As Officials Crack Down on COVID-19 Complaints and Relief Fund Misuse, How Can Businesses Stay Aboveboard?

September 28, 2020

As predicted in March, there has been a surge in white-collar cases following the $2.2 trillion coronavirus relief bill. Prosecutors claim to have found millions of dollars in misused funds. Also, workers have filed thousands of virus-related complaints with the Occupational Safety and Health Administration (OSHA), and civil suits are likely on the horizon.

The pandemic—and relief efforts aimed at fighting its effects—could expose companies to increased liability. But they can take steps to protect themselves.

OSHA Complaints

OSHA has reported more than 2,300 workplace complaints related to COVID-19. Disputes about the application of OSHA standards may expose employers to complaints, and violations can be damaging and costly. To reduce risk, companies should be vigilant about following OSHA standards for:

Businesses must also meet the “General Duty Clause” by providing a workplace that is free from recognized hazards.

Antitrust Violations

The Department of Justice (DOJ) and the FBI intend to pursue civil and criminal violations of antitrust laws related to COVID-19, including agreements to control:

  • Wages
  • Prices
  • Output
  • Quality
  • Bids
  • Markets

The Antitrust Division and the Federal Trade Commission (FTC) recognize that, in some cases, collaborative activities to improve health and safety responses to COVID-19 will be viewed more favorably. These include:

  • Collaborating on research, development and technical know-how
  • Joint purchasing agreements among health care providers
  • Private industry meetings with government officials to discuss COVID-19 response strategies

To stay in line with government policies, businesses can ask the Antitrust Division and FTC to review proposed COVID-19-related conduct. These agencies have promised to expedite reviews for proposed conduct and to resolve public health and safety requests within seven days.

CARES Act Loan Misuse

These federal programs released billions of dollars to keep businesses afloat during the pandemic:

  • The Small Business Administration’s Paycheck Protection Program (PPP) helps businesses keep their workforce employed during the pandemic.
  • Economic Injury Disaster Loans provide up to $10,000 to eligible businesses that does not need to be repaid.
  • The Federal Reserve’s Main Street Lending Program assists small- and mid-sized businesses.

Criminal Investigations

The PPP is the largest source of criminal investigations and prosecutions. Federal officials are looking into:

  • False representations made on loan applications
  • Improper use of funds
  • Misrepresentations when applying for loan forgiveness

The DOJ and U.S. attorneys’ offices have brought dozens of relief-related fraud cases with no slowdown in sight.

Civil Suits

Under the False Claims Act (FCA), whistleblowers can file civil suits on behalf of the government against those who knowingly defraud the federal government. The threshold to prove liability is low, and damages can be considerable. Since 1986, the government has recovered $62 billion from FCA suits.

 If you use these programs, how can you reduce your risk for lawsuits?

  • When applying for relief funds:
  • Make sure all information given to the federal government, including staff and revenue data, can be confirmed.
  • Certify that you meet all eligibility requirements.
  • Make supporting documentation available immediately upon request.
  • Once you have the funds, comply with the certifications you made about receipt and disbursement of the aid when you applied.
  • Make reasonable attempts to follow all available guidance.

The DOJ will not go after those who make accidental technical mistakes or honestly misunderstand the rules. But applicants that knowingly violate requirements or make false representations could be exposed to civil and criminal liability. Businesses should make sure their internal reporting and record-keeping systems are sufficient to comply with government standards and relief program rules.

Please contact A. Brian Albritton, Walt Green or any other member of Phelps’ White Collar Defense or False Claims Act teams if you have questions or need compliance advice and guidance. For more information related to COVID-19, see Phelps’ COVID-19: Client Resource Portal.