Will There Be Fraud in the Wake of the CARES Act?

The COVID-19 outbreak in the United States has led governors throughout the country to issue stay-at-home orders, forcing residents to spend most of each day at home and many businesses to close temporarily, resulting in millions of people losing their jobs and causing the economy to suffer another recession.

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which is the largest economic stimulus package in history. The CARES Act provides over $2 trillion in economic aid to businesses, individuals, government entities, and non-profit organizations.

The following are several provisions of the CARES Act:

  • The creation of the Paycheck Protection Program (PPP), which offers up to $350 billion in potentially forgivable loans.
  • The creation of the Economic Injury Disaster Loan Program (EIDL), which provides a maximum of $10,000 in economy relief to small businesses.
  • The creation of the Small Business Administration (SBA) Express Bridge Loans, giving businesses with an existing relationship with an SBA Express Lender access of a maximum $25,000 right away.
  • The creation of SBA Debt Relief, which provides small businesses financial reprieve during the coronavirus pandemic.

While these relief programs are designed to curb widespread economic collapse from the outbreak, federal investigators are also tasked to identify and take legal action against fraud and abuse involving these programs. In the aftermath of previous crises, such as the 2008 financial crisis and the ongoing national opioid epidemic, agencies have pursued legal actions under the False Claims Act (FCA) against various contractors and industries receiving government funding, recovering billions of dollars from FCA violators and prosecuting hundreds of them.

The U.S. Department of Justice (DOJ) plans to prioritize the investigation and prosecution of any fraud schemes related to COVID-19 relief. Furthermore, each U.S. District Attorney’s Office must appoint a “COVID-19 fraud coordinator,” who will oversee enforcement of the FCA and reaching out to the public about potential fraud schemes.

Some of federal investigators responsible for handling coronavirus-related fraud claims include:

  • SBA Office of Inspector General (SBA OIG) – If borrowers and lenders participating in the PPP, EIDL, and any other SBA loan programs fail to comply with the rules and restrictions, the SBA OIG will investigate and prosecute violators under the authority of the Inspector General Act (IG Act). About 20 percent of the SBA OIG’s active caseload deals with fraud investigations related to emergency disaster loan programs, which has led to over 163 criminal convictions since 2006.
  • Special Inspector General for Pandemic Recovery (SIGPR) – While the SBA OIG investigates potential fraud and abuse associated SBA loan fraud, the SIGPR investigates fraud and abuse associated with loans, investments, and even Federal Reserved programs handled by the U.S. Treasury. In response to the 2008 financial crisis, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) investigated fraud and abuse involving the $700 billion emergency loan program ran by the Treasury, which has led to more than 370 criminal convictions for a wide range of white collar crimes, from bank fraud and mortgage fraud to money laundering and conspiracy.
  • Pandemic Response Accountability Committee (PRAC) – The CARES Act created and dedicated $80 million to a new oversight committee known as PRAC to supervise the appropriation of the CARES Act funds. The committee possesses the same investigative powers of individual Inspectors Generals (IGs) and may work with and support any IG-led investigations. The PRAC can issue and enforce subpoenas against anyone who is not a federal employee or officer.

If you, your business, or your organization has been accused of fraud or abuse in Illinois after receiving and using federal funds from the CARES Act, The Law Office of Stephan F. Hall has experience defending state and federal fraud allegations. We are happy to review your case over the phone or through videoconferencing.

Contact our Chicago federal criminal lawyer today at (312) 757-8204 and schedule a free consultation.