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Two weeks ago, President Biden signed two laws extending the statute of limitations for civil and criminal actions for fraud involving the Paycheck Protection Program (PPP) and Economic Disaster Loans (EIDL) to ten years. ).1
Key points to remember
- The extension of the statute of limitations gives the U.S. Department of Justice (DOJ) and its law enforcement partners more time to investigate and prosecute COVID-19-related fraud.
- The extension highlights the administration’s clear and continued focus on COVID-19 relief fraud enforcement.
- Companies must prepare by investing in strong compliance programs and conducting whistleblower investigations in a timely manner.
As explained in previous Client Alerts, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided early relief against COVID-19 by authorizing loan programs such as PPP and the EIDL program.2The PPP provided small businesses with government-backed loans that could be forgiven as long as the proceeds were used for payroll and other eligible expenses.3The EIDL program provided low-interest, deferrable loans to small businesses experiencing a temporary loss of revenue.4 Although numbers vary, the US Secret Service predicts that individuals, organized groups and corporations have improperly misappropriated nearly $100 billion in pandemic relief funds.5
The extension of the statute of limitations for civil and criminal fraud actions related to the PPP and the EIDL program follows a series of concerted efforts to combat COVID-19 relief fraud. These efforts began shortly after the CARES Act was passed when the DOJ pledged to act aggressively. repression of fraud related to COVID-19.6In May 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to bring together resources and information sharing among federal agencies.sevenIn March 2022, the DOJ announced the appointment of the COVID-19 Fraud Enforcement Director and the creation of Strike Teams across the country.8
With resources already in place, extending the statute of limitations gives the DOJ more time to pursue COVID-19 relief fraud. And the DOJ has no shortage of leads. A recent report from the Small Business Administration (SBA) shows that the automated SBA system flagged nearly 40% of all PPP loans in 2020 for potential noncompliance with program criteria, requiring a manual review of each flagged loan.9Extending the statute of limitations will allow the DOJ to leverage its resources and investigate these leads, as well as other complex, large-scale fraud schemes. fraud, allowing companies to create robust compliance programs to combat wrongdoing and risk from past conduct.
1. Signed invoices: HR 7334 and HR 7352available at https://www.whitehouse.gov/briefing-room/legislation/2022/08/05/bills-signed-hr-7334-and-hr-7352/.
2. See Enforcement Against COVID-19 Related Fraud: Second Anniversary Updateavailable at https://www.mofo.com/resources/insights/220315-enforcement-against-covid-19-related-fraud#_ftn21;
DOJ Enforcement Actions Involving COVID-19 Relief Fraud: An Updateavailable at https://www.mofo.com/resources/insights/210310-doj-enforcement-actions-covid-19-relief-fraud-update.html;
DOJ Enforcement Actions Involving COVID-19 Relief Fraud: An Update (September 2021)available at https://www.mofo.com/resources/insights/210910-doj-enforcement-actions.html.
3. Paycheck Protection Programavailable at https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program
4. COVID-19 Economic Disaster Loanavailable at https://www.sba.gov/funding-programs/loans/covid-19-relief-options/eidl.
5. See Criminals stole nearly $100 billion in Covid relief funds, Secret Service saysavailable at https://www.cnbc.com/2021/12/21/criminals-have-stolen-nearly-100-billion-in-6.
Justice Department predicts coronavirus stimulus will be a major target for fraudavailable at https://www.justice.gov/ag/page/file/1258676/download.
seven. Attorney General Announces Task Force to Combat COVID-19 Fraudavailable at https://www.justice.gov/opa/pr/attorney-general-announces-task-force-combat-covid-19-fraud.
8. Department of Justice Announces Director of COVID-19 Fraud Enforcement, https://www.justice.gov/opa/pr/justice-department-announces-director-covid-19-fraud-enforcement.
9. SBA Paycheck Protection Program Loan Review Processavailable at https://www.sba.gov/sites/default/files/2022-02/SBA%20OIG%20Report%2022-09.pdf?utm_medium=email&utm_source=govdelivery.
Due to the generality of this update, the information provided here may not be applicable in all situations and should not be applied without specific legal advice based on particular situations.
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