There is more than $2 trillion on the line and the multi-trillion-dollar question is: Who’s minding the store?  On March 27, 2020, in response to the financial set-back created by the novel COVID-19 pandemic, President Trump signed into law the more than $2 trillion Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) – by far the largest economic relief package in U.S. history.^[1]  The CARES Act’s purpose is to keep the U.S. economy afloat and provide relief to struggling Americans, large corporate sectors, and small businesses while the nation battles this pandemic.  With $500 billion allocated for big corporations, $377 billion for small businesses, and another $153.5 billion for healthcare, these relief moneys (like with most government funds) are sure to come with strings attached in the form of complex regulations and substantial oversight, with enforcement not far behind.

As the Government continues everyday to figure out how to administer this staggering amount of monetary relief, those seeking relief from the CARES Act should pay careful attention to the details and be mindful of how the Government (especially Congress) implements oversight procedures.  Someday down the road – in the not too distant future – there will be government investigations and related enforcement actions against companies and individuals who do not carefully apply for and use such relief in accordance with statutory requirements.^[2]  Indeed, the CARES Act already has built into it three (3) different mechanisms to ensure that Congress and the Executive Branch have adequate resources in place from the outset to account for the relief funds, investigate those that cross the line and refer them to appropriate enforcement authorities, and implement Congressional oversight to carry out the intent and mandate of the Act.  Those three mechanisms are:

• The Pandemic Response Accountability Committee (“PRAC”) made up of nine (9) inspectors general from various departments and agencies. Of all the oversight measures, this committee appears to have the broadest powers.  The committee can audit, investigate, and analyze whether certain federal contracts are poorly managed; determine wasteful spending; and root out any “waste, fraud and abuse” discovered in the Act’s administration.  If the inspectors general suspect fraud and abuse, they will refer the matter to appropriate criminal, civil, or administrative enforcement agencies.
• The Special Inspector General for Pandemic Recovery (“SIGPR”) to be appointed by the President to monitor the Department of Treasury’s disbursal of the $500 billion in corporate liquidity fund. The SIGPR can conduct, supervise, and coordinate audits and investigations of the making, purchase, management, and sale of loans, loan guarantees, and other investments made by the Treasury Secretary.  The SIGPR also shall provide quarterly reports to Congress of his/her findings.  Like the PRAC, the SIGPR will have the mission or mandate to hunt down and root out potential fraud, waste, and abuse.
• The Congressional Oversight Commission made up of five (5) members to be appointed by the leaders of both Democratic and Republican parties. Among the Commission’s duties will be oversight of the Department of Treasury and Federal Reserve’s implementations of the Act and assessing the effectiveness of the Act.

At first blush, these oversight measures may appear to focus mainly on the Government’s own actions.  To be sure, however, the investigative powers conferred on those in watchdog positions will inevitably be used to respond to whistleblower complaints, deficient audit findings, and other concerns.  The Act’s inspectors general are authorized to initiate their own investigations, issue investigative subpoenas, and pursue other methods typically employed by inspectors general to detect and prevent fraud, waste, and abuse.  In the event the inspectors general detect or reasonably suspect reckless or fraudulent-type conduct by companies and/or individuals that applied for and received relief funds in the big money-grab, they also can refer matters to the Department of Justice for further criminal or civil investigation and potential prosecution.

Given the rapid enactment and complexity of the CARES Act and its accompanying regulations, along with substantial government oversight and investigative mechanisms, companies applying for and receiving relief under the Act should take care in doing following:

• Study the fine print and understand the regulatory obligations tied to any relief fund;
• Ensure conditions necessary for receipt and use of relief funds are met and maintained;
• Use relief funds/loans only as authorized;
• Create a proper paper trail that can withstand a government audit (or investigation) by preparing and maintaining accurate accounting of relief funds transactions;
• Ensure all statements and records used in support of receiving relief funds are accurate and complete, including any certifications;
• Implement and maintain a strong compliance plan that includes proper training of employees about use of and obligations concerning relief funds;
• Be prepared to address, investigate and resolve any internal or third-party allegations or reports of waste, fraud or abuse associated with relief funds; and
• Work with legal counsel to maintain proper controls, safeguards and legal privileges.

_{[1] For a comprehensive summary of key provisions in the CARES Act, see our prior blog posting here.}

_{[2] For a detailed look into potential enforcement actions, see our prior blog posting here.}