Government compliance, investigations, and white collar defense

The federal government has provided over $2 trillion of aid to businesses, government, and individuals impacted by the coronavirus under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Similar to previous bailout programs such as the 2008 financial crisis and natural disasters like Hurricane Katrina, businesses will likely be under the microscope from whistleblowers and federal and state law enforcement authorities who will closely scrutinize businesses’ receipt and use of CARES Act funds. In fact, the Department of Justice has already announced it will prioritize the investigation and prosecution of coronavirus-related fraud schemes and established a national hotline for whistleblowers to report suspected fraud.

This increased scrutiny will likely lead to future government enforcement actions and whistleblower claims under the False Claims Act (FCA). The FCA creates liability for any person who submits false claims for government funds, which includes certificates of compliance. The FCA allows both the federal government and individuals (whistleblowers) the right to fight fraud committed against the government. Whistleblowers can file an FCA complaint on the government’s behalf (known as a qui tam action), and the complaint remains under seal pending a prolonged government investigation process, which typically includes intense and expensive discovery and presentations to the Justice Department. Whistleblowers receive a share of any financial judgment or settlement recovered by the government. Significantly, many whistleblowers are current and former employees, and an increase in whistleblower action is likely given the unprecedented layoffs and furloughs arising from the coronavirus crisis.

The key actions companies should be taking now to avoid potential FCA liability as a result of receiving CARES Act funds include:

  • Ensure that you understand government regulations detailing what you are required to do and when.
  • Monitor announcements by the government to ensure you remain informed of modifications or guidance for your industry, which may change as the crisis continues to unfold.
  • Continue to invest in robust corporate compliance programs and augment these programs to address regulatory requirements imposed by the CARES Act, including implementing effective procedures and controls around any required certifications.
  • Document compliance with CARES Act funding program requirements, including certifications made to receive the funds, as well as records and documentation substantiating the reimbursement of costs paid by the CARES Act funds.
  • Pay close attention to any allegations or issues raised as part of employee exit interviews and ensure that you have effective reporting systems in place to both discover potential compliance issues and take them seriously.

If you have any questions about the use or documentation of CARES Act funds, seek guidance from counsel. Our experienced white collar lawyers are available to help.