US Attorneys Announce MOUs with Special Inspector General for Pandemic Recovery
Although most well known as a $2.2 trillion economic relief package for American citizens and business alike, the CARES Act also contains provisions for the proper stewardship and distribution of those funds. One such oversight tool was the creation of the Special Inspector General for Pandemic Recovery (SIGPR), whose job is to audit and investigate the Treasury Department's distribution of CARES Act funds. To fill that role, the President nominated and the Senate confirmed Brian Miller, who previously served as an Assistant US Attorney in the Eastern District of Virginia (EDVA), as the Inspector General for the General Services Administration, and most recently as an attorney in the White House Counsel's office.
On July 17, Miller formally joined forces with his alma mater, the US Attorney's Office for EDVA, to crack down on alleged fraud involving COVID-19 stimulus and relief funds. As announced by Miller and US Attorney Zachary Terwilliger, the two offices have entered into a Memorandum of Understanding (MOU), pursuant to which they intend to cooperate in the investigation and prosecution of matters involving the making, purchase, management, and sale of loans, loan guarantees, and other investments made by the Secretary of the Treasury under the CARES Act. Under the MOU, Terwilliger has promised to designate two EDVA AUSAs to serve as liaisons to the offices' joint efforts, and also to provide logistical and audit support for the SIGPR's enforcement efforts, including criminal and civil subpoenas.
The EDVA MOU appears to be part of a trend toward regional cooperation between the SIGPR and selected US Attorneys. On July 28, the US Attorney's Office for Massachusetts announced its own MOU with the SIGPR. And just today, the US Attorney's Office for the Northern District of Ohio announced a similar MOU, under which one of its AUSAs "will be assigned specifically to SIGPR investigations and prosecutions."
Such formalized enforcement partnerships are rare (if not unheard of) among US Attorney's Offices and Inspectors General, which suggests that the SIGPR may intend to bring the lion's share of his enforcement cases to EDVA and other US Attorney's Offices with which he has MOUs. If so, that could potentially benefit enforcement officials and affected industries by bringing a more uniform and coherent approach to the vetting and pursuit of potential cases than if the SIGPR's enforcement matters were divvied up among a larger number of US Attorney's Offices across the nation. On the other hand, certain reported provisions of the MOU also suggest that the participation of these three US Attorney's Offices indicates a willingness to take cases that others might otherwise deem too small. For example, the EDVA MOU outlines four objectives that could portend both scenarios:
1) Providing "a coordinated response to CARES Act funding fraud, with an emphasis on organized criminal activity, as well as criminal and civil fraud affecting federal money, vulnerable victims, and fraud recidivists";
2) Facilitating "legal process, case intake, and swift prosecution of CARES Act-related fraud";
3) Linking "isolated CARES Act-related complaints with larger schemes and related unlawful activity"; and
4) Deterring "future CARES Act funding fraud through an enhanced awareness of successful criminal prosecution and civil enforcement against individuals and companies involved in CARES-related financial fraud."
Our partner John Nassikas, also a former EDVA AUSA, offered his thoughts on the EDVA MOU: "My former colleague Brian Miller is a highly respected lawyer and an experienced Inspector General. You can be sure that he, US Attorney Terwilliger, and their respective teams will be zealous and effective in their efforts to detect, punish, and deter fraudulent use of government funds. With these two offices minding the store in the DC region and beyond, companies and individuals can expect a close watch on how they are handling CARES Act stimulus and relief money."
Indeed, the USAO for EDVA is already prosecuting multiple cases of fraud related to CARES Act loans, including a number obtained through the Paycheck Protection Program. Given the newly formalized EDVA-SIGPR cooperation, businesses and individuals should expect enhanced EDVA scrutiny as the government seeks to pursue fraud via criminal prosecution and civil enforcement actions.
Of course, other US Attorney's Offices remain free to bring their own pandemic-related cases, and don't need to rely on the SIGPR to do so. Other investigative agencies—such as the FBI and the IRS—may also investigate financial transactions related to CARES Act funding.
Regardless of where they arise, Arnold & Porter's White Collar Defense and Investigations Group actively litigates criminal and civil matters in the United States District Court for the Eastern District of Virginia, and in federal and state courts across the country. If you have additional questions on how to ensure your business is CARES Act-compliant, please see our Coronavirus Task Force's webpage and related advisories, or contact us for more information.