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Obama Signs Bill Broadening Anti-Fraud Laws, Increasing Funds for Fraud Enforcement
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May 25, 2009
By Fiona Philip
President Obama on May 20 signed the Fraud Enforcement and Recovery Act (FERA), passed by the House of Representatives on May 18 and the Senate on May 14.
Among other things, the legislation:
 | Increases funding for federal financial fraud enforcement.
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| Expands the scope of the criminal securities fraud to cover “any commodity for future delivery, or any option on a commodity for future delivery.”
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| Expands the definition of “financial institution” in 18 USC §20 to include “a mortgage lending business” and other entities that make “in whole or in part a federally related mortgage loan” and defines a mortgage lending business as “an organization which finances or refinances any debt secured by an interest in real estate... whose activities affect interstate or foreign commerce.”
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| Extends the current statutory prohibitions against making false statements in mortgage applications to include false statements by mortgage brokers and agents of mortgage lending businesses.
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| Amends provisions of the False Claims Act and federal money laundering statutes to expressly provide that the terms “knowing” and “knowingly”, as used, “require no proof of specific intent to defraud” the federal government.
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| Amends the definition of “proceeds” in 18 USC §1956(c) to include gross receipts of illegal activity.
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| Establishes a 10-member Financial Markets Commission to examine the domestic and global causes of the financial and economic crises.
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The revisions to the False Claims Act are particularly significant. The legislation overrides the Supreme Court ruling last year in Allison Engine Co, Inc. v. United States, which held that a defendant must have intended for the government to pay the false claim and that it was insufficient that some government funds might have been used to pay the claim.
All that is required now for a successful False Claims Act fraud claim is for a defendant to have received federal funds to advance a government purpose or interest. Accordingly, the False Claims Act now will be available against almost any private organization or corporation that receives any federal funds. Any company that receives federal funding – including stimulus package money and Troubled Asset Recovery Program (TARP) funds – needs to be aware of the breadth and consequences of FERA and the False Claims Act.
Click here to view the full text of the bill.
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