In the wake of the COVID-19 pandemic, businesses face great pressure and incentive to apply for funds under the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act). With increased government aid comes increased government oversight. Businesses and individuals must carefully comply with the mandates of the CARES Act, lest they be greeted by an inquiring knock from federal law enforcement.
The Justice Department has signaled from day one that it will closely monitor for potential fraud and abuse, and directing all United States Attorneys’ Offices to prioritize the investigation and prosecution of fraud schemes related to COVID-19. It has wasted no time fulfilling this mission – already charging two men with filing fraudulent bank loan applications to obtain CARES Act funds from the Small Business Administration. No business or individual should feel that it is too small or too well-intentioned to go unnoticed.
The CARES Act itself has created a three-headed mechanism to combat fraud and abuse. Not unlike the extensive oversight that followed the relief efforts in the wake of the 2008 Financial Crisis, the CARES Act created a Special Inspector General for Pandemic Recovery, a five-member Congressional Oversight Commission, and a Pandemic Response Accountability Committee.
This enforcement mechanism will be used to oversee the Paycheck Protection Program – a nearly multi-billion dollar program under the Small Business Administration that is intended help businesses remain viable by providing loans to guarantee eight weeks of payroll and other costs. As the PPP rolls out, many feel that some of the PPP requirements are unclear, such as how to calculate loan forgiveness of the funds received through the PPP. The Treasury Department has released guidance on this and other questions, addressing some of the confusion. Uncertainty surrounding the PPP requirements creates an increased likelihood that applicants and recipients of the loans will fail to strictly comply with it, opening them up to federal government scrutiny down the line.
What does this mean for businesses and individuals affected by the COVID-19 pandemic? It means that the government is taking enforcement of the pandemic-relief programs seriously, and the requirements of relief programs such as the PPP are susceptible to confusion. Business owners today are facing immense pressure to keep their livelihoods afloat, but law enforcement will not give a pass to well-intentioned individuals facing hardship. Individuals hoping to benefit (and rightfully so) from the CARES Act relief should be mindful that years down the road, when the stresses, pressures, and panic caused by today’s COVID-19 pandemic may no longer be fully appreciated, every decision, communication, application, writing, and record may be scrutinized and second-guessed by the government.