Recently, Congress passed the Fraud Enforcement and Recovery Act of 2009 ("FERA"). Ostensibly, this Act was developed to "improve enforcement of mortgage fraud, securities fraud, financial institution fraud and other frauds related to federal assistance and relief programs ...." However, the introduction also refers to "other purposes," which is a gross understatement.
- Expands the definition of "financial institution" (Section 20 of Title 18 U.S.) to include a mortgage lending businesses;
- Amends "Major Fraud Against the Government" to include Trouble Assets Relief Program ("TARP") funds;
- Amends "Securities Fraud" to include fraud involving options in futures and commodities;
- Expands and redefines "proceeds of specified unlawful activity" under the Money Laundering Act (MLA) to include "gross receipts of such activity;"
- Expands the International Money Laundering Act (18 U.S.C. 1956(a)(2)(A)) to apply to Tax Evasion;
- Provides additional funding for investigations and prosecutions of Mortgage Fraud, Securities Fraud, and other cases involving Federal Economic Assistance ($165,000,000 for each of the fiscal years 2010 and 2011);
- Amends the False Claims Act (31 U.S.C. 3729) (FCA) "to reflect the original intent to the law;"
- Reduces damages in FCA cases for an individual who "cooperates (with the Government) within 30 days after the date on which the Defendant first obtained the information."
- Redefines "knowing" and "knowingly" under the FCA to include, not just actual knowledge, but acts in deliberate ignorance of the truth or falsity of the information, or acts in reckless disregard of the truth or falsity of the information, and requiring "no proof of specific intent to defraud;"
- Redefines "material" under the FCA as "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money;"
- Retroactively, applies these new definitions and applications to all claims made under the FCA as of June 7, 2008 (one year prior to the planned effective date of FERA).
FERA will also establish a 10-member "Financial Markets Inquiry Commission" that will examine the causes of the current financial crisis. The Commission will have the authority to issue subpoenas and hold hearings on issues such as the role of fraud and abuse in the financial sector, tax treatment for financial products, and corporate governance and executive compensation.