For Civil Enforcement, the Pandemic Is Just Beginning
There have been many criminal prosecutions of COVID-related fraud—the DOJ recently announced that the Fraud Section has criminally charged at least 120 defendants to date in fraud cases involving the PPP—but those often alleged egregious misconduct. Two new end-of-year settlements go beyond such incidents of egregious wrongdoing, however, and shed greater light on how the government might pursue civil enforcement for companies whose behavior was grey, sloppy, or pushed boundaries, which William Harrington, Annie Railton and Melissa Brumer discuss in this Federal Civil Enforcement column.
April 01, 2021 at 12:45 PM
8 minute read
Early in the COVID-19 pandemic, many businesses worried about how to avoid running afoul of government scrutiny, especially as regulators warned businesses that they would look carefully at economic misdeeds. There have been many criminal prosecutions of COVID-related fraud—on March 26, 2021, the DOJ announced that the Fraud Section has criminally charged at least 120 defendants to date in fraud cases involving the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (among hundreds of other criminal cases)—but those often alleged egregious misconduct, such as obtaining loans for nonexistent businesses and spending loan proceeds on luxury goods.
Two new end-of-year settlements go beyond such incidents of egregious wrongdoing, however, and shed greater light on how the government might pursue civil enforcement for companies whose behavior was grey, sloppy, or pushed boundaries.
|CARES Act Funds-Related Enforcement
On Jan. 12, 2021, the DOJ entered into the first civil settlement involving alleged PPP loan fraud. The DOJ alleged that SlideBelts, and its president and CEO Brigham Taylor, made multiple loan applications and ultimately received a $350,000 PPP loan, but failed to disclose that the company had declared bankruptcy—a required disclosure in the loan applications and a bar to receiving a PPP loan—until after receiving the loan distribution. The DOJ contended that the company's misrepresentations about its involvement in bankruptcy proceedings constituted knowing false statements and caused false claims for payment to be made to the SBA, in violation of the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). In response to government demands, SlideBelts ultimately returned the loan to the lender several months after receiving it. Nonetheless, the company and its CEO agreed to pay $100,000 to settle the claims.
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