i think this is a new one here also at the at the holocaust memorial with the president and the speaker and others and i was also unable to get back to the committee in time to vote indeed i did not know the economic clearly there were several generations millions of lost their homes many have lost their jobs savings have is irresponsible behavior and then sometimes outright fraud and so with the gentleman from texas tomorrow cooperation we brought for  there are people in there that their large share of the blame and once the prime mortgage problem kicked in the real estate bubble collapsed and so now it's affecting people who aren't part of the problem but they're in neighborhoods that are and so we're trying to without question reach bank mortgage lenders that fraud in connection with finance relationships contemplated by the stimulus or other economic recovery programs will justice to be as effective as we can in helping protect those who still believe in the american dream of owning a home  on by the housing crisis and other factors expose a significant amount of fraud and corruption within the mortgage banking and securities industry the push for home ownership combined with unchecked lending practices and inflated property values upfront payment promises are almost always in the scam or pocket money while doing little or absolutely nothing and certainly less than the free publicly available channels that are available but in the aggregate the for your recommendation  you if there are no further amendments or reporting quorum being present the question is on reporting the bill favorably to the house those in favor say aye those opposed say no and the bill is ordered reported favorably without objection it will be reported as a single amendment and staff is authorized to make technical changes and we have two days for additional news  gentleman is recognized mr chairman i very much appreciate your scheduling this bill for markup today seven hundred eighty eight is virtually the identical bill that we this committee passed less than a year ago but since that time the case for the bill has only become stronger as i said in our hearing before the recess extraordinary steps to revive our economy in the last few months government funds to shore private  entities made a massive investment of taxpayer dollars to open credit markets and stimulate the economy we can debate the impact of these plans well what we know is that where there are programs with large sums of government time we should be strengthening what is proven to be one of the most successful tools ever created by congress the false claims act contains incentives for private individuals to report false claims and fraudulent activity and it allows these private parties to sue on behalf of the united states bring their private resources to the government's investigation of litigation if the u s investigates and merits to the private party allegations and intervene and take control of the lawsuit one hundred forty five year old originally passed to address rampant fraud against government funds by defen put new life into the restored incentives for whistleblowers to come forward and assist the government in protecting taxpayer dollars since that time the government has recovered nearly twenty two billion dollars of taxpayer money that would otherwise have been lost and that's a massive sum of recovery and yet in the scheme of things it's also a drop in the bucket for perspective the inspector general of the department of health and finding holds across all medicare outlays it could mean that the medicare alone taxpayers are losing about twenty three billion a year when i hear people say we don't need the amendments made by this bill because the false claims act has visions of the act and narrow application these courts are intent even in clear language in the law in legislative history and a matter that leaves entire categories of fraud outside the reach of the law the courts have thrown out cases in which the government is administered government programs and expanded its funds through contractors and other agencies as opposed to direct expenditure many courts by whistleblowers who are provisions will help the government root out fraud wherever the federal government commits taxpayer dollars however while some of the provisions may be beneficial other provisions could create problems in the execution in particular the whistleblower provisions claims in federal court by encouraging frivolous unfounded whistleblower this bill may make it harder for the government to recover funds under the false claims act these additional suits will add to the justice department's burden and detract from the ability to focus on meaningful cases so the provisions in this bill may be counterproductive that is why organizations such as the association of american university of american medical colleges among others strongly oppose this financial relationships with the government through strong internal controls and well established and rigorous compliance audit reconciliation process is additionally organizations such as the american hospital association the american health report the men without objection their member will be considered as the gentleman is recognized in support of his amendment thank you mr chairman why do you support the need for the underlying bill i believe it must take into account the manner in which universities typically receive funds from federal research is distinctly different from contract or a fee for service payments made to other types of government contract when university receives a dollar or one million dollar grant from the for example it does not receive a million dollar payment in a lump sum of the time of the award rather universities receive payments through large drawdowns on letters of credit issued by the sponsoring agency those drawdowns are based on charges that have been made to all the grants of the sponsoring agency at the university since the last drawdown for example at the university has multiple grants from and it will draw down sufficient funds to pay all the expenses salaries equipment travel associated with each of those grants during a given period in a single lump on the end there can be literally thousands of charges to the grants of a single sponsor between drawdowns universities have adopted a series of internal controls to help ensure that all the charges are accurate some of these controls come into play later in the grant term up to and including a final review of grant charges of the close up as a result during the term of a federally sponsored project a single grant may have under charges and over charges at any given time university systems are designed to help ensure that any incorrect charges are adjust cost transfers when they are detected in addition agencies may conduct periodic reviews and audits during the term of a grant to ensure the charges are accurate federal research agencies with oversight from the office of management and budget developed the decentralized grant charging process to pay  the large volume of charges submitted by major research universities like stanford columbia etc like universities research agencies have systems and controls in place to discover over charges or under charges and to correct them once discovered a similar situation also occurs with medicare and medicaid reimbursements to hospitals and medical schools that provide patient care a large volume of claims is submitted throughout the year and on occasion there can be both over payments and under payments the centers for medicare and medicaid services s works with providers to ensure that all accounts are square properly at the end of a certain time period during a temporary period of any overcharge before internal controls are audits catches and correct corrected before the final audit at the close out someone could allege under a provision of this bill h r one seven eight there there was a fraudulent charge and set in motion a time consuming and expensive investigation for the nonprofit institution this amendment is necessary to clarify the temporary overcharges that are subject to correction in the normal his amendment i think it is but the tip of the iceberg of the kinds of inadvertent on predicted actions and these unintended consequences that could come i think the gentleman in new york made a good case for why  these kinds of things can happen and in the complexity of billing as a former businessman i can tell you that we had an open book with certain city and best buy dating three years back and it was amazing how often we discovered each of us had made mistakes and those mistakes have been criminalized by a whistleblower rather than scrutinized by the green eyeshades accountants that each of us employ would have been simply a waste of time in the courts sources so i strongly support it i hope that it will be considered passed favorably along with the three amendments i'm going to offer that are similarly designed to improve this bill if this and my his amendment deals with an issue in the existing false claims act on the question of or payments it is not an effort to change something in this bill secondly there is a legitimate concern here and i respect the gentleman very much for bringing it up mr sensenbrenner and i tried to deal with that concern by making it clear that there is liability on the defendant whether it's a university or any other contractor with the government  retention of overpayment retention of over payments there's only liability of the defendant his bail to comply with a statutory or contractual obligation to go and over a payment about which the person is on actual notice of one of the things and i will talk with the both mr and others who want to about some if i could reclaim my time i understand the point you're making it's certainly a valid one from the university's point of view i think there's concern that you could have under way at the same grateful if the gentleman would withdraw his amendment and i'll commit to between now and the time we take this up on the floor we'll see if there's a way where we can get to where you want to go without going where i fear we might go with go but given this discussion which i thought was very productive and i think members on both sides i would seek to withdraw my award to the whistleblower if you will the original moving party what we seek to do in this in this amendment is to create a specific opportunity for the judge to any abatement of criminal prosecution as a result of this is to make the assumption that often this is a coconspirator who brings the case and fesses up that individual could have been criminally prosecuted and not being criminally prosecuted then the judge has the ability to weigh that in consideration of of how much money they get meaning one of the major benefits don't go to jail because you decided rather blow the whistle than continue being part of a conspiracy until it may or may not inevitable be discovered but that's a consideration if there is no criminal behavior on the part of the moving party there would be no pay no effect as to this amendment if there is criminal behavior then he simply may include that into his consideration and i would yield to the gentleman from california mr berman just because of the look on your face yeah the look  all the way down to zero other words no recovery if they planned or initiated the fraud even if they're not convicted in other words not applying criminal test but just about the evidence t judge has discretion in these cases i'm unclear what else what is the gentleman trying to reclaim my time what i'm trying to do is to realize that often the person bringing it was knowledgeable for a period of time could have been prosecuted for their criminal involvement even if they didn't plan they're still part of an ongoing conspiracy assuming there was one to the extent they may not have been charged with any crime because they came say this is guidance to the court because the government does joining seventeen percent of that twenty two billion dollars the doesn't join of course you're looking at thirty percent so we're talking about relatively large amounts of told to adjust the books to hide the nature of the fraud has done something wrong as he way whether or not to blow the whistle i think there are many inducements to do it and disincentives to do it and i think you're creating a disincentive to do it i'm unaware of any i would i you're creating a criteria that's going to create a tipping point against blowing the whistle i don't think we want to do that and reclaiming my time i would just say that if the tipping point is that a criminal might lead that you said you were not aware of is he convicted of a crime the way the language was how do you know he's a criminal avoiding criminal prosecution language in the amendment makes it clear that the judge would have to  reasonable to consider if he's already considering it under the current what is the value of avoiding criminal prosecution is it price well i certainly would say that if you're making two hundred fifty thousand dollars a year and you're not in jail that would right now to do exactly that and the fact is in these cases sometimes the little rogue decides to turn in the big we have a little debate going on in this country right mr scott critical report  taxpayers are the same as the federal taxpayers having the state taxpayers write a check to the federal taxpayers doesn't make much sense my amendment would extend that exemption to the logical place to go which is the city every one of our cities is vulnerable under this under this bill in a very fundamental way the way the bill is structured when brought by a whistleblower it's brought under seal fo months and months and months something that was wrong that's going on in health and human services department of a local city can be extended to more and more and more and legally under seal the result can be by the time the was passed that a lot of money went to states if a federal if a state employee does something amiss with that the state is exempt yet our small towns villages and cities in a similar circumstances would face exposure my amendment would exempt locality and say that look the purpose here is what was expressed in the senate bill have their committee report not tell you what it said it said the bill was intended to target non governmental entities and sub contractors of the federal government that we should make sure that we enforce the rules against them and i want to say one other thing that if you think for a moment that the deep and that's good a public ospital yes esoteric part of the law that frankly we had no idea about it wasn't because we weren't looking for it it wasn't because regulatory agencies weren't looking for it frankly was a practice that had developed over time that resulted in a massive fraud as i say the largest single action ever taken in the state of california and to mr berman's point you can point to huge there is no fraud at the local level of government county or local government in the midst of the largest funneling of money from the federal government to local and state governments in our nation's history then i could understand why we might want to support this amendment but if we believe the basis of the false claims act appropriate then the last thing i think we would want to do would be t exempt local government units and their operations from this kind of tool that really does more to prevent fraud chairman of the strike last word and act as ranking member the chairman i thought the closer we got the more likely it was to pass let's see if that bears any fruit but mr chairman this amendment quite simply  my other role as ranking member of government oversight and reform to limit the losses to government federal state and city if in fact the discovery of  crime or this fraud would have inevitably occurred with or without the whistleblower as the chairman is acutely aware you can often have a conspiracy and that conspiracy will inevitably be discovered one of the challenges for us is that under the act even if a normal audit two or three years later would have picked up the judge is not in a position to limit the damage is based on that explicit occurrence so if you have a whistleblower who knows he's going to be discovered days weeks or months and they go in and they say aha i want to report this they should not in my opinion they probably shouldn't be exempt criminal prosecution but certainly they should not be financially rewarded for it so the lead is very limited it limits in the language the attorney general determines that relevant agency or department of justice would have it inevitably discovered the material evidence and information that is the basis for the action brought by the person under the section that person shall not be entitled to any compensation under the  subsection it's a high standard it clearly shows inevitable i don't believe for a moment that the government would be self serving in order to save money but i do believe that it's a fair question to from time to time be evaluated three world war two the defense contractors did a massive push on congress to exempt the old abraham lincoln law and we wanted to restore the the law to it lawsuit appropriate if there's an editable discovery versus other whistleblower capability that might give an award but not as high i think the answer is yes but most important i want to clarify one thing the gentleman said for all of with the underlying bill if you are an employee of a of a company and you know fraud or some other form and it is reasonable and this is the way i wrote it it is reasonable for you to believe that you have a mechanism to report and let's just take for example the kinds of companies that are household words in defense contracting if they have a rigorous system for reporting if they have a clear channel and if let's assume for a moment that the conspiracy is known by the individual to be at a low level individuals very much like mr to say that you know big company lots of people relatively low level small folks relative to power doing it and there is a mechanism if you will to bring forward that to save the government money to allow the contractor to  overbuilding and so on and the employee does not avail himself of it then the question would be if he did not do it and give the company ninety days to do it and if he's not an nonspecific company compliance policy over and above the law and as i look at you talk talk discretionary it's all discretion but you're saying a person may not bring deliver tobacco products because we have no way of knowing whether the taxes paid on it and the united states postal service has also expressed a willingness to want to do that but they need congressional action to do it the bill would would provide help for that difference is enormously profitable if you can create a way to do it now with the internet those ways are much more readily available what the bill also does is it creates a list that that there are tests that they need to do there are there are some products that are only available in very small batches that they want to try to figure out ways to get into consumers hands we've been working with them to try to accommodate their needs point that we will also make violations of the felonies right now there are only misdemeanors so that even if local prosecutor finds out that this is going on there really isn't much incentive for them to prosecute since the penalties are so low this is very similar if not identical to the bill that we passed in the last congress late in the session that the senate didn't have a chance to act on hopefully they will hear this provides revenue revenues for localities weener and with mr smith i will briefly read his statement to h r six hundred seventy six to prevent cigarette trafficking or pack act will enhance the government's efforts to combat cigarette trafficking which is a growing problem in america i am pleased to join mr weener as a co sponsor of this legislation and just when or if i'm not a co sponsor please add me immediately taxes on cigarettes vary greatly from state to state this difference in state taxes creates a market for criminals and organized criminal syndicates to purchase cigarettes in one state and smuggle them into another state to resell them below market value and without paying local taxes cigarette trafficking is an issue that the committee and the manufacturers have worked together on in the past and continue to address today in the hundred tenth congress this committee favorably reported out previous versions of legislation that passed the house suspension however our colleagues in the senate did not take up the bill h r seventy six hundred seventy six very slightly from previous versions of the legislation and under the jurisdiction of the oversight and government reform committee those provisions have been removed this bill also contains additional funding for cigarette trafficking efforts by the bureau of alcohol tobacco and firearms and explosives this bipartisan legislation closes loopholes in current tobacco trafficking laws and provides law enforcement with the ways to combat the innovative member innovative methods being used by cigarette traffickers in distributing their the that business is done by legitimate business people and customers and consumers who are trying to follow the rules and this is an instance that you've correctly pointed out mr caldwell where market testing does need to be done and we have limitations  objection the minute will be considered as read in the gentleman is recognized support of his amendment thank you mr chairman mr chairman i agree with the goals of this legislation over i do have concerns about the presidential of fact that the new section two could have specifically this legislation creates a new section two a of the jenkins act which treats out of state sales of certain tobacco products as though the sales occurred quote entirely within the specific state and place and quote while this provision will surely help for state laws against abuses associated with online tobacco sales it could also confuse the issue of what constitutes a sufficient nexus with a state to justify that state imposing taxes on the out of state and  purpose of this amendment is to make clear that online tobacco sales constitute a unique situation with unique harms including harms to minors due to the lack of sufficient age verification technologies and that this legislation is not intended to serve as a precedent for future efforts to determine the appropriate nexus that out of state and it must have with states before the states can impose taxes or tax collection duties on those out of state entities similar language was added to efforts to tighten remote tobacco sales was back in the one hundred eighth congress furthermore language identical to what i am offering today was added to the pact during the judiciary committee markup that occurred on the bill last year it's my hope that the author of the legislation