Government uses big data and agency coordination to focus more on prosecuting widespread pandemic fraud – Coronavirus (COVID-19)

Recipients of the $5 trillion in federal funding for programs designed to respond to the economic impact of the COVID-19 pandemic may soon be subject to further review for non-compliance. Recent high-profile reports of public funds being used to buy luxury vehicles, opulent mansions and posh vacations have reignited public outrage over what is being called “the biggest fraud of a generation”. This renewed focus has been accompanied by a reinvigorated response led by the Department of Justice (“DOJ”).

As mentioned earlier, the Trump administration has notified recipients of its intention to conduct an automatic “full review” of loans over $2 million. The Small Business Administration (“SBA”) has also issued guidance that recipients of Paycheck Protection Program (“PPP”) loans must certify that the current economic uncertainty makes their loan application necessary to support businesses. ongoing operations. And on May 17, 2021, Attorney General Garland established a DOJ task force in multiple partner agencies dedicated to combating COVID-19 fraud.

These efforts to identify and prosecute fraud in programs like the PPP have been strengthened in recent months. For example, on December 3, 2021, the Biden administration published“unprecedented” orientation Agencies to cooperate fully with the Inspectors General. During the State of the Union 2022 on March 1, 2022, President Biden said “the watchdogs are back” and “we’re prosecuting the criminals who stole billions in relief money meant for small businesses and millions of Americans” and “The Department of Justice will soon appoint a chief prosecutor for pandemic fraud.”

One of the main developments in law enforcement is the Pandemic Response Accountability Committeeestablishment by (“PRAC”) of the Pandemic Analysis Center of Excellence (“PACE”) to provide analytical, auditing and investigative support to the surveillance community. Like Finished in the PRAC’s strategic plan, holding criminals accountable through “data analytics” remains a primary objective. DOJ Inspector General Michael Horowitz, Acting Chairman of the PRAC, recently noted new efforts Hire data scientists to use artificial intelligence to identify trends, patterns and fraud anomalies in 17 datasets and 150 million records from public, non-public and commercial data sources. Data scientists also analyze social media to establish connections in unforeseen connections online that can lead to the discovery of fraud rings. PACE’s efforts teach computers to recognize fraud through machine learning. Horowitz underline that the “[t]he PRAC’s long-term strategy for [PACE] is
sustainment.” Along the same lines, Gene Dodaro, head of the Government Accountability Office, suggested make PACE permanent.

PRACs 21 general inspectors now provide comprehensive and coordinated oversight of 426 pandemic relief programs across more than 40 agencies by collaborating on investigations with 41 investigators and 36 law enforcement partners. On March 17, 2022, Horowitz wrote that to date the work of the PRAC and other Inspectors General has led to 1,272 indictments and complaints, 949 arrests and 455 convictions.

On 21 January 2022, the PRAC published its assessment of the SBA’s Phase III fraud controls, identifying gaps that still allow fraud schemes to go undetected and recommending strengthened measures. SBA Inspector General Hannibal “Mike” Ware mentioned that pandemic stimulus fraud “will likely continue to be ‘its top challenge’ for years to come as the agency grapples with program fraud.” The SBA has always noted that “[m]is a representation of eligibility [for pandemic funds] is illegal and, where appropriate, such cases are referred to the Office of the Inspector General. »

Although the PPP ended on May 31, 2021, existing borrowers must decide whether to repay their loans or apply for loan forgiveness. Fluent estimates from the PRAC suggest that around 2.27 million loans remain outstanding. To request cancellation of a PPP loan, a borrower must comply with certain requirements, such as using at least 60% of the loan for personnel costs. The most recent SBA remission form, revised July 30, 2021, requires borrowers to make representations and certifications on compliance with the terms and conditions of the program.

These required certifications may be the basis of False Claims Act (“FCA”) liability if it is determined that a claimant has knowingly certified false compliance. 31 USC § 3729(a)(1). The DOJ has recognized the vital role that private citizens with knowledge of government fraud can play in pursuing legal action against the FCA on behalf of the United States and sharing in any recovery. Borrowers may understandably be apprehensive about these certifications due to ambiguous terms and conditions.

Fortunately for fund recipients, as mentioned earlier, acting “knowingly” means that a defendant must have acted with “actual knowledge of the information” or in “willful ignorance” or “reckless disregard”. of the “truth or falsity of the information”. .” 31 USC § 3729(b)(1). If a recipient’s conduct is based on a reasonable interpretation of an ambiguous requirement in the absence of official government direction, such conduct will not satisfy the FCA scientist requirement.Therefore, grantees and their attorneys can mitigate the risk of FCA liability by actively reviewing all program rules, monitoring official government guidance, and developing a reasonable rationale for their interpretation of any ambiguous funding requirements.

The relevant question for borrowers is whether the DOJ could retroactively interpret the withholding of COVID-19 funds by some companies as “withholding of an overpayment” – that is, funds that the company did not have the right to retain given her economic needs at the time she submitted her loan application. Such an interpretation could subject companies to liability for “reverse misrepresentation” under the FCA.

The ability of the PRAC and the Inspector General community to combat fraud in pandemic-related expenditures could be further strengthened by reforms outlined in the pending Administrative False Claims Act of 2021, SB 2429. in the US Senate. The bill would increase the maximum amount of a fraud claim that can be administratively processed by the government from $150,000 to $1,000,000, significantly expanding the scope of loans reviewed.

Broadly, best practices for mitigating FCA liability include:

  • Follow and understand the obligations created by legislation enacted in response to the COVID-19 pandemic;

  • Document compliance with new regulations and legislation and the basis for all required certifications;

  • Document all communications to and from the government and its agents regarding compliance; and

  • Implement and evaluate a comprehensive compliance program, which should include specific policies, procedures and training for legal counsel and compliance officers.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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