Fraud Enforcement and Recovery Act of 2009
Encyclopedia
The Fraud Enforcement and Recovery Act of 2009, or FERA, , is a public law
in the United States enacted in 2009. The law enhanced criminal enforcement of federal fraud
laws, especially regarding financial institution
s, mortgage fraud
, and securities fraud
or commodities fraud.
Patrick Leahy
of Vermont
, a Democrat
and the chairman of the Senate Judiciary Committee
, sponsored the bill.
On April 27, 2009, the Senate invoked cloture
on the bill as amended (S. 386) on an 84–4 vote, with eleven not voting. Only four Senators voted no, all Republicans
(Tom Coburn
, Jim DeMint
, James Inhofe, and Jon Kyl
). On April 28, the Senate passed the bill on a 92–4 vote, with three not voting; the same Senators who voted against cloture voted against the bill.
On May 6, the United States House of Representatives
passed the bill with its own amendment on a 367–59 vote, with six Representatives not voting and one Representative, Democrat Alan Grayson
of Florida
, case a present
vote. All 250 Democrats casting votes, as well as 117 Republicans, voted yes; all of the 59 no votes were cast by Republicans.
The Senate then added an amendment to the House's amendment. The House accepted the final version of the bill on a 338–52 vote on May 18, with 43 Representatives not voting. All 224 Democrats casting votes, as well as 114 Republicans, voted yes. Fifty-two Republicans voted no.
President
Barack Obama
signed the legislation into law on May 20 along with the Helping Families Save Their Homes Act of 2009
, a bill concerned with mortgage foreclosure prevention.
The crime of major fraud against the United States , which previously covered only fraud in government procurement and contracts for services, is amended to include a wider range of government involvement, including grants under the American Recovery and Reinvestment Act of 2009
, transactions under the Troubled Assets Relief Program
, and any “other form of Federal assistance”. FERA amends the definition of securities fraud
, , to include fraud related to commodities futures
and option
s in addition to the existing category of registered securities under the Securities Exchange Act of 1934
.
Finally, the Act defines proceeds in the money laundering
statute as “any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity”. Previously, the term was left undefined, and was interpreted by the United States Supreme Court
in United States v. Santos by a plurality of the justices as excluding gross receipts. A "Sense of the Congress" section suggests that senior prosecutors, such as a United States Attorney
or superior, should be involved before certain kinds of money-laundering cases are instigated, and directs the Attorney General to deliver a yearly report on such cases for the next four years.
These authorizations are made for the federal fiscal years beginning October 1, 2009 and 2010, after which point they expire, and are in addition to the previously authorized budgets for these agencies.
, to “reflect the original intent of the law“. This amendment is in reaction to the Supreme Court's 2008 decision in Allison Engine Co. v. United States ex rel. Sanders
, in which the Court held that the mere involvement of Federal money was insufficient to bring a fraudulent claim or invoice within the scope of the False Claims Act. The amended subsection (a) of effectively reverses the Allison Engine decision, weakening the requirement to “a false record or statement material to a false or fraudulent claim”, where a claim includes “any request or demand” related to a government program and which will be paid from funds supplied by the government.
, a legislative commission with each house of the United States Congress
represented by three members appointed by the majority party and two members appointed by the minority, none of whom may be employees of the Federal government or any state or local government. The purpose of the commission is "to examine the causes, domestic and global, of the current financial and economic crisis in the United States."
Public law
Public law is a theory of law governing the relationship between individuals and the state. Under this theory, constitutional law, administrative law and criminal law are sub-divisions of public law...
in the United States enacted in 2009. The law enhanced criminal enforcement of federal fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
laws, especially regarding financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s, mortgage fraud
Mortgage fraud
Mortgage fraud is crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth....
, and securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
or commodities fraud.
Legislative history
U.S. SenatorUnited States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Patrick Leahy
Patrick Leahy
Patrick Joseph Leahy is the senior United States Senator from Vermont and member of the Democratic Party. He is the first and only elected Democratic United States Senator in Vermont's history. He is the chairman of the Senate Judiciary Committee. Leahy is the second most senior U.S. Senator,...
of Vermont
Vermont
Vermont is a state in the New England region of the northeastern United States of America. The state ranks 43rd in land area, , and 45th in total area. Its population according to the 2010 census, 630,337, is the second smallest in the country, larger only than Wyoming. It is the only New England...
, a Democrat
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
and the chairman of the Senate Judiciary Committee
United States Senate Committee on the Judiciary
The United States Senate Committee on the Judiciary is a standing committee of the United States Senate, of the United States Congress. The Judiciary Committee, with 18 members, is charged with conducting hearings prior to the Senate votes on confirmation of federal judges nominated by the...
, sponsored the bill.
On April 27, 2009, the Senate invoked cloture
Cloture
In parliamentary procedure, cloture is a motion or process aimed at bringing debate to a quick end. It is also called closure or, informally, a guillotine. The cloture procedure originated in the French National Assembly, from which the name is taken. Clôture is French for "ending" or "conclusion"...
on the bill as amended (S. 386) on an 84–4 vote, with eleven not voting. Only four Senators voted no, all Republicans
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
(Tom Coburn
Tom Coburn
Thomas Allen "Tom" Coburn, M.D. , is an American politician, medical doctor, and Southern Baptist deacon. A member of the Republican Party, he currently serves as the junior U.S. Senator from Oklahoma. In the Senate, he is known as "Dr. No" for his tendency to place holds on and vote against bills...
, Jim DeMint
Jim DeMint
James Warren "Jim" DeMint is the junior U.S. Senator from South Carolina, serving since 2005. He is a member of the Republican Party and a leader in the Tea Party movement. He previously served as the U.S. Representative for from 1999 to 2005.-Early life and education:DeMint was born in...
, James Inhofe, and Jon Kyl
Jon Kyl
Jon Llewellyn Kyl is the junior U.S. Senator from Arizona and the Senate Minority Whip, the second-highest position in the Republican Senate leadership. In 2010 he was recognized by Time magazine as one of the 100 most influential people in the world for his persuasive role in the Senate.The son...
). On April 28, the Senate passed the bill on a 92–4 vote, with three not voting; the same Senators who voted against cloture voted against the bill.
On May 6, the United States House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
passed the bill with its own amendment on a 367–59 vote, with six Representatives not voting and one Representative, Democrat Alan Grayson
Alan Grayson
Alan Mark Grayson is a former U.S. Representative for , serving from 2009 until 2011. He is a member of the Democratic Party and loves cookies. After losing the election he moved to Austin to start stand-up comedy and a cookie business. The district Grayson represented lies in central Florida...
of Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
, case a present
Abstention
Abstention is a term in election procedure for when a participant in a vote either does not go to vote or, in parliamentary procedure, is present during the vote, but does not cast a ballot. Abstention must be contrasted with "blank vote", in which a voter casts a ballot willfully made invalid by...
vote. All 250 Democrats casting votes, as well as 117 Republicans, voted yes; all of the 59 no votes were cast by Republicans.
The Senate then added an amendment to the House's amendment. The House accepted the final version of the bill on a 338–52 vote on May 18, with 43 Representatives not voting. All 224 Democrats casting votes, as well as 114 Republicans, voted yes. Fifty-two Republicans voted no.
President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
signed the legislation into law on May 20 along with the Helping Families Save Their Homes Act of 2009
Helping Families Save Their Homes Act of 2009
The Helping Families Save Their Homes Act of 2009 is a recently enacted public law in the United States. On May 20, 2009, the Senate bill was signed into law by President Barack Obama...
, a bill concerned with mortgage foreclosure prevention.
Amendments to fraud statutes
The Act changes the definition of a financial institution for the purposes of Federal criminal law to include mortgage lending businesses, which are defined as “organizations which finance or refinance any debt secured by an interest in real estate, including private mortgage companies and any subsidiaries of such organizations, and whose activities affect interstate or foreign commerce.” , which makes it a federal offense to falsify loan documents submitted to a broad range of financial institutions, is amended to include mortgage lending businesses in that range, and for good measure also includes any other person “that makes in whole or in part a federally related mortgage loan”.The crime of major fraud against the United States , which previously covered only fraud in government procurement and contracts for services, is amended to include a wider range of government involvement, including grants under the American Recovery and Reinvestment Act of 2009
American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009, abbreviated ARRA and commonly referred to as the Stimulus or The Recovery Act, is an economic stimulus package enacted by the 111th United States Congress in February 2009 and signed into law on February 17, 2009, by President Barack Obama.To...
, transactions under the Troubled Assets Relief Program
Troubled Assets Relief Program
The Troubled Asset Relief Program is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008...
, and any “other form of Federal assistance”. FERA amends the definition of securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, , to include fraud related to commodities futures
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
and option
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
s in addition to the existing category of registered securities under the Securities Exchange Act of 1934
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 , , codified at et seq., is a law governing the secondary trading of securities in the United States of America. It was a sweeping piece of legislation...
.
Finally, the Act defines proceeds in the money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
statute as “any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity”. Previously, the term was left undefined, and was interpreted by the United States Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
in United States v. Santos by a plurality of the justices as excluding gross receipts. A "Sense of the Congress" section suggests that senior prosecutors, such as a United States Attorney
United States Attorney
United States Attorneys represent the United States federal government in United States district court and United States court of appeals. There are 93 U.S. Attorneys stationed throughout the United States, Puerto Rico, the U.S. Virgin Islands, Guam, and the Northern Mariana Islands...
or superior, should be involved before certain kinds of money-laundering cases are instigated, and directs the Attorney General to deliver a yearly report on such cases for the next four years.
Authorization for additional funding
Section 3 of the Act authorizes additional funding to detect and prosecute fraud at various federal agencies, specifically:- $United States dollarThe United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
165,000,000 to the Department of JusticeUnited States Department of JusticeThe United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
, - $30,000,000 each to the Postal Inspection ServiceUnited States Postal Inspection ServiceThe United States Postal Inspection Service is the law enforcement arm of the United States Postal Service. Its jurisdiction is defined as "crimes that may adversely affect or fraudulently use the U.S...
and the Office of the Inspector GeneralInspector GeneralAn Inspector General is an investigative official in a civil or military organization. The plural of the term is Inspectors General.-Bangladesh:...
at the United States Department of Housing and Urban DevelopmentUnited States Department of Housing and Urban DevelopmentThe United States Department of Housing and Urban Development, also known as HUD, is a Cabinet department in the Executive branch of the United States federal government...
(HUD/OIG) - $20,000,000 to the Secret ServiceUnited States Secret ServiceThe United States Secret Service is a United States federal law enforcement agency that is part of the United States Department of Homeland Security. The sworn members are divided among the Special Agents and the Uniformed Division. Until March 1, 2003, the Service was part of the United States...
- $21,000,000 to the Securities and Exchange Commission
These authorizations are made for the federal fiscal years beginning October 1, 2009 and 2010, after which point they expire, and are in addition to the previously authorized budgets for these agencies.
False Claims Act restatement
Section 4 of FERA restates part of the False Claims ActFalse Claims Act
The False Claims Act is an American federal law that imposes liability on persons and companies who defraud governmental programs. The law includes a "qui tam" provision that allows people who are not affiliated with the government to file actions on behalf of the government...
, to “reflect the original intent of the law“. This amendment is in reaction to the Supreme Court's 2008 decision in Allison Engine Co. v. United States ex rel. Sanders
Allison Engine Co. v. United States ex rel. Sanders
Allison Engine Co. v. United States ex rel. Sanders, No. 07-214, 553 U.S. 662 , was a decision by the Supreme Court of the United States holding that plaintiffs under the False Claims Act must prove that the false claim was made with the specific intent of inducing the government to pay or approve...
, in which the Court held that the mere involvement of Federal money was insufficient to bring a fraudulent claim or invoice within the scope of the False Claims Act. The amended subsection (a) of effectively reverses the Allison Engine decision, weakening the requirement to “a false record or statement material to a false or fraudulent claim”, where a claim includes “any request or demand” related to a government program and which will be paid from funds supplied by the government.
Financial Crisis Inquiry Commission
Finally, section 5 of the Act created the Financial Crisis Inquiry CommissionFinancial Crisis Inquiry Commission
The Commission reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the...
, a legislative commission with each house of the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
represented by three members appointed by the majority party and two members appointed by the minority, none of whom may be employees of the Federal government or any state or local government. The purpose of the commission is "to examine the causes, domestic and global, of the current financial and economic crisis in the United States."