Major Fraud Act of 1988
PL 100-700 (H.R.3911), enacted 11/19/1988

PUBLIC LAW 100-700—NOV. 19, 1988 
102 STAT. 4631 
Public Law 100-700 
100th Congress 
An Act 
To amend title 18, United States Code, to provide increased penalties for certain 
major frauds against the United States. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the "Major Fraud Act of 1988". 
SEC. 2. CHAPTER 47 AMENDMENT. 
(a) IN GENERAL.—Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following: 
*'§ 1031. Major fraud against the United States 
"(a) Whoever knowingly executes, or attempts to execute, any 
scheme or artifice with the intent— 
"(1) to defraud the United States; or 
"(2) to obtain money or property by means of false or fraudu-
lent pretenses, representations, or promises, 
in any procurement of property or services as a prime contractor 
with the United States or as a subcontractor or supplier on a 
contract in which there is a prime contract with the United States, 
if the value of the contract, subcontract, or any constituent part 
thereof, for such property or services is $1,000,000 or more shall, 
subject to the applicability of subsection (c) of this section, be fined 
not more than $1,000,000, or imprisoned not more than 10 years, or 
both. 
"Ot)) The fine imposed for an offense under this section may exceed 
the maximum otherwise provided by law, if such fine does not 
exceed $5,000,000 and— 
"(1) the gross loss to the Government or the gross gain to a 
defendant is $500,000 or greater; or 
"(2) the offense involves a conscious or reckless risk of serious 
personal injury. 
"(c) The maximum fine imposed upon a defendant for a prosecu-
tion including a prosecution with multiple counts under this section 
shall not exceed $10,000,000. 
"(d) Nothing in this section shall preclude a court from imposing 
any other sentences available under this title, including without 
limitation a fine up to twice the amount of the gross loss or gross 
gain involved in the offense pursuant to 18 U.S.C. section 3571(d). 
"(e) In determining the amount of the fine, the court shall con-
sider the factors set forth in 18 U.S.C. sections 3553 and 3572, and 
the factors set forth in the guidelines and policy statements of the 
United States Sentencing Commission, including— 
"(1) the need to reflect the seriousness of the offense, includ-
ing the harm or loss to the victim and the gain to the defendant; 
"(2) whether the defendant previously has been fined for a 
similar offense; and 
Nov. 19, 1988 
[H.R. 3911] 
Major Fraud Act 
of 1988. 
Contracts. 
18 u s e 1001 
note. 
Courts, U.S. 
102 STAT. 4632 
PUBLIC LAW 100-700—NOV. 19, 1988 
"(3) any other pertinent equitable considerations. 
"(f) A prosecution of an offense under this section may be com-
menced any time not later than 7 years after the offense is commit-
ted, plus any additional time otherwise allowed by law. 
"(g) Any individual who— 
Discrimination, 
"(1) is discharged, demoted, suspended, threatened, harassed, 
prohibition. 
or in any other manner discriminated against in the terms and 
conditions of employment by an employer because of lawful acts 
done by the employee on behalf of the employee or others in 
furtherance of a prosecution under this section (including inves-
tigation for, initiation of, testimony for, or assistance in such 
prosecution), and 
"(2) was not a participant in the unlawful activity that is the 
subject of said prosecution, may, in a civil action, obtain all 
relief necessary to make such individual whole. Such relief shall 
include reinstatement with the same seniority status such 
individual would have had but for the discrimination, 2 times 
the amount of back pay, interest on the back pay, and com-
pensation for any special damages sustained as a result of the 
discrimination, including litigation costs and reasonable attor-
ney's fees." 
1
8 use 1031 
(b) SENTENCING GUIDEUNES.—Pursuant to its authority under 
note. 
section 994(p) of title 28, United States Code and section 21 of the 
Sentencing Act of 1987, the United States Sentencing Commission 
shall promulgate guidelines, or shall amend existing guidelines, to 
provide for appropriate penalty enhancements, where conscious or 
reckless risk of serious personal injury resulting from the fraud has 
occurred. The Commission shall consider the appropriateness of 
assigning to such a defendant an offense level under Chapter Two of 
the sentencing guidelines that is at least two levels greater than the 
level that would have been assigned had conscious or reckless risk of 
serious personal injury not resulted from the fraud. 
(c) CLERICAL AMENDMENT —The table of sections at the beginning 
of chapter 47 of title 18, United States Code, is £imended by adding 
at the end the following new item: 
"1031 Major fraud against the United States.". 
SEC. 3. LIMITATION ON ALLOWABILITY OF COSTS OF CONTRACTORS 
INCURRED IN CERTAIN PROCEEDINGS. 
(a) IN GENERAL.—Chapter 15 of title 18, United States Code, is 
amended by adding at the end thereof the following new section: 
"§ 293. Limitation on Government contract costs 
"(a) Any proceeding costs incurred in connection with any 
proceeding brought by the United States or a State government that 
relates to a violation of, or failure to comply with, any Federal or 
State law or regulation on the part of the contractor are not 
allowable costs in a covered contract if the proceeding results in any 
of the following: 
"(1) an indictment by a Federal grand jury, or a conviction 
(including a conviction pursuant to a plea of nolo contendere) by 
reason of such violation or failure to comply; 
"(2) the assessment of a monetary penalty by reason of a civil 
or administrative finding of such violation or failure to comply; 
"(3) a civil judgment containing a finding of liability, or an 
administrative finding of liability, by reason of such violation or 
PUBLIC LAW 100-700—NOV. 19, 1988 
102 STAT. 4633 
failure to comply, if the charges which are the subject of the 
proceeding involve fraud or similar offenses; 
"(4) a decision to debar or suspend the contractor or rescind, 
void, or terminate a contract for default, by reason of such 
violation or failure to comply; or 
"(5) the resolution of the proceeding by consent or com-
promise, where the penalty or relief sought by the government 
included the actions described in paragraphs (1) through (5). 
"(b) In any proceeding brought by the United States or a State 
government that does not result in any of the actions described in 
paragraphs (1) through (5) of subsection (a), costs for legal services 
incurred by a contractor in connection with such proceeding shall 
not be allowed in excess of the rate specified in the Equal Access to 
Justice Act (28 U.S.C. 2412(dX2XA); 5 U.S.C. 504(a)) unless the 
responsible contracting officer finds that a special factor (such as the 
limited availability of qualified attorneys or agents) justifies an 
award of higher rates. 
"(c) For purposes of this section— 
"(1) the term 'covered contract' means a contract for an 
amount more than $100,000 entered into by a department or 
agency of the United States other than a fixed-price contract 
without cost incentives; 
"(2) the term 'proceeding' mecins a civil, criminal, or an 
administrative investigation, prosecution, or proceeding; and 
"(3) the term 'proceeding costs' means all costs relating to a 
proceeding incurred before, during, or after the commencement 
of the proceeding, and such term includes— 
"(A) administrative and clerical expenses; 
"(B) the cost of legal services (whether performed by an 
employee of the contractor or otherwise); 
'(C) the cost of the services of accountants and consult-
ants retained by a contractor; and 
"(D) the salaries and wages of employees, including offi-
cers and directors.". 
(b) AMENDMENT TO CHAPTER ANALYSIS.—The chapter analysis for 
chapter 15 of title 18, United States Code, is amended by adding at 
the end thereof the following: 
"293. Limitation on Government contract costs.". 
(c) APPUCABIUTY.—The amendments made by this section shall 
18 use 293 note. 
apply to contracts entered into after the date of the enactment of 
this Act. 
SEC. 4. ESTABLISHMENT OF ADDITIONAL ASSISTANT UNITED STATES 
ATTORNEY AND SUPPORT PROVISIONS. 
(a) EsTABUSHMENT OF POSITIONS.—Subject to the 
funding 
authorization limitations in section 5(a), there are hereby estab-
lished within the Department of Justice additioned Assistant United 
States Attorney positions and additional support staff positions for 
prosecuting csises under both the criminal and civil statutes. 
(b) FUNCTION OF PERSONNEL.—The primary function of individuals 
selected for the positions specified in subsection (a) shall be dedi-
cated to the investigation and prosecution of fraud against the 
Government. 
(c) LOCATIONS.—The Attorney General shall determine the 
locations for assignment of such personnel. In making such deter-
mination the Attorney General shall consider concentrations of 
102 STAT. 4634 
PUBLIC LAW 100-700—NOV. 19, 1988 
Government programs and procurements and concentrations of 
pending Government fraud investigations and allegations. 
SEC. 5. AUTHORIZATION OF APPROPRIATIONS. 
(a) AUTHORIZATION.—Subject to the provisions of subsection (b), for 
the purpose of carrying out the purposes of this Act there are 
authorized to be appropriated $8,000,000 for fiscal year 1989, and 
such sums as may be necessary for each of the four succeeding fiscal 
years, to be available until expended. 
Qoi) LIMITATION.—Before expending funds appropriated pursuant 
to subsection (a) to carry out the purposes of this section, the 
Attorney General shall utilize available existing resources within 
the Department of Justice for such purposes. 
28 u s e 522 note. 
SEC. 6. CONGRESSIONAL OVERSIGHT. 
Reports. 
Commencing with the first year after the date of enactment of 
this section, the Attorney General shall annually report to the 
Congress with respect to— 
(1) the number of referrals of fraud cases by the Department 
of Defense of defense contractors (with specific statistics with 
respect to the one hundred largest contractors), the number of 
open investigation of such contractors, and a breakdown of to 
which United States Attorney's Office or other component of 
the Department of Justice each such case was referred; 
(2) the number of referrals of fraud cases from other agencies 
or sources; 
(3) the number of attorneys and support staff assigned pursu-
ant to this Act; 
(4) the number of investigative agents assigned to each inves-
tigation and the period of time each investigation has been 
opened; 
(5) the number of convictions and acquittals achieved by 
individuals assigned to positions established by the Act; and 
(6) the sentences, recoveries, and penalties achieved by 
individuals assigned to positions established by this Act. 
SEC. 7. RELIEF OF PAULETTE MENDES-SILVA. 
(a) Notwithstanding section 2675 of title 28, United States Code, 
and section 24010)) of such title, or any other limitation on actions at 
law or in equity, the United States District Court for the District of 
Columbia shall have jurisdiction to hear, determine, and render 
judgment on any claim of Paulette Mendes-Silva against the United 
States for personal injuries which she allegedly incurred after an 
innoculation on March 12, 1963, by an employee of the Public 
Health Service of the United States Department of Health, Edu-
cation, and Welfare. Any such claim of Paulette Mendes-Silva shall 
be brought within six months after the date of the enactment of this 
Act. The court shall apply the laws of the District of Columbia in 
such case. 
0)) Nothing in this section shall be construed as an inference of 
liability on the part of the United States. 
SEC. 8. LIMITATIONS ON ALLOWABILITY OF COSTS INCURRED BY FED-
ERAL GOVERNMENT CONTRACTORS IN CERTAIN PROCEEDINGS. 
(a) AMENDMENT TO THE FEDERAL PROPERTY AND ADMINISTRATIVE 
SERVICES ACT OF 1949.—(1) Title III of the Federal Property and 
Administrative Services Act of 1949 (41 U.S.C. 251 et seq.) is 
Courts, U.S. 
District of 
Columbia. 
PUBLIC LAW 100-700—NOV. 19, 1988 
102 STAT. 4635 
amended by inserting after section 305 the following new section 
306: 
"UMITATIONS ON ALLOWABILITY OP COSTS INCURRED BY CONTRACTORS 
IN CERTAIN PROCEEDINGS 
"SEC. 306. (a) Except as otherwise provided in this section, costs 
41 use 256. 
incurred by a contractor in connection with any criminal, civil, or 
administrative proceeding commenced by the United States or a 
State are not allowable as reimbursable costs under a covered 
contract if the proceeding (1) relates to a violation of, or a failure to 
comply with, a Federal or State statute or regulation, and (2) results 
in a disposition described in subsection fla). 
"Ot)) A disposition referred to in subsection (aX2) is any of the 
following: 
"(1) In the case of a criminsd proceeding, a conviction (includ-
ing a conviction pursuant to a plea of nolo contendere) by 
reason of the violation or failure referred to in subsection (a). 
"(2) In the case of a civil or administrative proceeding involv-
ing an allegation of fraud or similar misconduct, a determina-
tion of contractor liability on the basis of the violation or failure 
referred to in subsection (a). 
"(3) In the case of any civil or administrative proceeding, the 
imposition of a monetary penalty by reason of the violation or 
failure referred to in subsection (a). 
"(4) A final decision by an appropriate official of an executive 
agency— 
"(A) to debar or suspend the contractor; 
"(B) to rescind or void the contract; or 
"(C) to terminate the contract for default, 
by reason of the violation or failure referred to in subsection (a). 
"(5) A disposition of the proceeding by consent or compromise 
if such action could have resulted in a disposition described in 
paragraph (1), (2), (3), or (4). 
"(c) In the case of a proceeding referred to in subsection (a) that is 
commenced by the United States and is resolved by consent or 
compromise pursuant to an agreement entered into by a contractor 
and the United States, the costs incurred by the contractor in 
connection with such proceeding that are otherwise not allowable as 
reimbursable costs under such subsection may be allowed to the 
extent specifically provided in such agreement. 
"(d) In the case of a proceeding referred to in subsection (a) that is 
Regulations. 
commenced by a State, the head of the executive agency that 
awarded the covered contract involved in the proceeding may allow 
the costs incurred by the contractor in connection with such 
proceeding as reimbursable costs if the agency head determines, 
under regulations prescribed by such agency head, that the costs 
were incurred as a result of (1) a specific term or condition of the 
contract, or (2) specific written instructions of the agency. 
"(eXD Except as provided in paragraph (3), costs incurred by a 
contractor in connection with a criminal, civil, or administrative 
proceeding commenced by the United States or a State in connection 
with a covered contract may be allowed £is reimbursable costs under 
the contract if such costs are not disallowable under subsection (a), 
but only to the extent provided in paragraph (2). 
"(2XA) The amount of the costs allowable under paragraph (1) in 
any case may not exceed the amount equal to 80 percent of the 
102 STAT. 4636 
PUBLIC LAW 100-700—NOV. 19, 1988 
amount of the costs incurred, to the extent that such costs are 
determined to be otherwise allowable and allocable under the single 
Government-wide procurement regulation issued pursuant to sec-
tion 4(4XA) of the Office of Federal Procurement Policy Act (41 
U.S.C. 403(4XA)). 
"(B) Regulations issued for the purpose of subparagraph (A) shall 
provide for appropriate consideration of the complexity of procure-
ment litigation, generally accepted principles governing the award 
of legal fees in civil actions involving the United States as a party, 
and such other factors as may be appropriate. 
"(3) In the case of a proceeding referred to in paragraph (1), 
contractor costs otherwise allowable as reimbursable costs under 
this subsection are not allowable if (A) such proceeding involves the 
same contractor misconduct alleged as the basis of another criminal, 
civil, or administrative proceeding, and (B) the costs of such other 
proceeding are not allowable under subsection (a). 
"(f) As used in this section: 
"(1) The term 'covered contract' means a contract for an 
amount more than $100,000 entered into by an executive agency 
other than a fixed-price contract without cost incentives. 
"(2) The term 'proceeding' includes an investigation. 
"(3) The term 'costs', with respect to a proceeding— 
"(A) means all costs incurred by a contractor, whether 
before or after the commencement of such proceeding; and 
"(B) includes— 
"(i) administrative and clerical expenses; 
"(ii) the cost of legal services, including legal services 
performed by an employee of the contractor; 
"(iii) the cost of the services of accountants and 
consultants retained by the contractor; and 
"(iv) the pay of directors, officers, and employees of 
the contractor for time devoted by such directors, offi-
cers, and employees to such proceeding. 
"(4) The term 'penalty' does not include restitution, reim-
bursement, or compensatory damages.". 
(2) The table of contents in the first section of such Act is amended 
by inserting after the item relating to section 305 the following new 
item: 
"306. Limitation on allowability of costs incurred by contractors in certain pro-
ceedings.". 
(b) AMENDMENTS TO TITLE 10.—Section 2324 of title 10, United 
States Code, is amended— 
(1) in subsection (e)— 
(A) by striking out subparagraph (N) and inserting in lieu 
thereof the following: 
"(N) Costs incurred by a contractor in connection with any 
criminal, civil, or administrative proceeding commenced by the 
United States or a Stete, to the extent provided in subsection 
(k)."; 
(B) by striking out paragraph (2); and 
(C) by redesignating paragraph (3) as pars^aph (2); and 
(2) by striking out subsection (k) and inserting in lieu thereof 
the following: 
"(kXD Except as otherwise provided in this subsection, costs in-
curred by a contractor in connection with any criminal, civil, or 
administrative proceeding commenced by the United States or a 
PUBLIC LAW 100-700—NOV. 19, 1988 
102 STAT. 4637 
State are not allowable as reimbursable costs under a covered 
contract if the proceeding (A) relates to a violation of, or failure to 
comply with, a Federal or State statute or regulation, and (B) results 
in a disposition described in paragraph (2). 
"(2) A disposition referred to in paragraph (IXB) is any of the 
following: 
"(A) In the case of a criminal proceeding, a conviction (includ-
ing a conviction pursuant to a plea of nolo contendere) by 
reason of the violation or failure referred to in paragraph (1). 
"(B) In the case of a civil or administrative proceeding involv-
ing an all^ation of fraud or similar misconduct, a determina-
tion of contractor liability on the basis of the violation or failure 
referred to in paragraph (1). 
"(C) In the case of any civil or administrative proceeding, the 
imposition of a monetary penalty by reason of the violation or 
failure referred to in paragraph (1). 
"(D) A final decision by the Department of Defense— 
"(i) to debar or suspend the contractor; 
"(ii) to rescind or void the contract; or 
"(iii) to terminate the contract for default; 
by reason of the violation or failure referred to in paragraph (1). 
"(E) A disposition of the proceeding by consent or compromise 
if such action could have resulted in a disposition described in 
subparagraph (A), (B), (C), or (D). 
"(3) In the case of a proceeding referred to in paragraph (1) that is 
commenced by the United States and is resolved by consent or 
compromise pursuant to an agreement entered into by a contractor 
and the United States, the costs incurred by the contractor in 
connection with such proceeding that are otherwise not allowable as 
reimbursable costs under such paragraph may be allowed to the 
extent specifically provided in such agreement. 
"(4) In the case of a proceeding referred to in paragraph (1) that is 
commenced by a State, the head of the agency that awarded the 
covered contract involved in the proceeding may allow the costs 
incurred by the contractor in connection with such proceeding as 
reimbursable costs if the agency head determines, imder regulations 
prescribed by such agency head, that the costs were incurred as a 
result of (A) a specific term or condition of the contract, or (B) 
specific written instructions of the agency. 
"(5XA) Except as provided in subparagraph (C), costs incurred by a 
contractor in connection with a criminal, civil, or administrative 
proceeding commenced by the United States or a State in connection 
with a covered contract may be allowed as reimbursable costs under 
the contract if such costs are not disallowable under paragraph (1), 
but only to the extent provided in subparagraph (B). 
"(BXi) The amount of the costs allowable under subparagraph (A) 
in any case may not exceed the amount equal to 80 percent of the 
amount of the costs incurred, to the extent that such costs are 
determined to be otherwise allowable and allocable under the single 
Government-wide procurement regulation issued pursuant to sec-
tion 4(4XA) of the Office of Federal Procurement Policy Act (41 
U.S.C. 403(4XA)). 
"(ii) Regulations issued for the purpose of clause (i) shall provide 
for appropriate consideration of the complexity of procurement 
litigation, generally accepted principles governing the award of 
legal fees in civil actions involving the United States as a party, and 
such other factors as may be appropriate. 
102 STAT. 4638 
PUBLIC LAW 100-700—NOV. 19, 1988 
"(O In the case of a proceeding referred to in subparagraph (A), 
contractor costs otherwise allowable as reimbursable costs under 
this paragraph are not allowable if (i) such proceeding involves the 
same contractor misconduct allied as the basis of another criminal, 
civil, or administrative proceeding, and (ii) the costs of such other 
proceeding are not allowable under paragraph (1). 
"GXl) In this section, the term 'covered contract* means a contract 
for an amount more than $100,000 entered into by the Department 
of Defense other than a fixed-price contract without cost incentives. 
"(2) In subsection (k): 
"(A) The term'proceeding* includes an investigation. 
"(B) The term 'costs', with respect to a proceeding— 
"(i) means all costs incurred by a contractor, whether 
before or after the commencement of any such proceeding 
and 
"(ii) includes— 
"(D administrative and clerical expenses; 
"(II) the cost of l^al services, including l^al services 
performed by an employee of the contractor; 
"(m) the cost of the services of accountants and 
consultants retained by the contractor; and 
"(TV) the pay of directors, officers, and employees of 
the contractor for time devoted by such directors, offi-
cers, and employees to such proceeding. 
"(O The tierm 'penalty* does not include restitution, reim-
bursement, or compensatory dams^es.'*. 
(c) TECHNICAL AMENDMENT.—Section 
832(b) of the National 
10 use 2324 
Defense Authorization Act, Fiscal Year 1989 is repealed. 
note. 
(d) REGULATIONS.—The r^ulations necessary for the implementa-
i^fY^^ 
tio'* o^ section 306(e) of the Federal Property and Administrative 
Services Act of 1949 (as added by subsection (a)) and section 
2324(kX5) of title 10, United States Code (as added by subsection 
m-
(1) shall be prescribed not later than 120 days after the date of 
the enactment of this Act; and 
(2) shall apply to contracts entered into more than 30 days 
after the date on which such regulations are issued. 
10 use 2324 
(e) EFFECTIVE DATE.—^The amendments made by subsections (a) 
and (b) shall take effect with respect to contracts awarded after the 
date of the enactment of this Act. 
SEC. 9. QUI T
A
M ACTIONS. 
(a) AWARDS OF DAMAGES.—Section 3730(d) of title 31, United 
States 0)de, is amended— 
(1) by redesignating paragraph (3) as paragraph (4); and 
(2) by inserting after paragraph (2) the following new 
paragraph: 
"(3) Whether or not the Ciovemment proceeds with the action, if 
the court finds that the action was brought by a person who planned 
and initiated the violation of section 3729 upon which the action was 
brought, then the court may, to the extent the court considers 
appropriate, reduce the share of the proceeds of the action which the 
person would otherwise receive under paragraph (1) or (2) of this 
subsection, taking into account the role of that person in advancing 
the case to litigation and any relevant circumstances pertaining to 
the violation. If the person bringing the action is convicted of 
criminal conduct arising from his or her role in the violation of 
note. 
note. 
PUBLIC LAW 100-700—NOV. 19, 1988 
102 STAT. 4639 
section 3729, that person shall be dismissed from the civil action and 
shall not receive any share of the proceeds of the action. Such 
dismissal shall not prejudice the right of the United States to 
continue the action, represented by the Department of Justice.". 
(b) TECHNICAL AMENDMENTS.—Section 3730 of title 28, United 
States Code, is amended— 
31 use 3730. 
(1) in subsection (cX4) by inserting "the" after "Government 
proceeds with"; and 
(2) in subsection (dX4), as redesignated by subsection (a)(1) of 
this section, by striking out "actions" and inserting in lieu 
thereof "action". 
Approved November 19, 1988. 
LEGISLATIVE HISTORY—H.R. 3911: 
HOUSE REPORTS: No. 100-610 (Comm. on the Judiciary). 
SENATE REPORTS: No. 100-503 (Comm. on the Judiciary). 
CONGRESSIONAL RECORD, Vol. 134 (1988): 
May 10, considered and passed House. 
Oct. 18, considered and passed Senate, amended. 
Oct. 20, House concurred in Senate amendment.