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Washington Lawyer

Taking the Stand: Casualty of War: Reasonable Statute of Limitation Periods in Fraud Cases

From Washington Lawyer, February 2014

By Joshua Berman, Glen Donath, and Christopher Jackson

“Taking the Stand” appears periodically in Washington Lawyer as a forum for D.C. Bar members to address issues of importance to them and that would be of interest to others. The opinions expressed are the author’s own.

earth graphicLost amidst the recent debate in Congress over whether to authorize military action in Syria was something that lawmakers likely gave little, if any, thought to, but that could have a significant impact on those who stand accused of defrauding the federal government. Had Congress voted to authorize the use of military force, it likely would have triggered (or, more accurately, retriggered) the Wartime Suspension of Limitations Act (WSLA),[1] a World War II-era statute that, in its current form, has the potential to toll indefinitely any limitations period for fraud offenses committed against the United States government. Under the WSLA, it is entirely conceivable that the limitations period for a fraud offense committed in 2001 will not expire until well into the 2020s or beyond, more than quadrupling the ordinary five-year statute of limitations.

Congress originally enacted the WSLA in the 1940s to provide federal law enforcement agencies more time to prosecute those who committed frauds against the federal government during a time of war, such as unscrupulous defense contractors.[2] The passage of the WSLA and prosecutorial utilization of the act made sense, given the significant drain on human and financial resources during and immediately after World War II. The act tolled the limitations period until three years after the termination of hostilities for virtually any kind of fraud in which the United States was a victim.[3] Federal prosecutors made extensive use of the additional time the WSLA gave them in the years following World War II, and there are dozens of cases analyzing and applying the WSLA through the 1950s. For the next half-century, the WSLA appears to have been largely forgotten. Between the 1950s and 2008, there was only one published case in which the government attempted (unsuccessfully) to invoke the WSLA shortly after the Persian Gulf War.[4] The lack of case law left unanswered some of the more difficult interpretive questions regarding the act, such as when the United States is “at war” so as to suspend the limitations period and, conversely, when hostilities have ceased so as to permit the limitations period to resume running. The earlier case law had little need to deal with these issues, given the relatively clear starting and ending points of World War II.[5]

The long period of dormancy ended, however, with United States v. Prosperi, a 2008 case involving the prosecution of employees of a concrete supply company in connection with the “Big Dig” construction project in Boston.[6] The U.S. Department of Justice successfully argued that the wars in Iraq and Afghanistan had tolled the otherwise expired limitations period, and the district court allowed the case to proceed.[7] Since Prosperi, the government (and private relators bringing qui tam suits) has invoked the WSLA in numerous cases, generally with success, citing the wars in Iraq and Afghanistan as justification for bringing otherwise stale cases and claims.[8] Furthermore, prosecutors sometimes threaten to use the WSLA in an effort to force subjects and targets of federal criminal investigations to agree to toll limitation time periods during investigations.

The same year that Prosperi was decided, Congress passed the Wartime Enforcement of Fraud Act (WEFA),[9] which amended the WSLA to (1) extend the postwar tolling period from three to five years, and (2) clarify those circumstances in which the WSLA applied.[10] Recognizing the original act’s ambiguity regarding when the United States was “at war,” Congress used much more precise language in the WEFA. The amendment simultaneously broadened the circumstances in which the WSLA’s tolling provision is triggered and narrowed the circumstances in which the “war” can be said to have ended. Now, under the post-amendment WSLA, virtually any congressional authorization for the use of military force—such as that which was approved by Congress prior to the wars in Afghanistan and Iraq and also recently contemplated with regard to Syria—will trigger the statute. But only a formal proclamation by the president, with notice to Congress, or a concurrent resolution of Congress will suffice to end the “war” and resume the running of the five-year clock under the original limitations period.[11]

The amendment is important because the degree to which defendants have prevailed in arguing against the application of the WSLA has depended in large part on whether the pre-amendment or post-amendment version of the statute applies. Defendants have had some success in fighting the more ambiguous pre-amendment version of the WSLA; they have had no success fighting the post-amendment version.[12] Whereas under the pre-amendment WSLA, a defendant could argue that the statute was triggered only by a formally declared war,[13] or that an informal statement by the president sufficed to end the war for WSLA purposes,[14] those arguments seem to have been completely foreclosed by the plain language of the post-amendment statute.[15]

Thus, under the current version of the WSLA, prosecutors can take the position that the United States has been “at war” at least since September 18, 2001, when Congress passed the authorization for the president to use military force in Afghanistan.[16] Redundantly, Congress’s authorization for the use of force in Iraq also triggered the WSLA.[17] And in spite of the fact that the last U.S. troops left Iraq in December 2011, it does not appear that that war has ended for WSLA purposes.[18] Nor, by all accounts, has the war in Afghanistan.[19] Thus, prosecutors could argue that the limitations clock has not even begun to run for any fraud perpetrated against the federal government for at least the past 12 years.

Moreover, U.S. troops are not scheduled to leave Afghanistan until December 2014, and some troops may remain beyond that date depending on the outcome of negotiations with the Afghan government. Even if the formal prerequisites are followed to “terminate hostilities” in Afghanistan by the end of 2014, the original five-year limitations period for a covered fraud offense would not begin to run until December 2019. Thus, the statute of limitations would not expire until December 2024, more than 23 years after the start of the tolling period. Of course, if neither Congress nor the president formally acts to terminate hostilities, the limitations period will never expire. And even if they do act, any new authorization Congress might pass for the use of military force in the future (such as that recently contemplated with regard to Syria) will retrigger the WSLA and toll the clock once again.

In spite of the seeming absurdity that an individual who, for example, kited a government check in 2001 could be timely prosecuted for the offense at least until 2024, the plain language of the statute seems to lead inexorably to that conclusion. And given that statutes of limitations exist as a matter of legislative grace, not constitutional right,[20] opponents of this potential abusive use of the WSLA struggle to conceive of any constitutional defenses that could be successfully deployed against an apparently facially valid application of the statute, at least in the absence of bad faith on the part of the government.[21] Congress is free to eliminate—and it has eliminated—limitations periods altogether for many federal offenses.[22]

Yet the mere fact that Congress was constitutionally authorized to do what it did does not mean that the WSLA is sound policy. Statutes of limitations exist for good reason: evidence goes stale, witnesses become difficult to locate, and memories fade. Certainly, when the national government is focused on prosecuting a war effort the size and scope of World War II, it is understandable and desirable that the government be given flexibility to bring cases that would otherwise become stale.[23] But this rationale has little salience in the era of modern warfare, when engagements of more limited scope (and often, though not always, duration) are typical. Moreover, while modern-day military engagements certainly take their toll on the American people and the military, the effort on investigations and prosecutorial staffing is dramatically different than 70 years ago. For example, military intervention in Syria, authorized by Congress, that hypothetically lasted only a few weeks would nevertheless be sufficient to toll the limitations period for a covered offense for more than five years. This would be so despite any indication that such a limited military action would in any way inhibit the Department of Justice from investigating and prosecuting fraud cases.

Such a stark departure from the ordinary rule in criminal jurisprudence should be supported by strong justification. For example, those crimes for which Congress has eliminated a limitations period entirely tend to be the most serious—crimes like murder, terrorism, and child abduction. These are crimes for which Congress has determined that the interests of prosecution are so acute they outweigh the countervailing considerations in favor of repose.[24] It is far from clear, however, that the kinds of offenses covered under the broad language of the WSLA, which would include everything from Social Security fraud to False Claims Act violations, fit into that category.[25]

Because the consequences of indefinite (or effectively indefinite) tolling of the limitations period for myriad fraud offenses are so significant, and the government’s need for such tolling in the modern era comparatively slight, policymakers should carefully consider options for mitigating the WSLA’s impact. For example, one step that could be taken immediately is for the president or Congress to formally end the Iraq War for WSLA purposes. The war in Afghanistan could be similarly “terminated” under the statute, either immediately or at some point in the near future as the United States continues to draw down its troop presence.[26] With regard to future authorizations for the use of military force, such as in Syria or elsewhere, Congress could include a provision that expressly prevents the WSLA from being triggered. Such a provision might be appropriate where, for example, the military action is contemplated to be of only limited scope and duration, and is, therefore, not of the type for which the WSLA was originally thought to be necessary.

As a more permanent solution, Congress could amend the statute to prevent never-ending “wars” that toll indefinitely the limitations period. For example, the statute could be revised so that, upon triggering, the limitations period would be tolled until the termination of hostilities or until a future date certain (say, three years from the triggering event), whichever is sooner, unless Congress acts to extend the period. This would preserve the WSLA’s automatic triggering upon the outbreak of war, but would require Congress to make a reasoned judgment within a few years about whether the exigencies of the conflict justified continued tolling. Finally, federal prosecutors must continue to heed the age-old wisdom of Justice George Sutherland in striking fair blows[27] and should exercise appropriate discretion in not threatening or seeking to invoke the WSLA in absurd situations.

Given that neither the president nor Congress has acted in more than two years to formally end the Iraq War for WSLA purposes, it appears that the WSLA has been forgotten—except, of course, by federal prosecutors who are increasingly invoking the statute to bring otherwise stale charges. The effects of the WSLA will likely be felt for years after the wars in Iraq and Afghanistan will have faded into history, and whatever justification for prosecutorial delay that earlier existed will have long since been extinguished. Policymakers should take note of this issue and act to restore a more appropriate balance between the desire for rigorous prosecution and the need for timely repose in matters of criminal law.

Joshua Berman is a former federal prosecutor for the U.S. Attorney’s Office for the Southern District of New York and for the U.S. Department of Justice’s Criminal Division. Glen Donath is a former federal prosecutor for the U.S. Attorney’s Office for the District of Columbia. Both are partners in the white collar and government investigation group at Katten Muchin Rosenman LLP in Washington, D.C. Christopher Jackson is an associate at Katten Muchin. He will join the U.S. Attorney’s Office for the Eastern District of Virginia as a Special Assistant U.S. Attorney in March 2014.

[1] Act of June 25, 1948, ch. 645, 62 Stat. 683, 828 (codified as amended at 18 U.S.C. § 3287 (2012)). The 1948 act had its origin in a similar statute enacted in 1942. Bridges v. United States, 346 U.S. 209, 217 & n.15 (1953) (citing act of Aug. 24, 1942, 56 Stat. 747–48).
[2] See United States v. Smith, 342 U.S. 225, 228–29 (1952); see also id. at 230 (Clark, J., concurring) (“Soon after the beginning of World War II, Congress realized that it would be impossible for the Department of Justice currently to investigate and prosecute the large number of offenses arising out of the war effort. Therefore, Congress suspended the running of the statute of limitations as to frauds against the Government. . . . It is clear that Congress intended to give the Department more time to apprehend, investigate, and prosecute offenses occurring ‘under the stress of present-day events’ of the war.”).
[3] 62 Stat. at 828.
[4] See United States v. Shelton, 816 F. Supp. 1132 (W.D. Tex. 1993).
[5] See, e.g., Smith, 342 U.S. at 227.
[6] 573 F. Supp. 2d 436 (D. Mass. 2008).
[7] Id.
[8] See, e.g., United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013); United States v. Pfluger, 685 F.3d 481 (5th Cir. 2012); United States v. Wells Fargo Bank, N.A., __ F. Supp. 2d __, No. 12 Civ. 7527 (JMF), 2013 WL 5312564 (S.D.N.Y. Sept. 24, 2013); United States v. Latimer, No. CR-11-384-R, 2012 WL 1023569 (W.D. Okla. Mar. 27, 2012); United States v. Anghaie, No. 1:09-CR-37-SPM/AK, 2011 WL 720044 (N.D. Fla. Feb. 21, 2011); United States v. Pearson, Criminal Action No. 2:09cr43-KS-MTP, 2010 WL 3120038 (S.D. Miss. Aug. 4, 2010); United States v. Western Titanium, Inc., Criminal No. 08-CR-4229-JLS, 2010 WL 2650224 (S.D. Cal. July 1, 2010).
[9] Identical versions of the WEFA were rolled into two larger defense appropriations bills—the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, Pub. L. No. 110–329, § 8117, 122 Stat. 3574, 3647 (enacted Sept. 30, 2008), and the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110–417, § 855, 122 Stat. 4356, 4545 (enacted Oct. 14, 2008). The latter, duplicate statute was later repealed. See National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111–84, § 1073(c)(7), 123 Stat. 2190, 2475 (2009); see also 18 U.S.C. § 3287 note (2012) (Amendments).
[10] The amended statute, codified at 18 U.S.C. § 3287, reads as follows:
When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), 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, whether by conspiracy or not . . . shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress. . . . For purposes of applying such definitions in this section, the term “war” includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).
[11] See id.
[12] Compare Anghaie, 2011 WL 720044, and Western Titanium, 2010 WL 2650224, with Wells Fargo Bank, 2013 WL 5312564, and Latimer, 2012 WL 1023569.
[13] See, e.g., Western Titanium, 2010 WL 2650224, at *2–4.
[14] See, e.g., Prosperi, 573 F. Supp. 2d at 454.
[15] See Wells Fargo Bank, 2013 WL 5312564, at *11 (“In light of the 2008 amendment, there is no dispute that the WSLA is now in effect. . . .”).
[16] See Authorization for Use of Military Force, Pub. L. No. 107–40, 115 Stat. 224 (2001).
[17] See Authorization for Use of Military Force Against Iraq, Pub. L. No. 107–243, 116 Stat. 114 (2002).
[18] Pfluger, 685 F.3d at 485 (as of date of opinion, “neither Congress nor the president [had] met the formal requirements for terminating the WSLA’s suspension of limitations”); Wells Fargo Bank, 2013 WL 5312564, at *11 (“[T]here has been neither a Presidential proclamation, with notice to Congress, nor a congressional resolution suspending hostilities.”); see also Halliburton, 710 F.3d at 179.
[19] Pfluger, 685 F.3d at 485; Wells Fargo Bank, 2013 WL 5312564, at *11.
[20] See Doggett v. United States, 505 U.S. 647, 669 (1992) (Thomas, J., dissenting).
[21] The two most obvious limitations-related constitutional defenses—the Ex Post Facto Clause and the Due Process Clause—are unlikely to be of much use to criminal defendants when the government invokes the WSLA. The Ex Post Facto Clause prohibits only the retroactive application of an expansion of the limitations period after the period has expired; it does not protect against the tolling or extension of a limitations period that has not yet lapsed. See Latimer, 2012 WL 1023569, at *2 (rejecting argument that 2008 amendment to the WSLA violated Ex Post Facto Clause). The Due Process Clause may be invoked as a defense against pre-indictment delay even within the limitations period, but the defendant must show both actual prejudice caused by the delay and, in accordance with the weight of authority, bad faith on the part of the government (i.e., that the government intentionally delayed bringing indictment to gain tactical advantage). See Charles Doyle, Statutes of Limitation in Federal Criminal Cases: An Overview 16–17, Cong. Research Serv., RL31253 (2012) (citing numerous cases). Finally, neither the Sixth Amendment nor Federal Rule of Criminal Procedure 48(b), authorizing a court to dismiss an indictment in the event of unnecessary delay, offers much hope for relief. See United States v. Marion, 404 U.S. 307, 313–19 (1971) (holding that the Sixth Amendment’s speedy trial provision and Rule 48(b) apply only after arrest or indictment).
[22] Halliburton, 710 F.3d at 187 (Wynn, J., concurring) (citing Doyle, supra note 21).
[23] See supra note 2.
[24] See Doyle, supra note 21, at 1 (“There is no statute of limitations for federal crimes punishable by death, nor for certain federal crimes of terrorism, nor . . . for certain federal sex offenses. Prosecution for most other federal crimes must begin within five years of the commitment of the offense.”); see also id. at 18–24 (listing all federal crimes for which there is no statute of limitations).
[25] Indeed, the WSLA has been successfully invoked even by private qui tam plaintiffs in cases in which the government declined to intervene to bring claims that would otherwise be time-barred. E.g., Halliburton, 710 F.3d at 173.
[26] We assume that the conflict in Afghanistan (as well as the broader, continuing efforts to fight terrorism globally) could be formally “terminated” for WSLA purposes without affecting the underlying congressional authorization for the use of military force.
[27] Berger v. United States, 295 U.S. 78, 88 (1935) (“[W]hile [a federal prosecutor] may strike hard blows, he is not at liberty to strike foul ones.”)