The Champion

August 2009 , Page 55 

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White Collar Crime Policy

By Tiffany M. Joslyn

Read more White-Collar Crime columns.

FERA’s Silver Lining — An Account of NACDL’s Efforts Combating Overcriminalization

In response to the financial crisis, Congress passed the Fraud Enforcement Recovery Act (FERA),1 adding a few more crimes to the more than 4,450 that comprise the federal criminal code. In addition, FERA legislatively reverses the Supreme Court’s recent defendant-friendly decision United States v. Santos,2 which correctly limited the term “proceeds,” as used in the principal money laundering statute, to the profits of a crime, not its receipts.3 

That said, FERA does have a silver lining, which is due in large part to the extensive and persistent efforts of NACDL to educate Capitol Hill on FERA’s problematic provisions. While these efforts could not stop Congress from acting on its compulsion to criminalize, it did stop some of the most troubling money laundering proposals from gaining traction and tempered the prosecutorial advantage created by the legislative reversal of Santos.

As it has been said before, Congress has many methods of responding to crises, yet some members of Congress consistently choose a politically popular and expedient route: more and harsher criminal laws, criminal enforcement, and criminal punishment. On February 5, 2009, Sens. Leahy (D-VT) and Grassley (R-IA) chose that route when they introduced FERA, S. 386, and scheduled it for an immediate hearing just six days later on February 11.

Recognizing the serious problems posed by Section 2 of FERA, NACDL teamed up with an unlikely partner, the Heritage Foundation, and quickly crafted a forceful opposition letter detailing these significant problems. It was Sen. Specter (D-PA, then R-PA), who actually introduced the joint opposition letter into the official hearing record. At this same hearing, all three federal officials who testified in support of FERA described the need for additional prosecutorial funding but virtually conceded that the existing federal criminal law was more than adequate to punish any actual conduct associated with the current financial crisis.

In response, NACDL and the Heritage Foundation again teamed up to co-author two op-eds detailing the absurdity of Congress’s push to criminalize conduct that was already covered by the criminal code. NACDL and Heritage also explained that before the Santos decision, expansive interpretations of “proceeds” fostered inappropriate and unfair misuse of the money laundering statute to “tack on” additional charges and significantly enhanced penalties to punish conduct that was virtually indistinguishable from the underlying offense (the so-called “merger” problem). Yet, the push to criminalize could not be held back.

The Senate Judiciary Committee reported S. 386 to the full Senate and, in response, NACDL circulated a handout detailing the redundancy of this bill and the need to focus on useful ventures, such as promoting inter-agency cooperation and using existing resources to enforce the laws already in place. NACDL’s efforts helped stall the bill, but eventually the full Senate voted 92-4 in support of FERA and sent it over to the House.

Anticipating that some members of the House Judiciary Committee were likely to introduce their own bills related to fraud and money laundering, NACDL worked actively to educate House allies and influence the impending legislation. By April 1, 2009, a handful of different bills were introduced on the various topics covered by FERA. Of particular alarm was H.R. 1793, Rep. Lungren’s (R-CA) Money Laundering Correction Act, which sought to legislatively reverse not only Santos, but another recent pro-defendant money laundering decision, Regalado Cuellar v. United States.4 

With the cloud of a drastically expanded money laundering statute looming, NACDL took full advantage of an invitation to participate in the April 1 House Judiciary Committee Hearing on Proposals to Fight Fraud and Protect Taxpayers. On behalf of NACDL, Board Member Barry Pollack submitted extensive written testimony discussing the serious injustices presented by the Money Laundering Correction Act, the critical need to match any prosecutorial funding increases with defense funding increases, and the fact that prosecutors already possess the tools necessary to combat financial fraud. In anticipation of the hearing, NACDL circulated a second handout directly attacking the money laundering proposals.
Hearing spectators could see that NACDL’s message broke through. In his opening remarks, Rep. Bobby Scott (D-VA) reiterated many of the key points set forth in NACDL’s opposition materials. Pollack’s live testimony was equally well-received, with many members probing the issue of defense funding. The conclusion of the hearing brought the game to the final inning — which bill and what provisions would become law?

NACDL focused its energy on influencing the House and preventing passage of the Money Laundering Correction Act, H.R. 1793. In doing so, NACDL drew on the expertise of its leadership to educate key allies on the dangers of these provisions. And then, on May 6, 2009, S. 386 went to the House floor for a vote in an amended form. The resulting bill, passed by a House vote of 367-59, included critical amendments reflecting NACDL’s chief complaints against the money laundering provisions.

The final bill, signed into law on May 20, 2009, did not contain a legislative reversal of Cuellar, nor did it contain the provision, present in the original bill, that would have amended international money laundering to include tax evasion. While the enacted version does contain duplicative criminal provisions and a legislative reversal of Santos, it has a silver lining: new language in Section 2(g)(1)-(2) that directly addresses the merger problem that NACDL fought so hard to prevent.

Specifically, Section 2(g)(1) prohibits prosecutors from charging money laundering as a separate offense where it merges with the underlying offense. This prohibition is not absolute; prosecutors may charge in that manner when doing so has been authorized by one of the listed executive branch authorities, the lowest level of which being the “relevant United States Attorney.” However, the subsequent language included in Section 2(g)(2) gives 2(g)(1)’s prohibition some teeth; it requires the Department of Justice to report back to Congress in one year with statistics detailing the number of authorization requests, approvals, and denials, and the number of unauthorized prosecutions.

This positive amendment was largely the product of NACDL’s efforts. While all the criminal provisions in FERA are troubling, the problem of merger in money laundering offenses is most unjust. As Justice Stevens wrote in Santos, allowing the government to charge both the underlying offense and money laundering for the same conduct is “tantamount to double jeopardy.”5 The language in Section 2(g) is a positive and crucial step in preventing this unfairness.

Only time will tell if and how these provisions actually impact money laundering charging decisions and prosecutions. For that reason, NACDL will continue to lobby for increased reform in the area of money laundering, to watch the implementation of this statute’s language, and to encourage NACDL members to do the same.

Notes

  1. The Fraud Enforcement Recovery Act of 2009, Pub. L. 111-21, 123 Stat. 1617, Section 2.
  2. 128 S. Ct. 2020 (2008).
  3. See Barry Boss, Jon May, and Matt Swerdlin, Money Laundering Defense After Santos and Regalado Cuellar, The Champion, September 2008 at 12.
  4. 128 S. Ct. 1994 (2008).
  5. 128 S. Ct. at 2033.

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