Attorney General Edwin Meese III, defending the Reagan administration's record in prosecuting white-collar crime, unveiled proposals yesterday aimed at combating fraud by government contractors.
Meese called a news conference to announce the eight-point package, calling it "the most important legislative initiative Congress could enact" to crack down on defense procurement fraud and corporate crime. He acknowledged, however, that part of the package simply clarifies existing law, and Justice Department officials said later that some of the proposals have already been introduced by members of Congress.
The proposed bills would, among other things, increase civil penalties for contract fraud, divert smaller fraud cases to hearing examiners and allow use of secret grand jury testimony in civil suits against contractors.
Meese also said he welcomes the Senate Judiciary Committee's decision to hold hearings this fall on the Justice Department's handling of several prominent criminal cases, including those against E.F. Hutton & Co., Eli Lilly Co. and SmithKline Beckman Corp.
"We have vigorously prosecuted all economic crime, and we've gotten the best possible result in each case," Meese said. "We've vigorously prosecuted every possible defendant, whether it be corporate or individual."
Responding to congressional criticism that the department has been soft on white-collar crime, Meese said that "some people are misinforming the public or distorting things in the press . . . . When you get a conviction of individuals, the newspapers put that on Page 19. But if you convict a corporation and are not able to convict individuals, then that gets on Page 1."
Meese again defended the department's decision to grant immunity to at least 19 potential targets in the E.F. Hutton check-kiting case, which led to 2,000 felony counts against the firm but no charges against individuals. "If we hadn't granted immunity, we never would have gotten the corporation," he said.
The news conference came as a Senate Judiciary subcommittee, headed by Sen. Charles E. Grassley (R-Iowa), prepares to hold hearings today on Grassley's proposed antifraud legislation, which in some respects would go further than Meese wants. A Republican Senate aide said that "they wanted to make sure they had their bill in and Grassley wasn't going to trash the Justice Department at the hearing."
Grassley called the package "a very small part of tackling this problem. We can pass volumes of new laws and never have the desired effect unless they're enforced."
Some of Meese's measures will be introduced by Judiciary Committee Chairman Strom Thurmond (R-S.C.) and ranking Democrat Joseph R. Biden Jr. (Del.). But Biden plans to argue in a speech today that the package is overly narrow and legalistic.
"You don't look at the problem of fraud simply by adjusting small details in the statutes," a Democratic Senate official said. "You have to look at a system that sanctions fraud."
Meese's proposals would:
Amend the False Claims Act, an 1863 statute aimed at Civil War profiteering, by strengthening the government's investigative powers and increasing civil fines against contractors from $2,000 to $5,000 per fraudulent claim. Grassley's bill would boost this to $10,000.
*Allow fraud cases involving less than $100,000 to be taken before administrative law judges, with an appeal to federal court. This amounts to an acknowledgment that Justice cannot handle many of the fraud cases developed by other federal agencies by allowing inspectors general to pursue such cases administratively. "Many smaller fraud cases simply do not warrant prosecution in the federal courts," Meese said.
*Guarantee Pentagon auditors the right to subpoena a contractor's records and make obstructing an audit a federal crime. Contractors could not contest the issue in court, and those successfully sued by the government could not charge legal fees to the Pentagon.
*Enable criminal prosecutors to provide confidential grand jury evidence to government lawyers for use in separate civil suits against contractors. Grassley's bill would grant similar access to Congress