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As COVID-19 Stimulus Funds Flow, DOJ Puts Fraudsters on Notice and Calls Whistleblowers “Essential”

Posted  April 2, 2021

On March 11th, President Biden signed The American Rescue Plan Act of 2021 (ARPA), a sweeping economic stimulus plan that will pump $1.9 trillion into the US economy. In addition to direct relief to Americans, ARPA includes record-setting government spending in numerous areas to speed recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession.

As we have previously written, with such massive government spending, there are new opportunities for fraud.  Acknowledging the continued lure of easy money to fraudsters, last week the DOJ issued a press release highlighting their ongoing efforts to root out and combat fraud related to COVID-19 financial rescue programs.  DOJ’s statement is an important reminder to fraudsters:  DOJ is deploying significant resources in its multifaceted and multi-district approach to coronavirus fraud enforcement.

DOJ’s statement, coming on the heels of passage of ARPA, should be read both as a warning to fraudsters, and an invitation to whistleblowers to help the government root out such fraud.  Whistleblowers serve as a crucial line of defense against fraud, helping to ensure that stimulus cash goes into the pockets of individuals and businesses who need it most.

DOJ Touts Action Against COVID-19 Fraud

As we enter the pandemic’s second year, it is no surprise that DOJ is emphasizing fraud related to the coronavirus pandemic as an enforcement priority – and highlighting its successes in combating such fraud.

The March 26th announcement by the Department of Justice focuses on its efforts regarding fraud in several programs and initiatives, including:

  • The Paycheck Protection Program (PPP);
  • Economic Injury Disaster Loans (EIDL), which are long-term, low-interest SBA loans;
  • Cyber-enabled fraud, including fraudulent and mislabeled COVID-19 treatments and sales of counterfeit pharmaceuticals;
  • Fraud involving the sale of personal protective equipment (PPE); and
  • Vaccine-related fraud

DOJ reports that over the past year it has brought criminal charges against 474 defendants based on COVID-related schemes that collectively represent attempts to fraudulently obtain over $569 million in taxpayers’ funds. In addition, DOJ emphasized the wide range of civil enforcement actions it has brought, including actions under the False Claims Act and FIRREA.

New Spending under ARPA Expands Opportunities for Fraud

NDAA money laundering AML whistleblower reward provisionsThe newest round of stimulus cash will certainly draw the interest of those seeking defraud the programs. Along with funding for individuals and state and local governments, the $1.9 trillion package provides the following hefty sums—all of which are ripe for abuse, as has been proven by fraudsters over the past year.

  • $130 billion for K-12 schools and $40 billion for colleges and universities, which must be used for specified purposes;
  • Over $100 billion for vaccine distribution, COVID-19 testing, and other coronavirus public health measures;
  • $10 billion in spending under the Defense Production act for PPE and other medical equipment;
  • $7 billion in additional PPP funds, now extended to certain previously-excluded non-profit organizations;
  • $15 billion for additional EIDLs;
  • $28.6 billion for restaurants and bars for payroll and other expenses
  • Nearly $60 billion to transportation funding; and
  • Nearly $2 billion for cybersecurity

ARPA was signed into law to provide significant financial relief, fast. The need in 2020 for expediency in rescue funds distribution proved costly to taxpayers, however, leading to more than one million referrals to the IG for potentially fraudulent loans. The SBA announced an eye-popping 19,500% increase in hotline complaints (that’s a LOT of whistleblowers); over 200 open OIG investigations over EIDL and UI fraud, and over $626 million seized from EIDL and PPP fraud.  With the significant expansion of spending under ARPA, we can expect that opportunities for fraud will also expand.

How Whistleblowers can Report Fraud in COVID-19 Spending and Programs

Fraud on government programs affects all Americans, depleting funds and diverting safety net cash from those who need it most. Fortunately, there are laws that encourage and reward individuals with knowledge of fraud to come forward.  Those who blow the whistle on such fraud may be eligible for a reward under the False Claims Act or other whistleblower reward programs.

DOJ’s statement acknowledges the importance of whistleblowers.  In describing its enforcement efforts regarding COVID-19 fraud.  DOJ noted:

Whistleblower complaints have been on the rise as unscrupulous actors take advantage of vulnerabilities created by the COVID-19 pandemic and the new government programs disbursing federal relief, and whistleblower cases will continue to be an essential source of new leads to help root out the misuse and abuse of taxpayer funds.

The whistleblower team at Constantine Cannon knows how important whistleblowers are, and has decades of experience representing whistleblowers.  The Department of Justice is right: whistleblowers are essential.

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Tagged in: COVID-19, FCA Federal, FIRREA, Government Loan Programs, Government Procurement Fraud, Government Programs Fraud, Importance of Whistleblowers,