A year after the COVID-19 pandemic hit the United States, it remains to be seen how the Biden administration will approach law enforcement against companies that have received pandemic relief through the law. CARES and other federal spending programs. Nonetheless, application models related to pandemic assistance in 2020 and early 2021 may provide insight into potential application trends in the future. Although these cases have largely focused on small businesses that have submitted fraudulent requests for relief funds (that is to say fruit at hand), these cases may pave the way for Department of Justice (“DOJ”) law enforcement against large corporations.
Application of COVID-19 to date
Enforcement cases over the past 12 months have focused on the more obvious fraud cases. Last Friday, March 26, the The GM announced that he had charged 474 defendants in 56 federal districts based on COVID-19-related fraud schemes, including attempts to obtain more than $ 569 million in pandemic relief funds. The vast majority of enforcement cases involved fraudulent claims and the use of stimulus funds for small businesses, including the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loans (“EIDL”).
Many of these enforcement actions alleged that individuals had submitted claims for non-existent companies, inflated their salary expenses by overestimating the number of employees, and submitted manipulated tax documents with their claims. For example, on March 18, 2021, a New Jersey man charged with fraudulent obtaining of $ 1.9 million in PPP funds. He allegedly submitted 10 fraudulent PPP loan applications to multiple lenders on behalf of 10 different companies. Each claim allegedly included false information, such as forged tax documents and fabricated identities of many business partners.
The DOJ has also pursued conspiracies to recruit other business owners to submit fraudulent PPP requests on their behalf in exchange for bribes. In October 2020, the United States Attorney’s Office for the Southern District of Florida accused 12 people for conspiring to submit more than $ 24 million in fraudulent P3 requests.
Additionally, the DOJ has pursued charges related to fraudulent medical treatment for COVID-19. Several charges have been linked to individuals peddling fake medicine, and vaccine scams. Recently, the DOJ laid its first criminal charges on bogus health insurance claims. At the end of December 2020, two owners of more than a dozen pharmacies in New York and Long Island were indicted for using COVID-19 emergency override codes to submit more than $ 30 million in bogus claims to Medicare. As there is still more money to lend and a variety of healthcare-related investigations are still underway, it appears that more charges of criminal fraud in healthcare are at stake. come.
What to expect from the app in 2021
For these and other reasons, while enforcement in 2020 largely focused on individuals engaging in relatively minor frauds, those same application theories will likely be applied to larger frauds in the near future. COVID-19 relief funds paid to businesses typically included strict certification requirements like those of the PPP, and the government will review whether recipient businesses submitted false documents to obtain relief funds. The government can investigate businesses other than small businesses that have received PPP funds for which they were not eligible, or businesses that have fraudulently obtained funds from other sources such as the Main Street Lending Program or the Provider Relief Fund. . The app in 2021 could also focus on fraud related to COVID-19 treatment, for example through fraudulent billing.
Civil lawsuits also seem inevitable. On January 12, 2021, the DOJ announced its first civil settlement related to fraudulent PPP loans, which included claims under the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”). The regulations provide for the government’s intended use of civil enforcement actions to recover losses in less egregious criminal fraud cases, and the number of new civil enforcement actions is likely to accelerate in the near future. The DOJ Press release of March 26, 2021 also warned that the FCA “whistleblower complaints are on the rise as unscrupulous actors take advantage of vulnerabilities created by the COVID-19 pandemic and new government programs providing federal relief,” signaling that enforcement action FCA-related pandemic relief fraud are almost certain in the near future.
Finally, we can also expect the DOJ, under the leadership of Merrick Garland, to start focusing on large companies that have received pandemic relief funds more generally. Administrative changes usually do not result in significant changes in enforcement policies. However, given the size and political significance of federal COVID-related stimulus programs, Garland may order his staff to aggressively pursue fraud claims, focusing on ensuring that relief funds are spent on recipients. appropriate. Democrat-controlled Congress is also highly motivated to investigate the Trump administration’s handling of COVID-19 aid and has already launched inquiries requiring information from companies that have received public funds.
Businesses that have received federal stimulus funding should review their representations to the government in order to receive such payments. The Small Business Administration has announced plans to automatically audit PPP loans of $ 2 million or more, and other agencies are also likely to investigate recipients of high financial aid. If necessary, recipients of stimulus funds should consult an external lawyer specializing in government law enforcement for advice on preparing and managing potential audits and enforcement actions. External lawyers will also be able to conduct internal investigations under the protection of solicitor-client privilege to identify misrepresentation and potential liabilities related to federal stimulus funds. These precautionary measures will help put businesses in the best possible position if the government focuses its attention on recipients who may have made false statements but have not engaged in outright fraud.
As you know, things change quickly, there is no clear authority or clear rules in this area, and the support measures and interpretations described here may change. This blog does not reflect an unequivocal statement of the law, but rather represents our best understanding and interpretation based on the current state of affairs. This blog does not address the potential impacts of the many other local, state, and federal ordinances that have been issued in response to the COVID-19 pandemic, including, without limitation, potential liability for disease. an employee, requirements for family leave, sick pay and other matters.
Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume XI, number 89