The Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides unprecedented economic relief to businesses, including many that never before received government support. However, those businesses may not appreciate that the benefits they receive are not risk-free. If enforcement efforts following the 2008 financial crisis are any guide, the government will aggressively enforce civil and criminal laws for years to come against those who commit fraud and abuse the CARES Act funds.
Potential Liability
CARES Act applicants are required to make various certifications regarding their eligibility for relief. These certifications subject the applicant to the civil False Claims Act (FCA). The FCA broadly targets those who submit or cause others to submit false claims to the government to obtain money or property.
The FCA allows the government and individual whistleblowers (called relators, who receive a portion of any recovered funds) to bring civil claims against alleged violators. The government may recover penalties of up to $23,331 for each false statement, plus damages equal to three times the amount of the false claim and the fees and costs of bringing the case. Violators also may be suspended or excluded from doing business with or receiving financial assistance from the government for a period of time.
Those who violate the civil FCA may also face criminal charges under one or more federal criminal statutes, including various statutes criminalizing fraudulent or false statements in connection with loan applications and federal programs, the mail or wire fraud statutes, and the general false statements statute. Defendants convicted under these statutes may be sentenced to prison and/or fines.
Mitigating Risk
To limit risk associated with receiving CARES Act funds, consider implementing the following best practices:
Warner’s White Collar Criminal Defense and Investigations Practice Group is prepared to help you navigate these issues. If you have any questions, please contact Brian Lennon, Madelaine Lane, Charlie Quigg or Katelyn Crysler.
