Nearly a year and a half after the passage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”)1 on March 27, 2020, the Special Inspector General for Pandemic Recovery (“SIGPR”) has ramped up and is investigating fraud related to the U.S. government’s pandemic relief efforts. From implementing its own programs and utilizing data analytics, to forming new partnerships with other enforcement bodies, SIGPR continues its efforts despite limits imposed on its jurisdiction. Indeed, in its latest Quarterly Report to Congress (the “Quarterly Report”) (available here), SIGPR requests that Congress expand SIGPR’s oversight jurisdiction, highlights its expanding efforts to investigate pandemic relief-related fraud, and seeks additional funding.
Section 4018 of the CARES Act established SIGPR to “conduct, supervise, and coordinate audits and investigations” of certain loans and other pandemic relief investments established under the CARES Act and managed by the Secretary of the Treasury.2 SIGPR has been funded at $25 million for a 5-year term — or $5 million a year — to support these efforts. Since its last Quarterly Report on April 30, 2021 (available here), SIGPR has received nearly double the hotline complaints — from 363 to 620 — and SIGPR’s referrals to other agencies have increased exponentially, from 14 to 201 referrals. SIGPR’s newly opened preliminary inquiries have increased from four to 12, its ongoing preliminary inquiries have increased from two to eight, its newly opened investigations have increased from three to seven, and its ongoing investigations have increased from six to 12. The Quarterly Report does not provide details about these inquiries and investigations, but SIGPR’s jurisdiction is limited to programs established under a specific section of the CARES Act known as the Coronavirus Economic Stabilization Act of 2020 (“CESA”). These are the loans to passenger air carriers, cargo air carriers, and related businesses; loans to businesses critical to national security; and the loans and other investments under the Main Street Lending Program managed by the Federal Reserve.
The extent of SIGPR’s jurisdiction has been the subject of some debate. SIGPR had opined that its jurisdiction should be read expansively (available here), but on April 29, 2021, the Department of Justice’s (“DOJ”) Office of Legal Counsel (“OLC”) issued an opinion (available here) that SIGPR’s jurisdiction is limited to the loan programs created under CESA, thereby making clear that SIGPR does not have oversight over other CARES Act programs, such as the popular Paycheck Protection Program (“PPP”). In its recent report, SIGPR points out that the limitations on its jurisdiction have caused SIGPR to terminate multiple audits and investigations and required SIGPR to transfer information collected as part of a preliminary review of the Coronavirus Relief Fund to the Department of Treasury Office of Inspector General.
Yet reports of pandemic relief-related fraud continue to increase. Indeed, between April 2021 and June 2021, SIGPR received 620 hotline complaints related to potential fraud, waste, abuse, and mismanagement of CARES Act funding and programs that fell outside its jurisdiction, and it referred 201 of these complaints to other agencies.3 Other enforcement bodies, such as DOJ, are continuing to investigate fraud under other CARES Act programs,4 and, as we previously discussed here, SIGPR conducts investigations in partnership with U.S. Attorneys’ offices, DOJ, and other federal law enforcement bodies. The report notes that SIGPR is continuing its work in these coordinated efforts. Further, SIGPR is actively looking to broaden its reach independent of those partnerships. Immediately after OLC’s April 2021 opinion, SIGPR called for Congress to pass legislation “to clarify SIGPR’s mandate to provide oversight of the Coronavirus Relief Fund, Payroll Support Program, and other pandemic-related programs managed by the Secretary of the Treasury.”5 The Quarterly Report reiterates SIGPR’s request to expand its oversight jurisdiction.
Still, even within the currently established limitations on its jurisdiction, SIGPR has ample oversight initiatives. These include auditing the management of the Department of Treasury’s Direct Loan Program and the Federal Reserve’s Main Street Lending Program. SIGPR has engaged in a number of other activities, such as maintaining a hotline for whistleblowers, adding a “Self-Disclosure” page to its website through which program participants can self-report potential violations, and carrying out investigative activities within its jurisdiction. SIGPR is also seeking increased access to borrower and lender information, particularly information for the Main Street Lending Program, to better carry out its reviews and audits. Moreover, SIGPR is focused on using data analytics to expand its auditing activities. SIGPR has already compiled nearly 70 million rows of data covering billions of dollars in CARES Act funding, and SIGPR is continuing to look for ways to grow that data library. It is also relying on data analytics to create and use interactive dashboards and visualizations to help SIGPR identify program areas for audits and evaluations, and is participating with inter-governmental agencies, committees, and third-party vendors to learn about emerging tools, methodologies, and techniques. Further, as discussed above, SIGPR has focused on building partnerships with other U.S. governmental offices investigating pandemic relief-related fraud.
Finally, in its recent report, SIGPR asserts that it cannot continue its efforts without additional funding. As noted above, SIGPR currently receives $5 million a year in funding, but SIGPR has requested a total of $25 million for Fiscal Year 2022 alone to support its mission. SIGPR warns that without this additional funding, it will not be able to continue its oversight efforts.
What This Means for You
SIGPR’s on-going initiatives and its requests for additional funding and increased oversight responsibility all demonstrate that SIGPR’s enforcement efforts and partnerships with other enforcement bodies are expanding. Further, the recent report signals that efforts to combat pandemic relief-related fraud are growing on a government-wide basis. SIGPR is one of many U.S. governmental enforcement bodies focused on these issues. For example, DOJ is pursuing pandemic fraud nationwide, with U.S. Attorneys’ offices, as described in a steady stream of press releases.6 Moreover, in May 2021, the Deputy Attorney General held the first meeting of the COVID-19 Fraud Enforcement Task Force to discuss the Government’s “priority goals,” which include “increased efforts to combat fraud related to COVID-19 relief programs like the Paycheck Protection Program (‘PPP’), the Economic Injury Disaster Loan (‘EIDL’) program, as well as unemployment insurance benefits.”7
Thus, SIGPR, DOJ, and various enforcement bodies are continuing to closely scrutinize the receipt and use of CARES Act funds and programs both independently and together. If Congress provides SIGPR with its requested funding or expands SIGPR’s jurisdiction, that would indicate a long-term commitment by Congress to focus on these efforts and broaden SIGPR’s reach. Individuals and companies that have received CARES Act funds should remain vigilant with compliance to ensure that expenditures of such funds comply with federal law. Accurate record-keeping consistent with program requirements is critical to demonstrating compliance to federal auditors and investigators. Those concerned about compliance with the pandemic relief programs should contact legal counsel to address any concerns sooner rather than later, before SIGPR, DOJ, and other governmental entities come knocking.
1 Pub. L. No. 116-136, 134 Stat. 281 (2020).
2 Id. at Sec. 4018(c)(1), 134 Stat. 483 (15 U.S.C. § 9053(c)(1)).
3 The complaints related to a range of topics, with more than a third related to the PPP under Title I of the CARES Act.
4 As we have written about here and here, DOJ is actively pursuing both civil and criminal enforcement of pandemic relief-related fraud.
5 Office of the Special Inspector General for Pandemic Recovery, Quarterly Report to the United States Congress: January 1, 2021 – March 31, 2021 5-7 (Apr. 30, 2021) (available here).
6 See, e.g., Press Release, Dep’t of Justice, Tulsa Man Sentenced for Applying for Paycheck Protection Program Loans under False Pretenses (Aug. 6, 2021) (available here); Press Release, Dep’t of Justice, Stoneham Woman Pleads Guilty to Identity Theft and Unemployment Fraud Related to COVID-19 Pandemic (Aug. 3, 2021) (available here).
7 Press Release, Dep’t of Justice, Deputy Attorney General Convenes Inaugural Meeting of the COVID-19 Fraud Enforcement Task Force (May 28, 2021) (available here).
