Client Update – Covid 19 – Anticipate Intense Post- COVID-19 Crisis Government Investigations

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The federal government has taken several direct and indirect measures through legislation and regulation to assist those most vulnerable to the economic effects of the coronavirus pandemic, including small businesses, the workforce, health care providers, and patients.

In particular, under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the $349 billion Paycheck Protection Loan Program was established, enabling businesses nationwide to obtain forgivable debt (with certain limitations) through the Small Business Administration for use in retaining and rehiring workers and weathering the coronavirus pandemic. Additionally, $100 billion was appropriated for a Public Health and Social Services Emergency Fund to reimburse eligible health care providers (including public entities, Medicare or Medicaid enrolled supplier and providers, and certain specified for-profit and not for-profit entities) diagnosing, testing or caring for individuals with possible or actual cases of COVID-19, for health care related expenses or lost revenues (in each case, not otherwise reimbursable) that are attributable to the coronavirus.

In order to participate under the Paycheck Protection Loan Program and Public Health and Social Services Emergency Fund, applicants are required to make certain attestations and certifications and to file certain documentation. These requirements are there to mitigate against potential fraud against the federal government.

Significantly, once the COVID-19 crisis stabilizes to a certain extent, the Department of Justice is expected to intensely focus on investigating instances of coronavirus-related fraud perpetrated on the federal government under each of these federal programs, as well as other governmental programs. This will primarily be done through the False Claims Act (“FCA”), 31 U.S.C. §3729 et seq.

In general, the FCA imposes liability on those (and their conspirators) who knowingly submit a false or fraudulent claim to the government for payment or approval, or knowingly make a false record or statement material to a false or fraudulent claim to get a claim paid by the federal government. An FCA violation results in a civil penalties (linked to inflation) and treble damages. The FCA also permits private individuals to sue on behalf of the federal government (referred to as a qui tam action). Likely areas of investigation would include a review of information submitted on eligibility; payroll cost calculation; use of loan proceeds; loan forgiveness under the Payroll Protection Loan Program and information submitted on eligibility; diagnosis and procedure; services provided; medical necessity; and billing for testing, treatment and medical supplies under the Public Health and Social Emergency Fund.

Accordingly, companies should proactively take extreme care to comply with the legal and regulatory requirements under each of these programs, implementing appropriate record keeping and internal controls and conducting regular reviews and audits to ensure legal and regulatory compliance, all of which are crucial from a defense perspective should an entity become subject to government inquiry, investigation or an FCA action.

The attorneys at DarrowEverett LLP are ready to assist you as you navigate these challenging times brought upon us all by the COVID-19 crisis, including representation in connection with governmental inquiries or investigations and assessing possible exposure under the False Claims Act or other laws.