The pandemic relief law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided an unprecedented $2 trillion in economic aid to American families, workers and small businesses affected by the Coronavirus Disease 2019 (COVID-19). Congress anticipated that the amount of money that would be involved, and the parameters for the different assistance programs established by the CARES Act would require some additional monitoring.Hence, the reason for the creation of the Special Inspector General for Pandemic Recovery (SIGPR), an independent federal law enforcement agency charged with the oversight.
In early August, the SIGPR released an initial report to Congress to indicate that its activities were underway. It may be helpful to understand more about the SIGPR as its reviews begin, including its jurisdiction and early indicators of its top priorities. Knowing where the scrutiny may land can help individuals and organizations that received assistance through the CARES Act anticipate what may coming from this oversight effort.
SIGPR in Context
Establishing a federal oversight agency such as SIGPR has precedent. Legislation passed in response to the 2008 financial crisis created the Troubled Asset Relief Program, and also called for the establishment of an oversight agency, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). The SIGTARP’s sole mandate was to investigate allegations of fraud with respect to the $700 billion program.
The SIGPR will play a similar role for the CARES Act funds. In short, its main purpose is to distinguish which CARES Act relief recipients were intentionally using fraudulent means to receive federal funds from those individuals and organizations that legitimately needed the CARES Act support. It will function much like the SIGTARP, as an agency that includes specialists in investigating allegations of fraud, waste and abuse. The SIGPR includes attorneys, investigators, analysts and forensic accountants who have authority to conduct, supervise, and coordinate audits and investigations of the making, purchase, management, and sale of loans, loan guarantees, and other investments related to the CARES Act’s various programs. The SIGPR will also have a broad power of subpoena and is working with the Department of Justice (DOJ), the Federal Bureau of Investigation (FBI) Economic Crimes Unit, and the Internal Revenue Service (IRS) as part of its investigative efforts.
In addition to the criminal side of the SIGPR, the SIGPR Office of Audits has been established for many purposes to
include conducting audits of “loans, loan guarantees, and other investments” made under the CARES Act, and for the prevention and detection of fraud waste and abuse, as well as the identification of individuals and businesses who are believed to have engaged in fraudulent activity. It is this function of the SIGPR that individuals and organizations that received CARES Act support may be more interested in, but its initial focus areas will likely only affect a fraction of the relief recipient population.
Defining the SIGPR’s Jurisdiction
The CARES Act creates four different types of programs to assist American workers and families:
- Assistance for American Workers and Families ? Provides payments of up to $1,200 for working adults.
- Assistance for Small Businesses ? Authorized up to $659 billion towards job retention and other expenses.
- Assistance for State, Local and Tribal Governments ? Establishes a $150 billion relief fund to states and eligible local governments for expenses incurred because of COVID-19.
- Preserving Jobs for American industry ? Establishes several tax-incentivized programs for purposes of improving businesses ‘cash flow over the next two years.
Among the largest and most ambitious programs within the CARES Act is the one designed for small businesses, specifically the Paycheck Protection Program (PPP). The program has allocated $659 billion to be used by small businesses for purposes of retaining employees and covering expenses such as mortgage interest, rent, and utilities for a Covered Period. As of this past August, approximately $525 billion in loans had been granted, but early reports indicated that some of the recipients might not have been the target audience for the PPP loans. Because of this, the SIGPR may eventually shift its criminal and audit focuses to the PPP.
First Priorities for SIGPR
According the SIGPR’s initial report, the SIGPR will investigate any individual or company suspected of engaging in fraudulent activity for purposes of obtaining funds pursuant to the CARES Act, specifically, “those who make intentional, material misrepresentations” when applying for, or reporting to the Treasury Department. The SIGPR’s report indicates these groups will be in violation of federal criminal statutes to include “securities fraud, wire fraud, mail fraud and false statements.”
The SIGPR’s efforts will initially focus on corruption as it pertains to the allocation of $500 billion to the Department of Treasury’s Exchange Fund. This program provides for $46 billion for distressed industries such as the airline industry and companies who maintain our national security.Other eligible businesses, states and municipalities and financial markets will be able to tap the remaining $454 billion for purposes of shoring of their troubled businesses.
To date, the SIGPR has established a hotline and website dedicated to responding to allegations of fraud waste made by individuals who will be offered all of the applicable whistleblower protections.
What to Expect in the Near Future
As the SIGPR continues to grow as an investigative agency and with the necessary funding to ensure its oversight of the historic CARES Act over the next decade, SIGPR will begin to turn its investigative compass to address the most egregious cases involving fraud committed by organizations and their leaders. Investigating allegations of fraud and corruption will likely take months to develop and secure evidence of a committed crime and the cooperation of those involved.
The resources of this new investigative agency and the willingness to tackle what are likely to be some of the largest complex white collar investigations seen in the past decade may make for robust fraud investigation cases. Should your organization and its executives find themselves at the center of a SIGPR investigation, you will likely want to enlist some external support. White collar attorneys and forensic accountants who are experienced with the rules and parameters of the CARES funds can assist in defending allegations of defrauding the CARES Act.
For More Information
We will know more about where the SIGPR is heading with its investigations, including who may be targeted for review, in the months to come. The SIGPR is required to publish quarterly reports to Congress documenting its most recent accomplishments starting this fall. Contact us for more information about this initiative.
John Mulvaney is the leader of CBIZ’s White Collar and Government Enforcement Practice where he specializes in government and internal investigations, as well as complex civil and criminal matters. Prior to joining CBIZ, he spent 28 years as a special agent with the Federal Bureau of Investigation (FBI) and with the Special Inspector General’s Office for the Troubled Asset Relief Program (SIGTARP) where he oversaw SIGTARP’s national criminal and civil investigative program related to the $700 billion US government bailout program.
Published on September 28, 2020