Afghanistan, Iraq, and the Wartime Suspension of Limitations Act

Written by David Laufman

It is a question asked by all parties in a matter with potential criminal consequences. The prosecutor – considering whether to invest time in an enforcement investigation or, later, seek an indictment – must assess whether a prosecution of the target’s offense conduct would be time-barred under the statute of limitations.  In-house corporate counsel, confronting the discovery of a violation of law, must weigh the benefits of a voluntary disclosure to the government against the possibility that the company might quietly remediate the problem and wait out the statute-of-limitations. Defense counsel, pondering the range of motions to file on behalf of a client facing indictment, must consider whether to attack the indictment on the grounds that the government’s charges are outside of the statute of limitations.

In enacting the Wartime Suspension of Limitations Act (“Suspension Act” or “Act”), Congress gave the Department of Justice vast discretion to bring charges beyond the standard five-year statute of limitations.  Thus far, however, the WSLA has had only a marginal measurable impact on the prosecution of procurement fraud and corruption relating to the wars in Afghanistan and Iraq.

General Rules and Principles

The purpose of a statute of limitations is to protect individuals from the unfairness of prosecution after significant periods of time have elapsed since the alleged commission of offenses, as probative evidence may have become lost or destroyed and witness memories may have faded.  As the Supreme Court has stated, statutes of limitations “may also have the salutary effect of encouraging law enforcement officials to investigate suspected criminal activity.”

Title 18, Section 3282 of the U.S. Code sets forth the general statute of limitations applicable to most federal crimes. It states that “no person shall be prosecuted, tried, or punished for any offense, not capital, unless the indictment is found or the information is instituted within five years next after such offense shall have been committed.”This five-year statute of limitations applies to most of the criminal offense conduct arising out of the wars in Afghanistan and Iraq, including violations of the False Claims Act, bribery, illegal gratuities, kickbacks, wire fraud, false statements, money laundering, and the theft of government property. It also applies to conspiracies to commit a federal offense against the United States or to defraud the United States, although the statute of limitations does not begin to run in such cases until the last overt act in furtherance of the conspiracy has been committed.

Congress has prescribed longer statutes of limitations for certain criminal offenses. For example, major fraud against the United States (i.e., fraud of $1 million or more) carries a statute of limitations of seven years. But the most far-reaching and elastic statute of limitations pertinent to the wars in Afghanistan and Iraq is the Suspension Act.

Wartime Suspension of Limitations Act

The Suspension Act, codified at Title 18 of the U.S. Code, Section 3287, originally was enacted in 1921 as a temporary exception to the prevailing three-year statute of limitations on frauds committed against the United States during World War I. The Act extended the statute of limitations to six years in cases of “offenses involving the defrauding or attempts to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner, and not indictable under any existing statutes.” Congress repealed the statute in 1927 after the Department of Justice announced that it contemplated no further prosecutions of fraud arising out World War I.

Congress re-enacted the statute in 1942 after the United States entered World War II, but included a sunset provision in the law calling for the suspension of the statute of limitations to expire on June 30, 1945, “or until such earlier time as the Congress by concurrent resolution, or the President may designate.”  As Congress explained in the legislative history regarding the amendment, the suspension statute was intended to give the government sufficient time to investigate and prosecute pecuniary frauds committed while the United States was distracted by the demands of war. In language evocative of what later characterized the flood of U.S. government contracting that followed the U.S. invasion of Iraq in 2003, Congress was particularly concerned about “the exceptional opportunities to defraud the United States that were inherent in its gigantic and hastily organized

[World War II] procurement program.” “These frauds,” the Senate report explained, “may be difficult to discover as is often true of this type of offense and many may not come to light for some time to come.”

In 1944, Congress amended the law twice to add specific references to wartime contracts, and the statute was recodified in 1948 to provide for a three-year suspension of the statute of limitations.Between 1948 and October 2008, the Act provided that:

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 or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancellation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress. (Emphasis added.)

In October 2008, the Suspension Act was amended to expand its applicability to times “’[w]hen 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….” (Emphasis added.) The amendment also extended the suspension period 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.”(Emphasis added.) The Senate report accompanying thelegislation underscored Congress’s desire to give U.S law enforcement agencies and auditors more time to investigate fraud associated with the wars in Iraq and Afghanistan.

It is important to understand the breadth of the Suspension Act’s potential applicability. As amended, the statute of limitations period does not begin to run until five years after the “termination of hostilities” specified in the Act – i.e., either a Presidential proclamation with notice to Congress or a concurrent resolution of Congress.  Thus, for example, if a U.S. contractor operating in Afghanistan committed a criminal violation of the False Claims Act in 2009, and the President issued the requisite Presidential proclamation in 2013, the statute of limitations under the Suspension Act would not beginrunning until 2018.  Hence, the government could wait another five years until 2023 to bring charges.

Moreover, the government’s application of the Act is not limited to procurement fraud relating to the prosecution of a war. As indicated above, the Act also extends the time to prosecute any fraud against the United States, as well as offenses concerning real property of the United States, which occur while the United States is “at war” or when Congress has enacted a specific authorization to use force.  The courts have construed this aspect of the Act to simply require proof of a “pecuniary fraud” against the United States, regardless of whether the fraud is related to a war.

Minimal Impact of the Suspension Act

On its face, the Suspension Act would appear to be a substantial boon to prosecutors, particularly given the magnitude of fraud and corruption associated with the wars in Afghanistan and Iraq.In fact, however, the Department of Justice has made only sparing use of the Act to pursue criminal cases stemming from the two wars.

The best available measure of the government’s reliance on the Act is the incidence of litigated cases where the government has brought an indictment and the defendant has moved to dismiss the indictment on the grounds that the charged offense conduct is outside the statute of limitations.Since 2001, there have been only five reported cases in which the Suspension Act was an issue. One of those was a fraud case involving the “Big Dig” project in Boston, totally unrelated to any military conflict; another was a civil qui tam action under the False Claims Act brought by a relator without the intervention of the U.S. Government. Still, that is five more Suspension Act cases than were reported between the end of World War II and the first Persian Gulf war, despite the intervening wars in Korea and Vietnam and substantial U.S. military engagements in the Balkans, Panama, Grenada, Haiti, and Somalia.

There may be several reasons for this dearth of reported decisions. Some cases in which the government may be relying on the Suspension Act result in convictions by plea agreement in which there is no specific mention of the Suspension Act and the defendant has waived his or her right to appeal. In other cases, the issue might have been litigated in pretrial motions but the district court simply issued a non-descriptive, unpublished order denying the defendant’s motion. (The latter is true in the Texas case of United States v. Pfluger, a case that is now on appeal before the U.S. Court of Appeals for the Fifth Circuit.)Moreover, in many instances, the government has been able to assemble prosecutable cases within the standard five-year statute of limitations, so it has not needed to invoke the Suspension Act.

In cases where the offense conduct was committed after the expiration of the general five-year statute of limitations, the Department of Justice may have been reluctant to bring more criminal cases because of concerns regarding the Act’s constitutionality.  In the government’s appellate brief in the Pfluger case, for example – the first Suspension Act case to reach a court of appeals – the government “expresse[d] no view on whether a due process claim would lie” in the circumstance where the government invoked the Suspension Act long after the expiration of the termination of hostilities. In addition, the government may have been deterred by previous erratic decisions by district courts construing the Suspension Act. The courts have been in conflict, for example, as to whether the Suspension Act as amended in 2008 should apply to offenses that occurred before passage of the 2008 amendments. In addition, the courts have been divided as to whether the pre-amendment Suspension Act requires a formal declaration of war or whether the authorized use of military force is sufficient.  In two separate cases decided in 2010 and 2011, for example, the district courts found that the United States was not “at war” for purposes of the pre-amendment Suspension Act even though Congress explicitly had authorized the use of military force in both Afghanistan (September 2001) and Iraq (October 2002) and there had been an obvious and enormous commitment of blood and treasure by the United States in both conflicts – on the grounds that Congress had not formally declared war in either situation.

So, too, there have been bizarre court decisions regarding when a “termination of hostilities” has occurred that would trigger the running of the statute of limitations (and thereby accelerate the government’s need to make a charging decision).  In 2008, the U.S. District Court in Massachusetts ruled that a termination of hostilities in Afghanistan occurred on December 22, 2001, when the United States formally recognized, and extended full diplomatic relations to, the new Afghan government of Hamid Karzai, and that a termination of hostilities in Iraq occurred on May 1, 2003, when President George W. Bush proclaimed on the deck of the U.S.S. Abraham Lincoln that “[m]ajor combat operations in Iraq have ended.”  A district court in Mississippi endorsed that ruling in a decision in 2010. The issue of when hostilities are terminated for purposes of the Suspension Act is now pending before the Fifth Circuit in the Pfluger case pursuant to a plea agreement in which the government permitted the defendant to preserve the issue for appeal — indicating that the government seeks clarification of the matter.

More Pervasive Obstacles to Prosecution

It is doubtful, however, that any Justice Department concerns about the courts’ application of the Suspension Act have materially affected the number of procurement fraud prosecutions stemming from the wars in Iraq and Afghanistan. Rather, based on my own experience, the number of indicted cases has been limited more by the inherent problems that often plague these cases – regardless of the applicable statute of limitations.

Because the offense conduct and evidence thereof are often centered overseas, efforts to investigate fraud and corruption regarding U.S. government contracting in Iraq and Afghanistan have been fraught with challenges not confronted in most criminal cases. Mutual Legal Assistance Treaties, which provide a formal mechanism for obtaining evidence from a foreign country, have not yet been executed by the United States with either Iraq or Afghanistan. As a result, obtaining access to foreign business and financial records, or to foreign nationals for purposes of witness interviews, must often take place on an informal, ad hoc basis that is frequently unreliable – and inadmissible as evidence in a U.S. court.  Access to bank records in Iraq and Afghanistan – and in nearby countries like Jordan where U.S. contractors favor depositing ill-gotten gains to avoid scrutiny – has proven particularly difficult.  Difficulty in obtaining U.S. Government contracting records (particularly records maintained at U.S. military facilities abroad) sometimes complicates procurement fraud investigations, as does frequent turnover in U.S. Government contracting personnel overseas and law enforcement agents assigned overseas to such investigations.

Conclusion

Whether the Department of Justice invokes the Suspension Act more often in the future may hinge on the outcome of appellate review in the pending Pfluger case, which should provide clarification and greater predictability as to when a “termination of hostilities” occurs. In the meantime, federal prosecutors will likely continue to pursue war-related fraud cases the old-fashioned way, striving to assemble admissible evidence within the traditional five-year statute of limitations.

David H. Laufman is the Principal of The Law Offices of David H. Laufman, PLLC (www.davidlaufmanlaw.com), a law firm in Washington, DC, specializing in corporate compliance and white-collar defense. From 2010 to 2011, he served as Special Trial Attorney to the Fraud Section at the Department of Justice, where he investigated fraud and corruption relating to U.S. reconstruction assistance to Iraq. Mr. Laufman previously served as an Assistant United States Attorney for the Eastern District of Virginia and as Chief of Staff to the Deputy Attorney General.