The federal COVID-19 economic stimulus package has earmarked $2 trillion in relief efforts for industries impacted by the global pandemic. The move has been widely regarded as a necessary measure in response to the unprecedented coronavirus epidemic. However, individuals and businesses are cautioned to take steps now to protect themselves from charges or allegations of fraud that are expected to result in the wake of these strange economic times.
CARES Act Paycheck Protection Program
With the massive amount of dollars flowing from the government into private hands, it is natural to believe that bad actors will seek to take advantage of available grant and loan programs. Some of those loans, including the Small Business Administration Paycheck Protection Program, have never before been implemented and a lack of regulatory oversight experience may provide opportunities for fraud. Even for reputable and well intentioned loan recipients who truly need this aid during a global pandemic, there are enough open questions about eligibility, loan use criteria, and forgiveness requirements that there is risk for unintentional misuse of stimulus grant and loan programs that could result in investigations and criminal allegations.
Don’t neglect corporate compliance programs
If the investigations and criminal indictments that followed previous bailouts programs are any indication, corporate management should be concerned that their current decisions and conduct during Coronavirus shutdowns are going to be subject to later scrutiny. Dysart Willis Houchin & Hubbard attorneys are experienced in defending individuals and businesses facing government investigation and white collar charges. More effectively, our firm is poised to proactively assist applicant businesses from future risk including implementing corporate compliance programs.
Corporations that already have compliance measures in place should abide by existing guidelines. For those that do not have fully developed compliance mechanisms, executives are encouraged to immediately implement such programs with the assistance of an experienced attorney. A mature compliance program should include policies for documenting loan decisions including summaries of salient facts and copies of government guidance documents available at the time decisions were made since policies and regulations may change by the time an investigation takes place.
Focus on details now to avoid future trouble
In the past, the Inspector General’s Office has been charged with investigation and prosecution of misused funds which led to numerous enforcement action and convictions. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides for three separate oversight authorities but there are initial fears that enforcement efforts may be hampered by underfunding. Whistleblowers, a vital government tool in combating many forms of fraud, are likely to emerge at companies that are misusing government bailouts related to COVID-19, in an effort to help federal agencies combat noncompliance. With the level of uncertainty in the CARES Act and the risk of federal investigation even if noncompliance was unintentional, corporations are wise to take steps to proactively protect themselves against risk by involving an experienced defense team.
Corporate management and in-house counsel are encouraged to contact Dysart Willis Houchin & Hubbard if there are questions about implementing a corporate compliance program or the potential legal liability that may arise from funds received as part of the CARES Act.