Perpetual Tolling for Fraud Against the United States?

Until Sept. 30, 2008, when Congress quietly amended the WSLA through an appropriations bill, the WSLA provided in relevant part:

When the United States is at war the running of any statute of limitations applicable to any offense ' involving fraud or attempted fraud against the United States or any agency thereof in any manner ' shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress. 18 U.S.C. ' 3287.

The 2008 amendments changed the statute in three significant ways.

First, Congress expanded the scope of the WSLA, extending its tolling provisions to instances when the nation is either at war or “Congress has enacted a specific authorization for the use of the Armed Forces” under the War Powers Resolution, 50 U.S.C. ' 1544(b). As a result, the current military operations in Iraq and Afghanistan ' both authorized by Congress under the War Powers Resolution ' have triggered the tolling provisions of the WSLA. Second, Congress extended the tolling period to five years beyond the “termination of hostilities.” Third, to enable courts and litigants to identify the termination of hostilities with precision, Congress required either a formal “Presidential proclamation, with notice to Congress,” or a concurrent resolution of Congress stating that the hostilities have ended. A simple statement by the President will no longer suffice.

Impact of Amendments

As a result of these amendments, even if the President were to proclaim an end to hostilities under the Iraq and Afghanistan military authorizations today, the government would have until 2014 to prosecute conduct occurring as far back as 2003, using the typical five-year statute of limitations that applies to most criminal offenses.

Of course, the government would likely have much longer than that, as an end to these military operations authorized by Congress is not likely to occur any time soon. The global war on terror may last generations, as the Supreme Court has noted. Hamdi v. Rumsfeld, 542 U.S. 507, 520 (2004). As long as the nation's efforts to combat terrorism are backed by a Congressional authorization of military force, the limitations period on government frauds will remain frozen.

Application of WSLA

Although the WSLA on its face applies to “any offense ' involving fraud or attempted fraud against the United States,” the Supreme Court, in United States v. Bridges, 346 U.S. 209 (1953), narrowed the scope in a manner helpful to individuals and entities confronted with an aggressive prosecutor invoking the WSLA. Because the 2008 amendments did not affect the definition of fraud for purposes of the WSLA, Bridges remains good law, and the case will become increasingly important as defendants challenge the applicability of the WSLA to the particular charges they face.

First, Bridges held that the fraud must be of a “pecuniary nature” or relate to the property of the United States. Second, fraud must be an “essential ingredient” of the offense at issue. Thus, there is a strong argument that a straightforward ' 1001 false-statement charge, even if made in connection with a fraudulent scheme, does not trigger the WSLA because fraud is not an element of a false-statement offense. Moreover, an allegation of fraud not required by the underlying criminal statutes will not trigger the WSLA because the “embellishment of the indictment does not lengthen the time for prosecution.” 346 U.S. at 222.

History of the WSLA

Through the recent amendments, Congress has made clear that the WSLA now applies to military conflicts expressly authorized under the War Powers Resolution even where there is no formal congressional declaration of war. Given that the WSLA amendments only took effect on Sept. 30, 2008, and that the Ex Post Facto Clause bars the resurrection of claims that were time-barred before that date, it is important to assess what the phrase “at war” meant within the meaning of the prior version of the WSLA.

The WSLA traces back to the aftermath of World War I. In 1921, the Department of Justice (DOJ) requested that Congress provide additional time to investigate and prosecute a backlog of war-related procurement-fraud cases. In response, Congress temporarily extended the limitations period (then three years) to six years for any frauds committed against the United States. Congress repealed the statute in 1927, after the DOJ announced it intended no further prosecutions arising out of the war-mobilization effort.

In 1942, against the backdrop of the massive World War II mobilization effort and the potential for widespread procurement fraud, Congress enacted a similar statute, this time tolling the limitations period until June 30, 1945. In 1944, Congress extended the tolling until “three years after the present war.” Finally, in 1948, the text was again amended so that the limitations period would be tolled whenever “the United States is at War.”

Although the WSLA does not define “at war,” its history and the circumstances surrounding its passage suggested that “war” meant a war declared by Congress exercising its powers under Article I, Section 8 of the Constitution. This was the essential holding of what was, until last year, the only opinion in decades to consider the scope of the WSLA, United States v. Shelton, 816 F. Supp. 1132 (W.D. Tex. 1993).

The purpose of the 2008 amendments was to expand WSLA's scope beyond formally declared wars. The Senate Report says the amendments “close a loophole in current law and give the government new power to prosecute contracting fraud in Iraq and Afghanistan.” S. Rep. No. 110-431, at 6. Clearly, Congress did not believe that the old statute applied to the current conflicts.

Applying the Old Statute to Pre-2008 Crimes

At least one district court, however, took a different view. In a case involving allegations of highway project fraud relating to Boston's $22-billion “Big Dig,” the court held that the country had been “at war” within the meaning of the pre-2008 statute during at least some of the preceding seven years. United States v. Prosperi, 573 F. Supp. 2d 436 (D. Mass. 2008).

The court considered four factors to determine whether the country was “at war” under the old WSLA: the extent of Congressional authorization; whether the conflict would be deemed a war under international law; the scope of the conflict; and the diversion of government resources. Based on these factors, the court concluded that the nation was “at war” from Sept. 18, 2001 ' When Congress authorized the use of force against the Taliban ' through Dec. 22, 2001, when the Karzai government took power in Afghanistan. Likewise, the country was also at war from Oct. 10, 2002 ' when Congress authorized the use of force against Iraq ' to May 1, 2003, when former President Bush stood aboard the USS Abraham Lincoln and declared “Mission Accomplished” and an end to major combat operations in Iraq. Accordingly, the district court held that the statute of limitations was tolled until May 1, 2006.

Another significant aspect of the court's decision in Prosperi was that the conduct at issue did not need to relate in any way to the war. Offenses relating to the delivery of concrete to a local highway project, bearing absolutely no nexus to the “war” effort, were tolled by the WSLA. It remains to be seen whether courts will give the same broad scope to the 2008 version despite the Senate Report's focus on “contracting fraud in Iraq and Afghanistan.”

Given the amended statute and Prosperi, the WSLA may play an increasingly prominent role in prosecutions of frauds against the government for years to come. Virtually all major health-care fraud prosecutions include some Department of Defense component. For most federal offenses, the government will have at least another five years to prosecute conduct that occurred as long ago as February 1999, and likely much longer.

Joshua Levy is a partner in the Government Enforcement Group at Ropes & Gray in Boston and a former federal prosecutor. David D'Addio is an associate at the firm who has worked extensively on white-collar matters. They represent one of the defendants in United States v. Prosperi.

The Wartime Suspension of Limitations Act (“WSLA”) was, until recently, a seldom-invoked World War II-era law designed to toll the statute of limitations for frauds committed against the United States while the nation was “at war.” Initially drafted in the wake of World War I, at a time when Congress formally declared wars and society fully mobilized in support of a war effort, the law had been largely ignored for decades. But last fall, Congress breathed new life into the old law, amending it to apply to the ongoing conflicts in Iraq and Afghanistan as well as any future military engagements expressly authorized by Congress.

The impact of these amendments will be significant for the defense of any clients who regularly do business with the government. The WSLA adds years of exposure to criminal prosecutions that would have otherwise been time-barred. It affects the limitations periods for all types of financial and property-related frauds against the United States ' criminal and perhaps civil False Claims Act cases, health care fraud offenses, and frauds involving federal loans or loan guarantees, to name just a few.

2008 Amendments

Until Sept. 30, 2008, when Congress quietly amended the WSLA through an appropriations bill, the WSLA provided in relevant part:

When the United States is at war the running of any statute of limitations applicable to any offense ' involving fraud or attempted fraud against the United States or any agency thereof in any manner ' shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress. 18 U.S.C. ' 3287.

The 2008 amendments changed the statute in three significant ways.

First, Congress expanded the scope of the WSLA, extending its tolling provisions to instances when the nation is either at war or “Congress has enacted a specific authorization for the use of the Armed Forces” under the War Powers Resolution, 50 U.S.C. ' 1544(b). As a result, the current military operations in Iraq and Afghanistan ' both authorized by Congress under the War Powers Resolution ' have triggered the tolling provisions of the WSLA. Second, Congress extended the tolling period to five years beyond the “termination of hostilities.” Third, to enable courts and litigants to identify the termination of hostilities with precision, Congress required either a formal “Presidential proclamation, with notice to Congress,” or a concurrent resolution of Congress stating that the hostilities have ended. A simple statement by the President will no longer suffice.

Impact of Amendments

As a result of these amendments, even if the President were to proclaim an end to hostilities under the Iraq and Afghanistan military authorizations today, the government would have until 2014 to prosecute conduct occurring as far back as 2003, using the typical five-year statute of limitations that applies to most criminal offenses.

Of course, the government would likely have much longer than that, as an end to these military operations authorized by Congress is not likely to occur any time soon. The global war on terror may last generations, as the Supreme Court has noted. Hamdi v. Rumsfeld , 542 U.S. 507, 520 (2004). As long as the nation's efforts to combat terrorism are backed by a Congressional authorization of military force, the limitations period on government frauds will remain frozen.

Application of WSLA

Although the WSLA on its face applies to “any offense ' involving fraud or attempted fraud against the United States,” the Supreme Court, in United States v. Bridges , 346 U.S. 209 (1953), narrowed the scope in a manner helpful to individuals and entities confronted with an aggressive prosecutor invoking the WSLA. Because the 2008 amendments did not affect the definition of fraud for purposes of the WSLA, Bridges remains good law, and the case will become increasingly important as defendants challenge the applicability of the WSLA to the particular charges they face.

First, Bridges held that the fraud must be of a “pecuniary nature” or relate to the property of the United States. Second, fraud must be an “essential ingredient” of the offense at issue. Thus, there is a strong argument that a straightforward ' 1001 false-statement charge, even if made in connection with a fraudulent scheme, does not trigger the WSLA because fraud is not an element of a false-statement offense. Moreover, an allegation of fraud not required by the underlying criminal statutes will not trigger the WSLA because the “embellishment of the indictment does not lengthen the time for prosecution.” 346 U.S. at 222.

History of the WSLA

Through the recent amendments, Congress has made clear that the WSLA now applies to military conflicts expressly authorized under the War Powers Resolution even where there is no formal congressional declaration of war. Given that the WSLA amendments only took effect on Sept. 30, 2008, and that the Ex Post Facto Clause bars the resurrection of claims that were time-barred before that date, it is important to assess what the phrase “at war” meant within the meaning of the prior version of the WSLA.

The WSLA traces back to the aftermath of World War I. In 1921, the Department of Justice (DOJ) requested that Congress provide additional time to investigate and prosecute a backlog of war-related procurement-fraud cases. In response, Congress temporarily extended the limitations period (then three years) to six years for any frauds committed against the United States. Congress repealed the statute in 1927, after the DOJ announced it intended no further prosecutions arising out of the war-mobilization effort.

In 1942, against the backdrop of the massive World War II mobilization effort and the potential for widespread procurement fraud, Congress enacted a similar statute, this time tolling the limitations period until June 30, 1945. In 1944, Congress extended the tolling until “three years after the present war.” Finally, in 1948, the text was again amended so that the limitations period would be tolled whenever “the United States is at War.”

Although the WSLA does not define “at war,” its history and the circumstances surrounding its passage suggested that “war” meant a war declared by Congress exercising its powers under Article I, Section 8 of the Constitution. This was the essential holding of what was, until last year, the only opinion in decades to consider the scope of the WSLA, United States v. Shelton , 816 F. Supp. 1132 (W.D. Tex. 1993).

The purpose of the 2008 amendments was to expand WSLA's scope beyond formally declared wars. The Senate Report says the amendments “close a loophole in current law and give the government new power to prosecute contracting fraud in Iraq and Afghanistan.” S. Rep. No. 110-431, at 6. Clearly, Congress did not believe that the old statute applied to the current conflicts.

Applying the Old Statute to Pre-2008 Crimes

At least one district court, however, took a different view. In a case involving allegations of highway project fraud relating to Boston's $22-billion “Big Dig,” the court held that the country had been “at war” within the meaning of the pre-2008 statute during at least some of the preceding seven years. United States v. Prosperi , 573 F. Supp. 2d 436 (D. Mass. 2008).

The court considered four factors to determine whether the country was “at war” under the old WSLA: the extent of Congressional authorization; whether the conflict would be deemed a war under international law; the scope of the conflict; and the diversion of government resources. Based on these factors, the court concluded that the nation was “at war” from Sept. 18, 2001 ' When Congress authorized the use of force against the Taliban ' through Dec. 22, 2001, when the Karzai government took power in Afghanistan. Likewise, the country was also at war from Oct. 10, 2002 ' when Congress authorized the use of force against Iraq ' to May 1, 2003, when former President Bush stood aboard the USS Abraham Lincoln and declared “Mission Accomplished” and an end to major combat operations in Iraq. Accordingly, the district court held that the statute of limitations was tolled until May 1, 2006.

Another significant aspect of the court's decision in Prosperi was that the conduct at issue did not need to relate in any way to the war. Offenses relating to the delivery of concrete to a local highway project, bearing absolutely no nexus to the “war” effort, were tolled by the WSLA. It remains to be seen whether courts will give the same broad scope to the 2008 version despite the Senate Report's focus on “contracting fraud in Iraq and Afghanistan.”

Given the amended statute and Prosperi, the WSLA may play an increasingly prominent role in prosecutions of frauds against the government for years to come. Virtually all major health-care fraud prosecutions include some Department of Defense component. For most federal offenses, the government will have at least another five years to prosecute conduct that occurred as long ago as February 1999, and likely much longer.

Joshua Levy is a partner in the Government Enforcement Group at Ropes & Gray in Boston and a former federal prosecutor. David D'Addio is an associate at the firm who has worked extensively on white-collar matters. They represent one of the defendants in United States v. Prosperi.