DOJ and Leaders in Congress are turning to aggressive oversight of new COVID-19 stimulus programs.
DOJ announced this week its first fraud and abuse enforcement actions against violators of the CARES Act.
As government oversight intensifies and additional reports are made public, it is an important time for recipients of stimulus funds to assess their internal compliance programs, policies, and procedures and ensure that they are in full compliance with all applicable laws and regulations.

On May 5, the Department of Justice (DOJ) announced its first fraud and abuse indictments related to CARES Act lending. DOJ charged two men in Rhode Island with fraudulently seeking more than $500,000 in forgivable loans from the Small Business Administration (SBA) under the Paycheck Protection Program (PPP). The men allegedly sought funds for businesses that were not in operation prior to the COVID-19 pandemic in order to pay the salaries of employees that did not exist, while providing false documentation to support the application. DOJ charged the men with bank fraud, conspiracy to commit bank fraud, conspiracy to make false statements to influence the SBA, and aggravated identity theft. This is expected to be the first of many enforcement actions DOJ will launch against COVID-19 fraudsters.

Oversight activities are also intensifying in Congress. On May 7, the Senate Committee on Banking, Housing, and Urban Affairs held a confirmation hearing for President Trump’s nominee for Special Inspector General for Pandemic Recovery, Brian Miller. The Special Inspector General will oversee CARES Act lending, and the various investment programs associated with economic stimulus in the wake of COVID-19. Miller most recently served as a senior associate counsel at the Office of White House Counsel, and has previously served as Inspector General for the General Services Administration, a role he held for over nine years.

The senators questioned Miller on his independence with respect to investigating issues of fraud and abuse in CARES Act funds given his recent work with the Trump Administration. In response, Miller highlighted his work under both Republican and Democrat administrations and said the following: “I will be independent. If the president removes me, he removes me. If I am unable to do my job, I will resign.” He also confirmed that he would not seek presidential approval prior to investigating, issuing reports, or communicating with Congress regarding the pandemic response. In response to a question from Senator Doug Jones about particular challenges of the job, Miller stated, “This is going to be a very challenging and demanding position—there’s no question about that—and I will go where the facts lead and they may be facts that the President and the Administration don’t like, but I will state them anyway.”

Senators also questioned Miller about his view of his authority and his anticipated investigation strategies, to which he responded:

At this point in time, looking at the Act, it’s clear that I have jurisdiction over the actions of the Secretary of the Treasury. And right now I consider every dollar that goes from Treasury through the Federal Reserve to also give me jurisdiction over the Federal Reserve.

Miller further indicated that staffing will be difficult and time consuming, and that he envisioned needing between 50-100 employees.

In their questioning, senators also raised concerns about the possibility that CARES Act funding may have been channeled to particular states for political gain and companies receiving bailouts and subsequently laying off workers. Ranking Member Sherrod Brown indicated concerns about small businesses being shut out for loans while “big well-connected franchises go to the front of the line,” which he described as “simply unacceptable.” These issues will likely continue to receive scrutiny both from the Special Investigator and from lawmakers as Congress continues its oversight activities for CARES Act lending and the broader pandemic response.

The House of Representatives also has been active in conducting oversight activities this week. The House Oversight and Reform Committee recently took steps to address the rise in COVID-19-related scams. Speaking on Pillsbury’s Washington Weekly Briefing webcast, Chairman of the Subcommittee on Economic and Consumer Policy, Rep. Raja Krishnamoorthi highlighted actions taken against companies providing unapproved and falsely marketed antibody tests. Rep. Krishnamoorthi also raised the issue with the Food and Drug Administration (FDA), leading the FDA to review all antibody tests on the market and to remove all inaccurate and falsely marketed tests.

Chairman Krishnamoorthi also highlighted additional oversight actions, including sending cease-and-desist orders to companies fraudulently selling alleged COVID-19 cures. “The Oversight Committee and the Subcommittee that I chair are absolutely crucial for making sure that our agencies operate properly and that we get rid of scam artists and go after hucksters trying to prey on vulnerable Americans in this crisis,” Rep. Krishnamoorthi stated.

We will continue to closely monitor additional oversight developments in Congress. Congressional inquiries involve special challenges for companies, associations, and executives, in part because Congress has very broad powers for conducting Congressional investigations and Congressional hearings. Committees exercise significant control over the scope of document and information requests. Congress also can ignore attorney-client privilege, leading to possible judicial contests over disclosure. The political stakes of these investigations are high; this is particularly the case when parties seek to utilize Congressional oversight authority for political gain.

These issues highlight the need for companies doing business with governments—at any level—to take proactive steps to document and demonstrate full compliance with relevant laws and regulations. For additional background, please see our recent client alert on compliance issues created by the CARES Act.

Pillsbury’s experienced, multidisciplinary COVID-19 Task Force is closely monitoring the global threat of COVID-19 and providing real-time advice across industry sectors. Our team advises companies doing business with the government, including recipients of stimulus funding, on how to achieve compliance with relevant laws and regulations. We represent companies, associations and executives facing “bet-the-company” government investigations, including Congressional and IG investigations. Pillsbury’s bipartisan team of lawyer lobbyists applies a top-down approach to problem solving, combining technical and substantive expertise with connections to influential leaders on Capitol Hill, in the Executive Branch, and in state governments.

For more thought leadership on this rapidly developing topic, please visit our COVID-19 (Coronavirus) Resource Center and our Public Policy practice page.

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