September 21, 2021

Volume XI, Number 264

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September 20, 2021

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U.S. Department of Justice Reports on Heightened Enforcement Activities Against COVID-19 Related Fraud

On March 26, 2021, the U.S. Department of Justice (“DOJ”) reported on the agency’s heightened criminal and civil enforcement activities in connection with COVID-19-related fraud.[1]  As of that date, DOJ had publicly charged 474 defendants with criminal offenses in connection with COVID-19-related schemes across 56 federal districts to recover more than $569 million in U.S. government funds.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law, enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  The CARES Act provides relief through a number of different programs, including the Paycheck Protection Program (“PPP”), Economic Injury Disaster Loans (“EIDL”), the Provider Relief Fund, and Unemployment Insurance (“UI”).[2]  With the promulgation of these programs, DOJ has ramped up efforts in identifying and investigating fraud to protect the integrity of the $2.2 trillion in taxpayer funds appropriated under the CARES Act.

Criminal Enforcement Activities

The majority of fraud cases brought by DOJ have originated in the Criminal Division’s Fraud Section, accounting for at least 120 defendants charged with PPP fraud.[3]  The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent.  PPP loan proceeds must be used by businesses for payroll costs, interest on mortgages, rent, and utilities.  Most of these defendants are facing charges for allegedly misappropriating loan payments for prohibited purposes, such as luxury purchases, while another significant portion are charged in connection with allegedly inflating payroll expenses in order to obtain larger PPP loans.[4]

DOJ also announced that it has seized over $580 million in fraudulent application proceeds in connection with the EIDL program, which is designed to provide loans to small businesses and agricultural and nonprofit entities.  DOJ’s primary concerns with respect to this program have related to fraudulent applications for EIDL advances and loans on behalf of shell or nonexistent businesses.

In response to a rise in UI fraud schemes, DOJ has established the National Unemployment Insurance Fraud Task Force to investigate domestic and international organized crime groups targeting unemployment funds through the use of identity theft.  Since the start of the pandemic, over 140 defendants have been publicly charged with federal offenses related to UI fraud.[5]

Civil Enforcement Activities

As it relates to civil enforcement, DOJ continues to combat fraud in connection with the CARES Act and other government relief programs using its primary tool, the federal False Claims Act (“FCA”), which allows the U.S. government to recover damages and penalties against those who submit false or fraudulent claims for payment to government-sponsored health care programs.

For instance, as we previously covered here, on January 12, 2021, the U.S. Attorney’s Office for the Eastern District of California announced the first civil settlement to resolve allegations of fraud involving PPP funds.[6]  In that matter, SlideBelts Inc. and its president/CEO agreed to pay the United States a combined $100,000 in damages and penalties for alleged violations of the FCA and the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”).  Similar to the FCA’s penalties provision, the FIRREA allows the government to impose civil penalties for violations of enumerated federal criminal statutes, which include fraud against federally-financed institutions.[7]

DOJ has also announced that it has prioritized supporting foreign counterparts in investigating international fraud through the International Computer Hacking and Intellectual Property (“ICHIP”) program.  The ICHIP program has assisted foreign counterparts in combating cyber and intellectual property crimes, including the marketing of fraudulent COVID-19 treatments and cures.  DOJ has similarly brought actions to combat these types of cybercrimes domestically against individuals selling false or unapproved products claiming to treat or prevent COVID-19 infections.  DOJ has partnered with various agencies to shutter hundreds of fraudulent websites promoting consumer scams and has taken action to disrupt the networks supporting such schemes.

Notwithstanding DOJ’s historical enforcement activity during the pandemic, DOJ has signaled its continued commitment to rigorous enforcement of COVID-19-related fraud, and we anticipate a continued increase in criminal and civil enforcement activity and investigations in the coming months.

[1] Justice Department Takes Action Against COVID-19 Fraud, Press Release (March 26, 2021), https://www.justice.gov/opa/pr/justice-department-takes-action-against-covid-19-fraud.

[2] The CARES Act, Pub. L. No. 116-136 (2020).

[3] Id.

[4] Texas Man Pleads Guilty to $24 Million COVID-19 Relief Fraud Scheme, Press Release (March 24, 2021), https://www.justice.gov/opa/pr/texas-man-pleads-guilty-24-million-covid-relief-fraud-scheme; Four Additional Members of Los Angeles-Based Fraud Ring Indicted for Exploiting COVID-Relief Programs, Press Release (March 12, 2021), https://www.justice.gov/opa/pr/four-additional-members-los-angeles-based-fraud-ring-indicted-exploiting-covid-relief.

[5] Justice Department Takes Action Against COVID-19 Fraud, Press Release (March 26, 2021), https://www.justice.gov/opa/pr/justice-department-takes-action-against-covid-19-fraud.

[6] Eastern District of California Obtains Nation’s First Civil Settlement for Fraud on Cares Act Paycheck Protection Program, Press Release (January 12, 2021), https://www.justice.gov/usao-edca/pr/eastern-district-california-obtains-nation-s-first-civil-settlement-fraud-cares-act.

[7] Justice Department Takes Action Against COVID-19 Fraud, Press Release (March 26, 2021), https://www.justice.gov/opa/pr/justice-department-takes-action-against-covid-19-fraud.

©2021 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XI, Number 109
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About this Author

George Breen, Health Care Attorney, Epstein Becker Law Firm
Member

GEORGE B. BREEN is a Member of the Firm in the Health Care and Life Sciences and Litigation practices. He is Chair of the firm's National Health Care and Life Sciences Practice Steering Committee and a member of the firm's Board of Directors.

Mr. Breen:

  • Defends clients undergoing investigation for health care fraud by the Department of Justice, the Department of Health and Human Services Office of the Inspector General, and other state and federal governmental authorities
  • ...
202-861-1823
Erica F. Sibley, Epstein Becker, Long term acute care hospitals lawyer, Healthcare Attorney
Associate

ERICA F. SIBLEY is an Associate in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green. She represents a diverse group of health care providers, including, but not limited to, long-term acute care hospitals, skilled nursing facilities, institutional pharmacies, home care agencies, adult day care facilities, physician groups, and various other health care facilities and providers.

202-861-1867
Daniel C. Fundakowski Pharmaceutical and Healthcare Attorney Epstein, Becker & Green Law Firm
Senior Counsel

DANIEL C. FUNDAKOWSKI is a Senior Counsel in the Health Care & Life Sciences and Litigation & Business Disputes practices in the Washington, DC, office of Epstein Becker Green. His practice focuses on representing leading pharmaceutical and device manufacturers, retail pharmacy chains, compounding pharmacies, academic medical centers, skilled nursing facilities, and other institutional providers in health care regulatory and litigation matters.

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Mr. Fundakowski’s...

202-861-1826
Elizabeth A. Harris Health Care Attorney Epstein Becker & Green Washington, DC
Associate

Elizabeth A. Harris is an Associate in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green. She focuses her practice on health care government investigations and litigation matters.

Specifically, Ms. Harris:

  • Provides assistance to health care clients undergoing inquiries, audits, or investigations by the U.S. Department of Justice, the U.S. Department of Health and Human Services' Office of Inspector General, and other state and federal government authorities
  • Represents clients in litigation arising...
202-861-1873
Law Clerk - Admission Pending

Lauren Petrin is a Law Clerk - Admission Pending - in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green.

202-861-1816
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