Special Inspector General for Pandemic Recovery MOUs: A Roadmap to CARES Act Enforcement

Businesses across the country have wondered how the new Special Inspector General for Pandemic Recovery (SIGPR) will enforce the CARES Act’s loan requirements, especially with the large number of loan and forgiveness applications. Until recently, the answer was unclear. Press releases have announced Memoranda of Understanding (MOU) between SIGPR and three U.S. Attorney’s Offices to collaborate on investigating and prosecuting CARES Act violations. With this strengthened enforcement model being put in place, CARES Act loan recipients need to ensure their eligibility for loan forgiveness and double-check their documentation of that eligibility.

SIGPR has entered into MOUs with the U.S. Attorney’s Offices for the Eastern District of Virginia, the District of Massachusetts, and the Northern District of Ohio, according to recent press releases. SIGPR has not made the MOUs themselves publicly available but the press releases indicate that all three MOUs are substantively similar and share four objectives: (1) coordinating the Government’s response to CARES Act funding fraud, (2) streamlining prosecution of that fraud, (3) effectively associating CARES Act funding fraud with other unlawful schemes, and (4) deterring fraud by increasing awareness of successful enforcement. And they all contemplate both criminal prosecutions and civil enforcement actions. See E.D. Va. U.S Attorney’s Office July 17, 2020 Press Release; D. Mass. U.S. Attorney’s Office July 28, 2020 Press Release; N.D. Ohio U.S. Attorney’s Office August 4, 2020 Press Release.

Now that SIGPR has entered into these three MOUs, it seems like SIGPR is patterning its enforcement model after the Special Inspector General for Troubled Asset Relief Program (SIGTARP), which was created to investigate and prosecute violations relating to the recovery package passed in response to the 2008 financial crisis and recession. Just like SIGTARP, Congress created a Special Inspector General to enforce the CARES Act. Also like SIGTARP, Congress gave SIGPR the authority to subpoena documents but not to require testimony. See CARES Act § 4018(d)(1) (granting SIGPR the same authority as other “Special Inspector General[s]” under the IG Act); IG Act § 6(a)(4), (5) (granting Inspector Generals the power to subpoena documents but only take voluntary testimony).

Now SIGPR is following SIGTARP’s playbook by entering into MOUs with certain U.S. Attorneys’ Offices dispersed in different geographic areas around the country to divide up the enforcement work in collaboration with the U.S. Department of Justice. If SIGPR continues to follow that playbook, we expect to potentially see some more MOUs with U.S Attorneys’ Offices in other regions, like the West Coast, and for SIGPR to make us of private contractors to help with the review of loan files to identify those that warrant further investigation. With the roadmap to an efficient enforcement mechanism now laid out, CARES Act recipients should plan for any potential enforcement actions by ensuring their eligibility for loan forgiveness and properly documenting that eligibility.

If you have any questions, please contact Jonathan Feld (312-627-5680), Andrew VanEgmond (734-214-7603) or your relationship contact at Dykema.

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