Government Funds under the CARES Act Come With Oversight and Enforcement

Congress has set aside $500 billion in the CARES Act to help certain hard-hit businesses during the coronavirus pandemic, but those funds come with a special inspector general whose oversight may result in civil and criminal enforcement actions similar to that seen in the aftermath of TARP and the 2008 financial crisis.

In light of the many requirements that come with the loans, employers will be required to make a host of certifications and provide financial statements during the application process and after funding, giving rise to potential False Claims Act violations and triggering other government enforcement actions.  The special inspector general will have subpoena power to investigate the veracity and accuracy of applicants’ submission materials and subsequent expenditure of the funds.  In addition, the special inspector general will participate in a joint committee with numerous federal agencies to conduct investigations into False Claims Act violations.

Accordingly, applicants must take caution about what information and documents they submit to the government and to use the funds consistent with the representations made to the government, because an applicant’s submission materials likely amount to material statements for purposes of the False Claims Act, and false statements upon which the government relies to approve and disburse funds can expose an applicant to liability, including treble damages.