S. 119, which was reported to the Senate on May 15 as amended by the Judiciary Committee, would create two new federal felonies (carrying enhanced sentences) for certain conduct that is already covered by the United States Code. The bill would apply to conduct involving a contract, or the provision of goods or services, in connection with a war or other military, reconstruction, or relief activities. Under the bill, a person who in wartime knowingly and willfully executes or attempts a scheme or artifice to defraud the United States or materially overvalues any good or service with the specific intent to defraud would be punishable by a fine of $1 million or twice the proceeds of the offense and up to 20 years in prison. Such a scheme is generally prohibited by the current 18 U.S.C. § 1031 as major fraud against the United States and is punishable by up to 10 years in prison. A person who falsifies, conceals, or covers up a material fact, makes false, fictitious or fraudulent statements, or knowingly makes or uses false documentation in connection with a war would be punishable by up to 10 years in prison. The current federal general fraud statute, 18 U.S.C. § 1001, which carries a penalty of up to 5 years in prison, covers the same conduct in any matter within the jurisdiction of any branch of the U.S. Government.
In addition to creating these two new felonies, S. 119 would provide for extraterritorial federal jurisdiction and would authorize expansive venue over the new offenses. Both offenses would also be included in the civil (18 U.S.C. § 981) and criminal (18 U.S.C. § 982) forfeiture sections of the United States Code, meaning that any property directly or indirectly traceable to the offenses would be forfeited to the United States upon conviction.
The bill would also include both new offenses within the definition of “specified unlawful activity” contained in the federal money laundering statute, 18 U.S.C. § 1956. Defendants would then be exposed to an additional 20 years in prison for conducting a financial transaction involving proceeds from either of the new offenses with the intent to promote the carrying on of the offense or with the knowledge that the transaction is designed to disguise or conceal the proceeds. Neither of the two general statutes proscribing the same conduct, 18 U.S.C. §§ 1031 and 1001, is a federal money laundering predicate.
Both of the new felonies created by S. 119 would also be made RICO predicate offenses, opening defendants to all the potential consequences of a RICO prosecution, including an additional 20 years in prison, mandatory asset forfeiture upon conviction, pre- or post-indictment asset restraint, and the possible commencement by the government or a private party of a civil action for treble damages. The availability of these powerful sanctions would give federal prosecutors tremendous leverage over defendants and the potential ability to affect the preparation of a defense through pre-trial asset restraint. Again, neither of the general fraud statutes criminalizing the same conduct, 18 U.S.C. §§ 1031 and 1001, constitutes a RICO predicate offense.