PPP Oversight: Congress Focuses on Agency Due Diligence | Baker donelson
The memo highlights the key steps the Biden-Harris administration and Democrats in Congress have taken to address the risk of fraud in these important relief programs, including key program changes, as well as the investment of An additional $ 142 million under United States Rescue Plan (ARP) legislation for federal watchdogs to stamp out fraud in these programs, including Inspectors General, the Pandemic Accountability Committee (PRAC ) and the Government Accountability Office. In addition, the president appointed former director of the National Economic Council, Gene Sperling, to oversee the implementation of the ARP and ensure that funds are not diverted to fraud or waste.
The note notes that inter-agency coordination has also improved, with the Ministry of Justice, the PRAC and other agencies having launched a working group to eradicate fraud, and lists the measures taken to date by the Select Committee in regarding the monitoring of these programs, foreshadowing that further investigations are on the horizon.
Application increaseeMent measures
Enforcement measures have already been initiated in several states and the note, coupled with strengthened inter-agency efforts, suggests that such enforcement measures, in the form of indictments, information filings and requests for ‘record, will likely increase in the remainder of 2021. Nationally, the cases involve a range of scenarios, from individual business owners who have inflated their salary expenses to obtain larger loans than they otherwise would have qualified for. , to fraudsters who revived dormant companies and bought shell companies with no actual transactions to apply for several of the loans mistakenly indicating they had a large payroll, and to organized criminal networks submitting identical loan requests and supporting documents under the name of different companies.
In Florida, over the course of a month, the U.S. District Attorney for the Southern District of Florida indicted 18 federal criminal cases alleging financial fraud under the CARES Act, totaling more than $ 75 million. As an example, a tax preparation company was accused of submitting 118 PPP loan applications, all with falsified income and expense data, resulting in the receipt of 975,582 $ in PPP loan funds; and a financial services company was charged with wire fraud, bank fraud and conspiracy to commit fraud, the defendant having filed forged loan applications and received $ 17.6 million in PPP loans, and distributed bribes to various co-conspirators.
Likewise, in Maryland, charges have been laid against a wide range of entities and individuals, including a car dealership, a church official, and a pastor. In addition to Florida and Maryland, federal prosecutors have filed lawsuits in the District of Columbia, Texas, Georgia, and Louisiana, and state attorneys general are also actively investigating P3 fraud under privacy protection laws. consumer states and the False Claims Acts, which can result in severe penalties beyond restitution and other enforcement actions.
Potential independent investigations
But law enforcement and law enforcement probably won’t be the whole story. The lack of confidence in the effort of the actions of the agency of the previous administration suggests a possible independent investigative activity of the sub-committee. Generally speaking, Congress has broad authority to conduct the research necessary to inform the legislative process, and the oversight and review of legislation that enables the PPP loan program can be reasonably anticipated. This activity could take several forms. In many cases, such an investigation begins with a voluntary request for records from private entities, which in this case would be those that could have benefited from PPP loans, or financial institutions that act as lenders. These requests will likely see the records fall into one of several categories. Documents relating to:
- advocacy or communication efforts; and
- impact on third parties.
In the context of PPPs, recipients can expect to see requests for more than their loan requests. Inquiries are likely to include requests for all financial statements, including audited financial statements for the past several years, as well as supporting and backup documents such as working papers and detailed account statements. In addition, entities can expect to be asked to show how the money has been used, as well as how other disposable funds or independent income have been used. In particular, expect Congress to seek details on capital spending, executive compensation, and debt reduction.
Communication with lending institutions, as well as any communication with government agencies, may also be sought. In addition to the actual loan requests, Congress will likely want to see any follow-up requests made by lenders and what was submitted in response to those requests. Finally, the data and records relating to the impact on staff – hiring, layoffs, time off and pay cuts – will likely be of interest.
How to respond to inquiries
While these requests may be voluntary in nature, they should not be ignored and should be responded to as promptly and appropriately as possible. Obviously, some requests may need to be curtailed or negotiated, but this should be handled by a lawyer with the responsible Congress staff. The request will likely include a deadline, but this should also be carefully considered and discussed with staff if an extension is needed. In addition to these voluntary requests, members or staff may seek to conduct informal or formal interviews with employees or managers. In addition, according to the appropriate rules, the Chamber may issue subpoenas for documents or testimony at a formal hearing, if necessary.
As with large government relief programs, administrative changes, and pending midterm elections, all participants in the CARES Act and related programs should be prepared and expect government oversight. This most recent press release suggests that expectations should include more than routine investigations from responsible oversight agencies.