Massachusetts U.S. Attorney's Office Joins with Special Inspector General to Investigate CARES Act Fraud

Foley Hoag LLP - White Collar Law & Investigations

The U.S. Attorney’s Office in Massachusetts is ramping up its effort to combat fraud related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) through an agreement to work with the Office of the Special Inspector General for Pandemic Recovery (“SIGPR”), an office established by the CARES Act to audit and investigate loans and investments made under the CARES Act.

The two offices entered into a Memorandum of Understanding (“MOU”) to cooperate on the investigation and prosecution of pandemic relief fraud, including by providing criminal and civil Assistant U.S. Attorneys to support SIGPR investigations.  This paves the way for SIGPR to bring its cases to the District of Massachusetts, and could make Massachusetts a center of CARES Act enforcement.  A similar MOU has been entered into by the U.S. Attorney’s Office for the Eastern District of Virginia.

The MOU with the USAO in Massachusetts sets forth objectives that extend beyond simply fostering cooperation.  The offices will focus on “organized criminal activity,” and investigations will not be strictly limited to CARES Act fraud but will expressly try to connect CARES Act fraud to “larger schemes and related unlawful activity.”  Pursuing such broad (and potentially high-profile) investigations would serve another objective set forth in the MOU: to deter fraud by “increasing awareness” of successful enforcement actions.

U.S. Attorney Andrew E. Lelling has been vocal since the beginning of the pandemic that his office was making COVID-19-related fraud an enforcement priority. The U.S. Attorney’s Office created a position of COVID-19 Fraud Coordinator and has brought charges against individuals for fraud related to Pandemic Unemployment Assistance and the Paycheck Protection Program (“PPP”).  The agreement with SIGPR demonstrates that the U.S. Attorney’s Office will continue to commit significant resources to investigating the distribution and use of CARES ACT funds.

Large numbers of businesses and individuals have benefited from the CARES Act’s multifaceted relief.  In Massachusetts alone, over 18,000 businesses have received PPP loans of more than $150,000, not to mention the additional businesses that received smaller PPP loans or took advantage of the CARES Act’s employee retention credit.  The U.S. Attorney’s Office in Massachusetts (now in conjunction with SIGPR) is only going to increase its scrutiny of these payments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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