Committee, ``Oversight Hearing on Fraud, Waste, 
and Abuse in Defense Department Contracts Supporting Activities in Iraq 
and Afghanistan'' (July 23, 2008).
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    In response to this problem, the Deputy Secretary of 
Defense Gordon England and the Acting Defense Department 
Inspector General Gordon Hedell testified before the Senate 
Appropriations Committee on July 23, 2008 that the bill would 
help them complete their oversight of Iraq war contracts, and 
they both supported the bill.\4\
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    \4\In their views, Senators Sessions and Coburn express concern 
that ``the Department of Defense should weigh in before the Senate 
considers the bill'' and the legislation needs to be studied further. 
In their testimony before the Appropriations Committee, the Deputy 
Secretary of Defense and the Defense Department Inspector General both 
weighed in supporting the bill. In addition, Senators Sessions and 
Coburn claim that in passing the Wartime Suspension of Limitations Act 
in 1942 and 1948, Congress ``intentionally limited'' the law to 
declared wars, not authorizations for the use of military force. Since 
the War Powers Resolution, which allows for congressional 
authorizations for the use of military force, was not passed until 
1973, nearly three decades after the Wartime Suspension of Limitations 
Act, this contention is dubious at best. Even if there were anything to 
this claim, that does not preclude this Congress from doing the right 
thing and extending the wartime suspension of statutes of limitations 
to war zones created by authorizations for the use of military force. 
The point of the Wartime Suspension of Limitations Act and this bill is 
the same, to ensure that the fog of war does not allow those who 
defraud the United States from getting away with it because their 
actions could not be investigated during hostilities.
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                        B. NEED FOR LEGISLATION

    While the World War II provision suspending the statute of 
limitations is still the law today, it applies only ``when the 
United States is at war.'' 18 U.S.C. Sec. 3287. As a result, 
the ongoing military operations in Iraq and Afghanistan are 
likely exempt from this law because they were undertaken when 
Congress authorized the use of military force, rather than by a 
formal declaration of war.
    The Wartime Enforcement of Fraud Act of 2008 (WEFA) would 
correct this problem and extend the statute of limitations when 
Congress has authorized the use of the Armed Forces pursuant to 
the War Powers Resolution, as well as during declared wars. The 
legislation would make three changes to current law.
    First, it would extend the statute of limitations when 
Congress enacts a specific authorization for the use of the 
Armed Forces consistent with the War Powers Resolution. In 
doing so, this language would apply current law to the ongoing 
conflicts in Iraq and Afghanistan, and to similar actions in 
the future. This amendment is not intended to apply to 
peacekeeping missions under the auspices of the United Nations, 
or military actions not specifically authorized by Congress 
pursuant to the War Powers Resolution. This will give 
investigators and auditors additional time to thoroughly review 
all war contracts and bring those who have defrauded the 
American taxpayers to justice.
    Second, the legislation would extend the statute of 
limitations for five years after the end of the conflict, 
updating the provision to be consistent with the general 
statute of limitations for criminal offenses. See 18 U.S.C. 
Sec. 3282(a). The statute of limitations for criminal fraud 
offenses was only three years when the law was passed during 
World War II, but is five years today.\5\
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    \5\Pub. L. No. 870-299, 68 Stat. 1145 (1961) amended 18 U.S.C. 3287 
to change the statute of limitations to five years for noncapital 
offenses.
---------------------------------------------------------------------------
    Third, it makes clear that a presidential proclamation 
ending hostilities, and thus ending the tolling of the statute 
of limitations period, must be a formal proclamation with 
notice to Congress. This will provide a clear point in time at 
which the statute of limitations will begin to run, providing 
certainty to courts, prosecutors, and litigants interpreting 
this provision.
    Now, more than five years after the start of the Iraq war 
and nearly seven years after the beginning of the Afghanistan 
war, the statute of limitations has started to bar criminal 
actions in investigations of contracting fraud early in these 
conflicts. This bill will allow additional time for 
investigators and auditors to thoroughly investigate and review 
all war contracts and potentially save the U.S. taxpayers 
untold millions of dollars. If the current law is left 
unchanged, each passing day of the conflicts in Iraq and 
Afghanistan would result in a grant of immunity for fraudulent 
conduct by war contractors that has gone undiscovered or 
unprosecuted during the conflicts.

          II. History of the Bill and Committee Consideration


                      A. INTRODUCTION OF THE BILL

    Chairman Patrick Leahy introduced the bill, S. 2892, on 
April 18, 2008, with Senator Grassley.

                       B. COMMITTEE CONSIDERATION

    The Committee voted at a June 26, 2008 executive business 
meeting to report S. 2892 favorably to the Senate without 
amendment by voice vote.

              III. Section-by-Section Summary of the Bill


Section 1. Short title

    This section provides that the legislation may be cited as 
the ``Wartime Enforcement of Fraud Act of 2008.''

Section 2. Suspends the statute of limitations when Congress has 
        authorized the use of military force

    This provision amends Section 3287 of title 18, which 
suspends the statute of limitations ``when the United States is 
at war,'' to include circumstances where Congress has 
authorized the use of military force consistent with the War 
Powers Resolution. Technically, Section 3287 only applies to 
declared wars, not circumstances where Congress has authorized 
the use of military force, as in the recent wars in Iraq and 
Afghanistan. The amendment to Section 3287 specifically tracks 
the text of the Congressional authorizations for the use of the 
Armed Forces in Iraq and Afghanistan and refers only to those 
authorizations described in the War Powers Resolution (50 
U.S.C. 1544(b)). As a result, only significant military actions 
requiring Congressional action would trigger this suspension of 
the statute of limitations. This amendment is not intended to 
apply to peacekeeping missions under the auspices of the United 
Nations or military actions not specifically authorized by 
Congress pursuant to the War Powers resolution. This language 
is intended to apply the suspension of statute of limitations 
to the wars in Iraq and Afghanistan.
    The bill extends the statute of limitations for five years 
from the termination of hostilities, as opposed to the three 
years under current law. When the original Wartime Suspension 
of Limitations Act was passed in 1942, the criminal statute of 
limitations was only three years, and today it is five years. 
This change is consistent with the standard statute of 
limitations for all criminal fraud provisions and is necessary 
to update the law for modern times. See 18 U.S.C. 3282(a).
    The bill also makes clear that the act that ends the 
tolling of the statute of limitations period must be an 
official act of the President with notice to Congress, or a 
concurrent resolution of Congress. This change is necessary so 
that the date ending the authorization of military force is 
clear, so courts, prosecutors, and litigants can be sure when 
the statute of limitations starts to run. This change will 
avoid any confusion or unnecessary litigation in enforcing 
fraud cases in the future.
    Lastly, the bill clarifies that for purposes of applying 
the definitions in Section 103 of Title 41 in Section 3287 of 
Title 18, the term ``war'' shall include Congressional 
authorizations for the use of military force pursuant to the 
War Powers resolution. This is just a conforming amendment so 
the definitions in the law can properly be applied.

             IV. Congressional Budget Office Cost Estimate

    The cost estimate provided by the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974 was not available for inclusion in this report. The 
estimate will be printed in either a supplemental report or the 
Congressional Record when it is available.

                    V. Regulatory Impact Evaluation

    In compliance with rule XXVI of the Standing Rules of the 
Senate, the Committee finds that no significant regulatory 
impact will result from the enactment of S. 2892.

                             VI. Conclusion

    The Wartime Enforcement of Fraud Act, S. 2892, would close 
a loophole in current law and give the government new power to 
prosecute contracting fraud in Iraq and Afghanistan. If passed, 
the government could recover taxpayers' money lost in no-bid 
and cost-plus contracts awarded to companies that have 
delivered defective products, overbilled the government, or 
committed criminal fraud. The legislation would update a law 
first passed by the Congress during World War II that suspends 
the statute of limitations for contracting fraud offenses 
during times of war. It will allow the government to punish war 
profiteers and potentially save the U.S. taxpayers untold 
millions.

                         VII. Additional Views

                              ----------                              


  ADDITIONAL VIEWS OF SENATORS SESSIONS AND COBURN ON S. 2892, ``THE 
               WARTIME ENFORCEMENT OF FRAUD ACT OF 2008''

    The Wartime Enforcement of Fraud Act amends the Wartime 
Suspension of Limitations Act, which currently extends the 
statute of limitations for contracting fraud offenses committed 
during a time of war. The bill would add any ``Congressional 
enactment of a specific authorization for the use of the Armed 
Forces'' as a trigger for suspension of the statute of 
limitations for contracting fraud offenses. Additionally, the 
bill provides that the statute of limitations is suspended 
until 5 years after the termination of hostilities as 
proclaimed by a Presidential proclamation with notice to 
Congress.
    Individuals who commit fraud against the government during 
hostilities should be vigorously prosecuted. We have a history 
of supporting legislation, such as the Military 
Extraterritorial Jurisdiction Act, that ensures crimes and 
frauds perpetrated in Iraq or other places overseas are rightly 
brought to justice here in the United States. We support 
efforts to provide the Department of Justice all the tools they 
need to prosecute contractors who commit fraud against the 
United States. However, we fear this approach would have the 
unintended consequence of creating a potentially unlimited 
statute of limitations period for defense contractors. This 
goes against the great traditions of our American legal system 
where statutes of limitation typically begin to run as soon as 
a crime has been committed and are usually limited to a 
specific number of years. In fact, prosecution for most federal 
crimes must begin within five years of the commission of an 
offense. Limited exceptions include murder and other offenses 
punishable by death, and some federal terrorism and sex 
offenses.
    By including a Congressional authorization for the use of 
Armed Forces as an event that triggers suspension of the 
Statute of Limitations, the bill will directly impact conflicts 
that fall short of declared war. The Wartime Suspension of 
Limitations Act was enacted after World War II and we can only 
assume that the language is intentionally limited to declared 
wars. A declared war is of a different nature than an 
undeclared military conflict which can be a much smaller affair 
that does not similarly affect the government's ability to 
build and prosecute war fraud cases. If, as is potentially the 
case in the current conflicts with Iraq and Afghanistan, a 
President is hesitant to officially announce the end of 
hostilities, the statute of limitations will never start 
running. This means contractors could remain subject to 
potential liability for criminal offenses (or investigations) 
for years, possibly a lifetime. Even if an official act 
declaring an end to hostilities is made, it may not happen for 
a very long time. The Supreme Court recently said in Boumediene 
v. Bush, ``the duration of hostilities . . . may last a 
generation or more.''\1\
---------------------------------------------------------------------------
    \1\128 S. Ct. 2229, at 2270 (2008) (the Court was expressing 
concern for detainees, saying that the possibility of persons 
wrongfully detained for such a long conflict ``is a risk too 
significant to ignore'').
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    Furthermore, providing a very long--potentially 
indefinite--statute of limitations for a criminal offense 
violates longstanding principles often articulated by the 
Supreme Court. In Toussie v. United States, the Court held:

          The purpose of a statute of limitations is to limit 
        exposure to criminal prosecution to a certain fixed 
        period of time following the occurrence of those acts 
        the legislature has decided to punish by criminal 
        sanctions. Such a limitation is designed to protect 
        individuals from having to defend themselves against 
        charges when the basic facts may have become obscured 
        by the passage of time and to minimize the danger of 
        official punishment because of acts in the far-distant 
        past. Such a time limit may also have the salutary 
        effect of encouraging law enforcement officials 
        promptly to investigate suspected criminal activity.\2\
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    \2\Toussie v. United States, 397 U.S. 112 (1970).

---------------------------------------------------------------------------
    The Court has also held:

          Passage of time, whether before or after arrest, may 
        impair memories, cause evidence to be lost, deprive the 
        defendant of witnesses, and otherwise interfere with 
        his ability to defend himself. . . . Possible prejudice 
        is inherent in any delay, however short; it may also 
        weaken the Government's case. . . . Such a [statute of] 
        limitation is designed to protect individuals from 
        having to defend themselves against charges when the 
        basic facts may have become obscured by the passage of 
        time and to minimize the danger of official punishment 
        because of acts in the far-distant past. Such a time 
        limit may also have the salutary effect of encouraging 
        law enforcement officials promptly to investigate 
        suspected criminal activity.\3\
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    \3\U.S. v. Marion, 404 U.S. 307, 321-323 (1971) (emphasis added).

    We believe this bill creates two disturbing disincentives 
at a time where contractors are vital to national security and 
American efforts during armed conflicts: (1) it could make it 
more difficult to recruit contractors needed during conflict, 
and (2) it could make it more difficult for the government to 
prove these cases if too much time goes by. We believe the 
statute of limitations issue should be studied closely and that 
the Department of Defense should weigh in before the Senate 
---------------------------------------------------------------------------
considers the bill.

                                   Jeff Sessions.
                                   Tom Coburn.
      VIII. Changes to Existing Law Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 2892, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                           UNITED STATES CODE

TITLE 18--CRIMES AND CRIMINAL PROCEDURE

           *       *       *       *       *       *       *


PART II--CRIMINAL PROCEDURE

           *       *       *       *       *       *       *



CHAPTER 213--LIMITATIONS

           *       *       *       *       *       *       *


Sec. 3287. Wartime suspension of limitations

    When the United States is at war or Congress has enacted a 
specific authorization for the use of the Armed Forces, as 
described in section 5(b) of the War Powers Resolution (50 
U.S.C. Sec. 1544(b)), the running of any statute of limitations 
applicable to any offense (1) involving fraud or attempted 
fraud against the United States or any agency thereof in any 
manner, whether by conspiracy or not, or (2) committed in 
connection with the acquisition, care, handling, custody, 
control or disposition of any real or personal property of the 
United States, or (3) committed in connection with the 
negotiation, procurement, award, performance, payment for, 
interim financing, cancelation, or other termination or 
settlement, of any contract, subcontract, or purchase order 
which is connected with or related to the prosecution of the 
war or directly connected with or related to the authorized use 
of the Armed Forces, or with any disposition of termination 
inventory by any war contractor or Government agency, shall be 
suspended until [three] five years after the termination of 
hostilities as proclaimed by [the President] Presidential 
proclamation, with notice to Congress, or by a concurrent 
resolution of Congress.
    Definitions of terms in section 103 of title 41 shall apply 
to similar terms used in this section. For purposes of applying 
such definitions in this section, the term `war' includes a 
specific authorization for the use of the Armed Forces, as 
described in section 5(b) of the War Powers Resolution (50 
U.S.C. Sec. 1544(b)).

                                  
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