05 September 2008

The global war on terror and [health] fraud

John Lunstroth

case has just been decided that will be of interest to lawyers and risk managers who represent clients (including within research enterprise) that can be accused of health or other fraud against the government.  Thanks to Robert Chesney of the [nationalsecuritylaw] listserv for the heads up. 

The case, filed in 2006, arose from sales of substandard concrete in the 1990s for use in the Big Dig (Boston highway infrastructure). The defendants asserted the statute of limitations as a defense. The government responded by arguing the statute of limitations for fraud against the US government was tolled (suspended) during the wars authorized by Congress in 2001. The Court said: 

Defendants contend that the acts of highway project fraud and mail fraud alleged to have been committed prior to May 3, 2001 (eighty-five counts in total), are barred by the five-year federal statute of limitations. The government, for its part, maintains that these counts are saved by the Wartime Suspension of Limitations Act (Suspension Act), 18 U.S.C. § 3287. The government argues that the Suspension Act tolled the running of the statute of limitations as of September 18, 2001, the date on which Congress authorized the use of military force against the Taliban government of Afghanistan; or alternatively, as of October 10, 2002, the date of the authorization of the use of military force in Iraq. The Suspension Act provides (with appropriate emphasis) as follows: 

When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancellation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress. 

The Court held that the: 

[Authorization for Use of Military Force], which authorized the Afghanistan War, tolls the limitations period from September 18, 2001, to December 22, 2004. The Iraq War Authorization tolls the limitations period from October 10, 2002, to May 1, 2006. The court therefore will deem the Suspension Act to toll the limitations period for defendants’ alleged offenses from September 18, 2001, to May 1, 2006. 

That the transactions were unrelated to the war is irrelevant. The Court also said, in a footnote, that the “global war on terror” is not properly a war: 

At the hearing on the motion, there was also discussion of a global “war” on terrorism, waged principally against Osama bin Laden and al Qaeda. The use of the metaphor of war to describe the struggle against terrorism has been criticized. See Sir Adam Roberts, The ‘War on Terror’ in Historical Perspective, 47 SURVIVAL 101-130 (Summer 2005). I do not understand the government to be pressing the argument that the United States is “at war” with al Qaeda, at least in any traditional legal sense. 

The relevance is obvious. The statute of limitations for any claims for health care or other fraud were suspended for about five years based strictly on the Court’s determination, without administration input, of when the war ended. (The Court recognized that in matters of war the judiciary typically defers to the administration.) But not only is this Court’s finding not widely binding, its calculation of when hostilities ended is buttressed with facts and argument that extend far past its dates of wars’ end. The Court recognized, for example, that the underlying reason for the Suspension Act is that during a state of war the government’s resources are strained by the war budget and therefore it cannot prosecute as many cases. In addition to recent estimates of the cost of the “wars” that project well into the future, the Court refers to post-9/11 prosecutions of white-collar crime as evidence the Government was unable to prosecute as many cases because of the “wars.” 

Since the fall of 2001, the FBI has referred more than 7,000 terrorism cases to DOJ. Over 2,000 of these cases have resulted in prosecutions. At the same time, the overall number of criminal prosecutions credited to the FBI has dropped by more than 30 percent (from 19,000 to 12,700 cases). The sharpest declines have been in the prosecution of white-collar and organized crime. While the government has not offered any evidence that the [Big Dig] investigation was directly affected by this shift in resources, it is not required to do so. The Suspension Act requires only that the government show that the United States is at war, and that the government’s ability to investigate and prosecute pecuniary frauds has been hampered as a result. 

The foregoing reasoning supports the argument that the wars did not end. As this is being written the Bush administration is seeking confirmation from Congress that there is an ongoing war against Al Qaeda. If the administration is successful it will potentially suspend the statute of limitations for all allegations of offenses against the government in which the government asserts “the element of deceit that is the earmark of fraud.”

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