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DOJ Pandemic Fraud Enforcement Efforts Accelerate | Cooley LLP

On March 10, 2022, the Department of Justice announced the appointment of Associate Deputy Attorney General Kevin Chambers as DOJ’s first Director of COVID-19 Fraud Enforcement. The announcement comes two years after Congress passed the $2.2 trillion economic relief bill known as the Coronavirus Aid, Relief, and Economic Security Act (CARES), and less than a year later. that the DOJ has established its COVID-19 Fraud Enforcement Task Force. With this appointment, the DOJ signals its commitment to strengthening COVID-related law enforcement. As we enter the third year of the COVID-19 pandemic, it is more important than ever for businesses to remain vigilant of compliance and enforcement issues when it comes to pandemic relief programs.

We have previously written on government enforcement risks for businesses that have received CARES Act funds. Companies and their officers may face civil and criminal liability under federal law, including under the False Claims Act, for their actions related to participation in the pandemic relief program. To date, the DOJ has filed criminal lawsuits against more than 1,000 defendants for alleged losses in excess of $1.1 billion, and more than 240 civil investigations of more than 1,800 individuals and entities for misconduct related to a total more than $6 billion in pandemic relief loans. While the majority of these lawsuits and investigations involved clear fraud schemes, the DOJ reported scrutiny of a wider range of activity, including by entities that handled fraudulent loans. As we explained earlier, while government enforcement can be slow at first following a crisis, it often increases, rather than decreases, as the crisis subsides.

White House and DOJ predict significant increase in pandemic fraud investigations

President Joe Biden first outlined the DOJ’s plans to appoint a director for COVID-19 fraud enforcement in his State of the Union address on March 1. In a fact sheet released the same day, the White House explained that the director would lead teams of prosecutors and specialized agents focused on the main targets of pandemic fraud, such as those “committing large-scale identity theft, including foreign-based actors”. The teams, which the White House has called “Strike Force Teams,” will also use “cutting-edge data analytics tools” to identify complex fraud schemes, warning that investigations could be launched only by security tools. ‘data analysis. This emphasis on the use of data analytics continues a prevalent trend in other areas of fraud investigation, particularly healthcare fraud enforcement.

Further illustrating Biden and the DOJ’s commitment to uncovering pandemic fraud, Attorney General Merrick Garland announced during a March 3 speech that DOJ to hire 120 additional attorneys to bolster pandemic fraud efforts. Garland also promised to continue to focus on white-collar crime more broadly and noted that in 2021, U.S. prosecutors’ offices nationwide charged 5,521 people with white-collar crimes, which is an increase. 10% compared to the previous year. Garland touted the increase as being due in part to “a major crackdown on all forms of pandemic-related fraud, particularly with respect to CARES Act programs like the Paycheck Protection Program and the Fund.” relief from suppliers”.

Facing a government investigation

The DOJ conducts COVID-related investigations of businesses and individuals soon after the CARES Act is enacted, but the DOJ’s increased commitment to prosecuting pandemic-related fraud with the appointment of a director for the fight against COVID-19 fraud and other lawyers lead to a greater number and wider range of investigations and enforcement actions in the coming years. Additionally, the DOJ’s use of data analytics tools to identify what it considers aberrant or questionable loans could result in companies receiving a subpoena or request for civil investigation (CID). based solely on statistics. Of course, analytical data is rarely definitive proof of misconduct. A company that is prepared to respond quickly to a subpoena or CID with documentation and information substantiating eligibility and compliance with program requirements may be able to resolve or significantly narrow an investigation.

We therefore recommend that companies anticipate any potential investigation by verifying that the appropriate documentation exists – and will continue to be maintained – to support initial loan certifications, compliance with loan conditions and all certifications and/or subsequent claims made to the government. . This becomes especially important over time, and especially if staff turnover has occurred since this documentation was created. The same goes for non-beneficiary entities, such as lenders and other financial institutions, which may begin to receive an increased number of inquiries.

As previously written, although most inquiries to lenders still target potentially fraudulent borrowers, lenders could face greater scrutiny if they are unable to produce the documents and information they were required to collect from borrowers under certain CARES Act programs, or if regulators notice a fraudulent borrowing pattern tied to a single institution. Additionally, companies – both borrowers and lenders – can minimize their exposure by ensuring that internal allegations are taken seriously, addressed and resolved in a timely manner, as whistleblowers often report fraud allegations in internally before approaching the government. Finally, a parallel internal investigation or review in the face of a government investigation is often essential to identify useful and potentially problematic information to better protect and defend the interests of the company.

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