COVID-19 Relief Programs: Mitigating and Responding To Enforcement Risk

Since the early days of the pandemic, Mintz’s COVID-19 Compliance & Enforcement Defense Task Force has closely monitored and advised clients on the evolving COVID-19 relief programs, including those created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act provided for over $2 trillion in relief funds, which is the largest emergency assistance package in American history. The numerous CARES Act programs have continued to develop through, among other things, the passage of the Paycheck Protection Program and Health Care Enhancement Act, the Paycheck Protection Program Flexibility Act of 2020, and rapidly changing regulatory guidance and FAQs. As one example, the government recently wrestled with whether to make public the list of about 4.6 million entities that received more than $500 billion from the Paycheck Protection Program (PPP) under the CARES Act. After initially refusing to disclose PPP loan recipients, the Small Business Administration and Treasury Department decided to make public the names of entities that received loans larger than $150,000, as well as the dollar range of each loan.

In addition to monitoring the fast-paced evolution of these COVID-19 relief programs, we are continually assessing the criminal and civil enforcement actions that recipients of COVID-19 relief funds may face, including substantial risk under the False Claims Act (FCA) and various criminal laws.  The federal government has already announced a number of fraud cases and will undoubtedly continue to pursue COVID-19 grant and loan fraud. 

This post is the first in a series that will discuss the compliance risks related to acceptance of COVID-19 relief funds, examine strategies for mitigating risks, report on criminal and civil enforcement developments, and forecast how future enforcement actions may arise in this rapidly evolving landscape. This series will culminate with a webinar on Wednesday, July 15th.

Overview of COVID-19 Relief Programs

As mentioned above, the CARES Act authorized over $2 trillion in economic relief for individuals and businesses, including health care providers, to address the public health crisis and adverse economic impact resulting from COVID-19. The law created several programs with differing eligibility requirements, varying terms and conditions and certifications of eligibility, and a number of ongoing compliance obligations. The risks associated with each program may differ based on which government agency administers the program, how the program is structured, who is eligible, the certifications made to obtain funds, and the agency charged with overseeing and enforcing each program. In addition, the rapidly evolving agency guidance for the COVID-19 relief programs presents substantial compliance challenges as the guidance is sometimes unclear, is internally inconsistent, or conflicts with past statements made by the agency.

Below we have provided a high-level overview of select programs established or expanded under the CARES Act, each of which poses compliance and enforcement risks.

Oversight and Enforcement Agencies

In conjunction with these COVID-19 relief programs, the CARES Act also created several oversight and enforcement mechanisms intended to facilitate transparency, monitor the implementation of the CARES Act, and oversee the distribution and use of funds.

As funds have been and will continue to be disbursed through the various COVID-19 relief programs, investigating fraud among fund recipients has become a top enforcement priority for new oversight agencies as well as existing enforcement authorities, including the Department of Justice (DOJ).  In a March 16, 2020 Memorandum regarding DOJ’s COVID-19 priorities, Attorney General William Barr directed every U.S. Attorney’s Office to “prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.” For example, DOJ’s Criminal Division has already filed several cases against individuals accused of fraud in connection with the PPP program in Illinois, Washington, California, Texas and Rhode Island.

Below is a listing of a few of the many enforcement agencies tasked with overseeing disbursements under the CARES Act:  

• Office of the Special Inspector General for Pandemic Recovery (SIGPR): Section 4018 of the CARES Act established the SIGPR, which is intended to lead a new inspector general’s office within the Department of the Treasury.  It is directed to “conduct, supervise, and coordinate audits and investigations” of the COVID-19 relief programs for businesses included in the CARES Act and any other Treasury programs established under the CARES Act. The SIGPR received $25 million under the CARES Act.
• The Pandemic Recovery Oversight Committee (PRAC): Section 15010(b) of the CARES Act establishes the PRAC within the Council of Inspector General on Integrity and Efficiency (CIGIE). The PRAC is tasked with coordinating and monitoring the federal government’s COVID-19 response, conducting oversight, and maintaining a public website. Among its oversight responsibilities, the PRAC supports efforts to “prevent and detect fraud, waste, abuse, and mismanagement [and] mitigate major risks that cut across program and agency boundaries.” In particular, the PRAC holds broad authority to conduct its own investigations and to collaborate with any other inspector generals, and it is authorized to issue subpoenas for documents, records, and testimony from private individuals. The PRAC receives $80 million under the CARES Act.
• Congressional Oversight Commission: Section 4020 of the CARES Act establishes the Congressional Oversight Commission, which is charged with overseeing the implementation of the CARES Act by the Department of the Treasury and the Board of Governors of the Federal Reserve System, and with submitting related reports to Congress.
• Inspectors General: Existing Inspectors General at various federal agencies including HHS, SBA, and the Department of the Treasury are conducting anti-fraud and auditing work related to funds dispersed under the CARES Act.  For example, in May 2020, the HHS OIG announced that it would audit the distribution of $50 billion in Provider Relief Fund payments to hospitals and other providers. Additionally, in its Paycheck Protect Program Loans FAQ, SBA advised that “all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements[.]”

In addition, we expect that whistleblowers will actively seek to enforce the FCA in this context and that investigative reporters will undoubtedly play a role as well in driving CARES Act enforcement activity and FCA investigations and lawsuits.

In the next installment of our blog series, we will discuss civil enforcement, including lessons learned from the Troubled Asset Relief Program implemented in 2008 during the last financial crisis.

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