President Obama Signs Fraud Law With Broad Vendor Implications

According to a post today on, the Fraud Enforcement and Recovery Act, signed by President Obama last week, could have implications for vendors who may ultimately receive stimulus funds.

The major thrust of the legislation is aimed at giving the Feds more tools to investigate and prosecute mortgage and securities fraud.  However, language in the law makes its application broader to include “defrauding the federal government to fraudulent activities involving the Troubled Assets Relief Program (TARP) or a federal economic stimulus…” 

In effect, any vendor defrauding the government directly, and/or through other entities receiving government TARP or ARRA  funds (previously a gray area) can be prosecuted with greater vigor.  In addition, the law provides appropriation means to agencies such as the Department of Justice, HUD, U.S. Postal Service, Secret Service, and the SEC to investigate and prosecute fraud.


In some ways, it’s surprising laws relating to fraudulent vendor activity weren’t explicitly defined already.  Clearly, no vendor should ever engage in deceptive practices that waste taxpayers money; and blatant attempts to do so should be met with harsh and swift justice. 

What remains to be seen, however, is how far and wide such investigations and prosecutions will reach.  Expect to see “test cases” brought against companies that may have violated regulations unintentionally in the midst of a complex procurement process.  Also expect to see vendors shying away from certain contracts due to the perceived legal risk.  And, finally, continue to expect to see a handful of vendors cutting corners and pulling strings unethically (someone always does).

This environment of “transparency and accountability,” while potentially complicated, will also represent opportunity for vendors with a culture of openness, customer service, and integrity.  At the end of the day, good value and solid work will bear fruit and keep you out of trouble.



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