The Wartime Suspension of Limitations Act, the Wartime Enforcement of Fraud Act, and the war on terror.

• Author: Brown, Erin M.

INTRODUCTION

In 1945, while the world was sifting through the rubble of World War II, Harold Lurie and Samuel Dworett were attempting to fraudulently profit from the remnants of the American war machine. In order to redistribute what was estimated at the time to be $75 billion in surplus stock, (1) veterans were granted a priority right to buy property, machinery, and other surplus items. (2) In fact, by the distribution's end, former soldiers purchased over $500 million worth of the remaining tools and materials--twenty-two percent of the entire war surplus. (3)

Lurie and Dworett, hoping to exploit this priority access to the goods, attempted to fraudulently obtain veterans' preferences for themselves and for their business, Rel Sales Company, Inc. (4) They "advised and caused" honorably discharged veterans to apply for materials on the company's behalf, including counseling the veterans to falsify statements on their applications. (5) The two were eventually indicted in 1952, but Lurie and Dworett filed motions to dismiss on the grounds that the charges were barred by the three-year statute of limitations on fraud. (6)

Despite the apparent staleness of the indictments, the government was able to prevail on the prosecution by utilizing the Wartime Suspension of Limitations Act (7) (WSLA). The Act, seemingly drafted for this very situation, suspended the commencement of the statute of limitations on fraud until three years after the termination of hostilities. (8) Accepting the government's application of WSLA, the U.S. Court of Appeals for the Seventh Circuit affirmed Lurie and Dworett's convictions. (9)

After a flurry of like prosecutions in the aftermath of World War II, WSLA was not successfully invoked again for over fifty years. (10) But in May 2006, the government successfully relied on the now "obscure" (11) WSLA to prosecute construction contractors who were charged with multiple counts of fraud while the United States was involved in the conflicts in Afghanistan and Iraq. (12) District Judge Richard Stearns accepted the government's application of the Act, allowing prosecutors to extend the statute of limitations and pursue charges of fraud related to Boston's Central Artery/Tunnel Project, known in Massachusetts as the "Big Dig." (13)

Awakening this essentially dormant Act not only has significant implications for both corporate and individual actors, but it also presents new challenges for judicial interpretation and reestablishes an important tool for federal prosecutors. The application of this twentieth century statute to a twenty-first century conflict, however, also raises a host of concerns, including the constitutional tension that arises when the judiciary must decide when the nation is at war, particularly in a threat environment where armed conflict is drastically different than the 1940s-conception of war. Judge Stearns's application of this statute to non-war-related fraud also reopens an old jurisprudential inconsistency: exactly how broadly did Congress envision the types of "fraud" that should be affected by WSLA? Further, it requires a consideration of the purpose of the statute itself, and whether this purpose can still provide interpretational guidance or a rationale for the Act.

As it turns out, Senators Leahy and Grassley had already considered some of the problems inherent in WSLA and its application to the conflicts in Iraq and Afghanistan. (14) Nearly five months before Judge Stearns issued his Big Dig decision, the Senators introduced the Wartime Enforcement of Fraud Act (15) (WEFA) in an attempt to modernize WSLA. Added as an amendment to the national defense bill, the legislation made its way through both Houses, passing the Senate in September 2008, and was signed into law on October 14, 2008. (16) The Senators' amendment makes significant improvements to the original WSLA, but unfortunately does not adequately address some of its key shortcomings. Most notably, it does not apply to the breadth of modern conflicts that are susceptible to wartime fraud, and its legislative history complicates the already ambiguous jurisprudence as to the scope of frauds that should be covered by the Act. (17)

Part I of this Note briefly introduces WSLA, looking at the purposes behind the original Act and its application. This Part also analyzes four distinct problems with the sixty-year-old statute. First, it addresses the practical question of why the Act was established in the first place--either to counteract the increased opportunity for fraud during wartime, or in response to the belief that the investigative branches of government are less capable of initiating prosecutions during times of war. Second, it assesses the theoretical problems with the Act, particularly the challenge of applying vague terms such as "at war" to our current threat environment. Part I next considers constitutional concerns, including the separation of powers and justiciability problems inherent in the original Act, Last, this Part asks about the appropriate scope of the Act, namely whether the statute is limited to war-related fraud, or all fraud against the government during times of war.

Part II explains WEFA and assesses how this amendment impacts these four challenges. Part III considers ways to improve the understanding of WSLA and its new amendment, both through an analysis of the courts' jurisprudence and legislative history, as well as by offering suggestions for further legislative clarification.

Overall, while this Note provides a fairly favorable assessment of WEFA, it views the amendment as addressing only some of WSLA's failings. In light of WEFA's shortcomings, legislators should look to expand the kinds of conflicts that are covered by WSLA, and should specifically define the types of fraud that merit a suspension of limitations.

1. UNDERSTANDING AND ASSESSING THE ORIGINAL WSLA

   The relevant text of the original WSLA states:

   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 ... shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress. (18) The Act was originally signed into law in 1942 by President Franklin D. Roosevelt, (19) who vigorously spoke out against "war millionaires" and profiteers who exploited the calamity of war. (20) Throughout his presidency, whenever Roosevelt requested further funding for military spending, "it was usually accompanied by legislation for the 'prevention of profiteering.'" (21) In 1948, WSLA was permanently enshrined in Tire 18 of the United States Code by President Harry S. Truman, (22) who as a senator had held public hearings to expose fraud and waste by contractors during the war. (23)

   Prosecutors attempted to apply WSLA to a wide range of fraudulent acts in the immediate post-World War II years with mixed success. (24) These inconsistent outcomes can be attributed in some part to interpretational challenges not unlike the ones facing the judiciary today due to the vagueness of the statute's text and its ambiguous legislative history. (25)

   1. Practical Criticisms: Purposes Behind the Act

      While it is generally agreed that WLSA was not intended to secure the prosecution of all frauds committed against the government during times of war, (26) the "legislative history offers no express affirmative indication of the purpose that Congress had in mind." (27)

      The simplest explanation is that there is a much greater opportunity for defrauding the government when the nation is at war. (28) The legislative history of the Act details this concern, noting that "opportunities will no doubt be presented for unscrupulous persons to defraud the Government or some agency. These frauds may be difficult to discover ... and many of them may not come to light for some time to come." (29) This "demand-side" argument implies that the purpose behind WSLA is a direct response to the greater possibilities for fraud during wartime. (30)

      An alternative, not entirely contradictory interpretation, suggests that the purpose of the Act is to allow a hampered investigatory arm of the government more time to prosecute fraud. (31) According to Judge Learned Hand, "the purpose of the [Act] was not to let crimes pass unpunished which had been committed in the hurly-burly of war." (32) In other words, the purpose of WSLA was less related to the opportunity for fraud itself, and more fled to the fact that "investigative agencies of the government are handicapped during such periods by loss of personnel to the armed forces." (33) This understanding of the Act presents a "supply-side" argument about the need for the statute--while the need for prosecutions during wartime is high for reasons discussed above, this need cannot be met with an adequate supply of prosecutorial tools. (34)

      This reveals two possible rationales for the Act: executive and congressional belief that businesses and individuals should not improperly profit from the machinery of war, and Judge Hand's suggestion that investigative capabilities are much less effective during wartime. This bifurcated view of the purpose of WLSA is particularly relevant when assessing the intended scope of both it and WEFA. (35)

   2. Theoretical: Defining War in the Twenty-First Century

      Under the original WSLA, there was no express definition of what Congress meant by the phrase "at war." (36) Surely, the 70th Congress viewed the phrase "at war" through the lens of the only wars and conflicts that it knew: World War I and World War II. (37) The reality, however, is that since the statute was enacted, the United States has simply not declared war, "despite prolonged engagements in Korea, Vietnam, Kosovo, Afghanistan, and Iraq (twice) and shorter deployments in Panama, Grenada, Haiti, and Somalia, among others." (38) The drafters'...