Ending Too Big to Jail Act

II 116TH CONGRESS 1ST SESSION S. 1005 To stop financial institution crime, require certain officers of companies to certify that they have conducted due diligence relating to criminal conduct or civil fraud, create accountability in deferred prosecution agree- ments, and for other purposes. IN THE SENATE OF THE UNITED STATES APRIL 3, 2019 Ms. WARREN introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To stop financial institution crime, require certain officers of companies to certify that they have conducted due diligence relating to criminal conduct or civil fraud, cre- ate accountability in deferred prosecution agreements, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Ending Too Big to 4 Jail Act’’. 5 SEC. 2. STOP FINANCIAL INSTITUTION CRIME. 6 (a) FINDINGS.—Congress finds the following: 7 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 1005 IS (1) History has shown that the Office of the 1 Special Inspector General for the Troubled Asset 2 Relief Program (referred to in this subsection as 3 ‘‘SIGTARP’’) has— 4 (A) served as an effective model for— 5 (i) recovering taxpayer dollars; and 6 (ii) bringing accountability by rooting 7 out waste, fraud, and abuse; and 8 (B) proven to be a leader in targeting 9 crimes committed by insiders at financial insti- 10 tutions in order to protect the interests of the 11 people of the United States. 12 (2) The financial crisis in 2008 laid bare one of 13 the biggest vulnerabilities of the United States, 14 which is fraud committed by financial institutions. 15 Fraud committed by financial institutions continues 16 as of the date of enactment of this Act, which dem- 17 onstrates that such fraud does not disappear, but 18 evolves and grows over time, which weakens finan- 19 cial institutions from the inside. 20 (3) There is a need for a permanent law en- 21 forcement agency dedicated solely to investigating 22 fraud committed by financial institutions and insid- 23 ers at financial institutions because that type of 24 fraud— 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 1005 IS (A) wreaks havoc on the economy of the 1 United States; 2 (B) puts the finances of the United States 3 at risk; and 4 (C) ruins the lives of individuals in the 5 United States. 6 (4) Investigations led by SIGTARP have re- 7 sulted in criminal charges against more than 400 de- 8 fendants, including criminal charges against nearly 9 100 bankers. These criminal charges were related to 10 more than 20 failed banks, with a combined esti- 11 mated loss to the deposit insurance fund of 12 $7,000,000,000. 13 (5) SIGTARP’s investigations led to the De- 14 partment of Justice enforcement actions against 10 15 financial institutions, with 8 having total assets ex- 16 ceeding $100,000,000,000. 17 (6) SIGTARP has developed unique methods to 18 search for crime by using industry, financial, and 19 human intelligence, including fraudulent conduct 20 that contributed to the failure of financial institu- 21 tions, or that was either in, or impacted, financial 22 institutions. 23 (7) Rather than establishing an entirely new 24 entity, it makes the most sense for taxpayers to rely 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 1005 IS on SIGTARP’s understanding of complex bank 1 records and bank operations and use of intelligence 2 to— 3 (A) identify anomalies; and 4 (B) investigate, and root out fraud at, fi- 5 nancial institutions. 6 (8) The vast expertise of SIGTARP, and the 7 proven results of SIGTARP with respect to the in- 8 vestigation of crime at financial institutions, should 9 be used on a permanent basis to bring accountability 10 and to deter fraud that jeopardizes financial institu- 11 tions in the United States, especially considering the 12 extent to which the people of the United States rely 13 on those institutions. 14 (b) REDESIGNATION OF THE OFFICE OF THE SPE- 15 CIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET 16 RELIEF PROGRAM AND THE SPECIAL INSPECTOR GEN- 17 ERAL FOR THE TROUBLED ASSET RELIEF PROGRAM.— 18 (1) IN GENERAL.—The Emergency Economic 19 Stabilization Act of 2008 (12 U.S.C. 5211 et seq.) 20 is amended— 21 (A) by striking ‘‘Special Inspector General 22 for the Troubled Asset Relief Program’’ each 23 place the term appears and inserting ‘‘Special 24 Inspector General for Financial Institution 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 1005 IS Crime’’, except where the term is used to refer 1 to the Special Inspector General for the Trou- 2 bled Asset Relief Program Act of 2009; 3 (B) in section 121 (12 U.S.C. 5231), in 4 the section heading, by striking ‘‘SPECIAL IN- 5 SPECTOR GENERAL FOR THE TROUBLED 6 ASSET RELIEF PROGRAM’’ and inserting 7 ‘‘SPECIAL INSPECTOR GENERAL FOR FI- 8 NANCIAL INSTITUTION CRIME’’; and 9 (C) in the table of contents, by striking the 10 item relating to section 121 and inserting the 11 following: 12 ‘‘Sec. 121. Special Inspector General for Financial Institution Crime.’’. (2) TECHNICAL AND CONFORMING AMEND- 13 MENTS.— 14 (A) ADDITIONAL APPROPRIATIONS PROVI- 15 SION.—The Helping Families Save Their 16 Homes Act of 2009 (Public Law 111–22; 123 17 Stat. 1632) is amended— 18 (i) in section 402 (12 U.S.C. 19 5231a)— 20 (I) in the section heading, by 21 striking ‘‘SPECIAL INSPECTOR 22 GENERAL FOR THE TROUBLED 23 ASSET RELIEF PROGRAM’’ and in- 24 serting ‘‘SPECIAL INSPECTOR GEN- 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 1005 IS ERAL FOR FINANCIAL INSTITU- 1 TION CRIME’’; and 2 (II) in subsection (b)(1)(A), by 3 striking ‘‘Special Inspector General of 4 the Trouble Asset Relief Program’’ 5 and inserting ‘‘Special Inspector Gen- 6 eral for Financial Institution Crime’’; 7 and 8 (ii) in the table of contents, by strik- 9 ing the item relating to section 402 and in- 10 serting the following: 11 ‘‘Sec. 402. Special Inspector General for Financial Institution Crime.’’. (B) EXEMPTION FROM BUDGET REDUC- 12 TION.—Section 255(i) of the Balanced Budget 13 and Emergency Deficit Control Act of 1985 (2 14 U.S.C. 905(i)) is amended by striking ‘‘Special 15 Inspector General for the Troubled Asset Relief 16 Program’’ and inserting ‘‘Special Inspector 17 General for Financial Institution Crime’’. 18 (3) REFERENCES.— 19 (A) OFFICE REFERENCES.—Any reference 20 to the Office of the Special Inspector General 21 for the Troubled Asset Relief Program in any 22 law, rule, regulation, certificate, directive, in- 23 struction, or other official paper in force on the 24 date of enactment of this Act shall be consid- 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 1005 IS ered to refer and apply to the Office of the Spe- 1 cial Inspector General for Financial Institution 2 Crime. 3 (B) SPECIAL INSPECTOR GENERAL REF- 4 ERENCES.—Any reference to the Special In- 5 spector General for the Troubled Asset Relief 6 Program in any law, rule, regulation, certifi- 7 cate, directive, instruction, or other official 8 paper in force on the date of enactment of this 9 Act shall be considered to refer and apply to 10 the Special Inspector General for Financial In- 11 stitution Crime. 12 (c) DUTIES OF SPECIAL INSPECTOR GENERAL FOR 13 FINANCIAL INSTITUTION CRIME.— 14 (1) IN GENERAL.—Section 121 of the Emer- 15 gency Economic Stabilization Act of 2008 (12 16 U.S.C. 5231) is amended— 17 (A) in subsection (b)— 18 (i) by striking paragraph (3); and 19 (ii) by redesignating paragraphs (4), 20 (5), and (6) as paragraphs (3), (4), and 21 (5), respectively; 22 (B) by striking subsection (c) and insert- 23 ing the following: 24 ‘‘(c) DUTIES.— 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 1005 IS ‘‘(1) IN GENERAL.—It shall be the duty of the 1 Special Inspector General to conduct, supervise and 2 coordinate— 3 ‘‘(A) investigations of fraudulent conduct 4 in, or impacting— 5 ‘‘(i) an entity described in any of sub- 6 paragraphs (A) through (F) of section 7 5312(a)(2) of title 31, United States Code; 8 ‘‘(ii) a bank holding company, as de- 9 fined in section 2 of the Bank Holding 10 Company Act of 1956 (12 U.S.C. 1841); 11 or 12 ‘‘(iii) a savings and loan holding com- 13 pany, as defined in section 10(a) of the 14 Home Owners’ Loan Act (12 U.S.C. 15 1467a(a)); and 16 ‘‘(B) audits and investigations of— 17 ‘‘(i) the purchase, management, and 18 sale of assets by the Secretary under any 19 program established by the Secretary 20 under section 101; and 21 ‘‘(ii) the management by the Sec- 22 retary of any program established under 23 section 102, including by collecting and 24 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 1005 IS summarizing the information described in 1 paragraph (2). 2 ‘‘(2) INFORMATION REQUIRED.—The informa- 3 tion described in this paragraph is the following: 4 ‘‘(A) A description of the categories of 5 troubled assets purchased or otherwise procured 6 by the Secretary. 7 ‘‘(B) A listing of the troubled assets pur- 8 chased in each such category described in sub- 9 paragraph (A). 10 ‘‘(C) An explanation of the reasons the 11 Secretary deemed it necessary to purchase each 12 such troubled asset. 13 ‘‘(D) A listing of each financial institution 14 from which those troubled assets were pur- 15 chased. 16 ‘‘(E) A listing of and detailed biographical 17 information on each person or entity hired to 18 manage such troubled assets. 19 ‘‘(F) A current estimate of the total 20 amount of troubled assets purchased pursuant 21 to any program established under section 101, 22 the amount of troubled assets on the books of 23 the Treasury, the amount of troubled assets 24 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 1005 IS sold, and the profit and loss incurred on each 1 sale or disposition of each such troubled asset. 2 ‘‘(G) A listing of the insurance contracts 3 issued under section 102. 4 ‘‘(3) ADDITIONAL DUTIES.—The Special In- 5 spector General shall— 6 ‘‘(A) establish, maintain, and oversee such 7 systems, procedures, and controls as the Special 8 Inspector General considers appropriate to dis- 9 charge the duty under paragraph (1); and 10 ‘‘(B) have the duties and responsibilities of 11 inspectors general under the Inspector General 12 Act of 1978 (5 U.S.C. App.). 13 ‘‘(4) ADDITIONAL AUTHORITY.— 14 ‘‘(A) IN GENERAL.—Except as provided 15 under subparagraph (B), and in addition to the 16 duties specified in paragraphs (1) and (2), the 17 Special Inspector General shall have the author- 18 ity to conduct, supervise, and coordinate an 19 audit or investigation of any action taken under 20 this title as the Special Inspector General deter- 21 mines appropriate. 22 ‘‘(B) EXCEPTION.—Subparagraph (A) 23 shall not apply with respect to any action taken 24 under section 115, 116, 117, or 125.’’; 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 1005 IS (C) in subsection (e)— 1 (i) in paragraph (1), by striking sub- 2 paragraph (B) and inserting the following: 3 ‘‘(B)(i) Subject to clause (ii), notwithstanding the 4 fact that the Office of the Special Inspector General for 5 Financial Institutions Crime Enforcement is not a tem- 6 porary organization, as defined in subsection (a) of section 7 3161 of title 5, United States Code, the Special Inspector 8 General may exercise the authorities of subsections (b) 9 through (i) of that section. 10 ‘‘(ii) If the Special Inspector General exercises the 11 authorities described in clause (i)— 12 ‘‘(I) section 3161(b)(2) of title 5, United States 13 Code (relating to periods of appointments), shall not 14 apply; and 15 ‘‘(II) with respect to an individual who is hired 16 after the date of enactment of the Ending Too Big 17 to Jail Act, section 3161(b)(3) of title 5, United 18 States Code, shall not apply unless that individual is 19 a reemployed annuitant described in paragraph 20 (5).’’; and 21 (ii) in paragraph (5)— 22 (I) in subparagraph (A)— 23 (aa) by striking ‘‘(A)’’; and 24 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 12 •S 1005 IS (bb) in the first sentence, by 1 striking ‘‘Except as provided 2 under subparagraph (B), if’’ and 3 inserting ‘‘If’’; and 4 (II) by striking subparagraph 5 (B); 6 (D) by striking subsection (g) and insert- 7 ing the following: 8 ‘‘(g) COOPERATION AND COORDINATION WITH 9 OTHER ENTITIES.— 10 ‘‘(1) DEFINITIONS.—In this subsection— 11 ‘‘(A) the term ‘bank holding company’ has 12 the meaning given the term in section 2 of the 13 Bank Holding Company Act of 1956 (12 14 U.S.C. 1841); 15 ‘‘(B) the term ‘financial institutions’ 16 means an entity described in any of subpara- 17 graphs (A) through (F) of section 5312(a)(2) of 18 title 31, United States Code; and 19 ‘‘(C) the term ‘savings and loan holding 20 company’ has the meaning given the term in 21 section 10(a) of the Home Owners’ Loan Act 22 (12 U.S.C. 1467a(a)). 23 ‘‘(2) REQUIRED COORDINATION.—In carrying 24 out the duties, responsibilities, and authorities of the 25 VerDate Sep 11 2014 03:43 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1005.IS S1005 pamtmann on DSKBFK8HB2PROD with BILLS 13 •S 1005 IS Special Inspector General under this section, the 1 Special Inspector General shall work with the enti- 2 ties described in paragraph (3), with a view toward 3 avoiding duplication of effort and ensuring com- 4 prehensive oversight of— 5 ‘‘(A) financial institutions, bank holding 6 companies, and savings and loan holding com- 7 panies; 8 ‘‘(B) any fraudulent conduct in, or impact- 9 ing, [Text truncated for display. 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