In a press release issued on March 26, 2021 (“Press Release”), the Department of Justice (“DOJ”) announced that immediately after Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the DOJ created an elaborate network to protect the integrity of the $2.2 billion economic relief package. Working with myriad enforcement partners, the DOJ to date has charged nearly 500 individuals with crimes related to fraud schemes targeting the Paycheck Protection Program (“PPP”), Economic Injury Disaster Loan (“EIDL”) program and Unemployment Insurance (“UI”) programs, as well as various acts of consumer fraud that exploited the fear and desperation of private citizens during the global pandemic. Efforts to uncover health care fraud are also well underway, headed by HHS.

According to the Press Release, a rise in whistleblower complaints has been “an essential source of new leads” fueling the DOJ’s rapid and effective nationwide response.

Thus far, the DOJ has uncovered PPP fraud perpetrated by over 120 defendants, including physicians, whose schemes included inflating payroll expenses to obtain larger loans, and applying for loans for non-existent, defunct or shell corporations falsely claiming significant payroll obligations. In most cases, the fraudulently obtained funding was used to purchase real estate, vehicles, jewelry and other luxury consumer items. The Press Release further confirms that the DOJ has made use of the federal False Claims Act as its “primary civil tool” to assist in these recoveries.

The Press Release indicates that, just to date, the DOJ has already seized $580 million in funds that were diverted from the EIDL program to fraudsters “applying for EIDL advances and loans on behalf of ineligible newly-created, shell or non-existent businesses” and using the funds for illegal purposes. Over 140 defendants have also been charged with federal offenses related to UI fraud, from ineligible individuals like prison inmates to members of international organized criminal groups that used stolen identities to file for UI benefits. To help combat UI fraud, DOJ is hiring Assistant U.S. Attorneys in multiple offices across the country to prosecute individuals perpetrating this fraud.

According to the Press Release, the DOJ’s International Computer Hacking and Intellectual Property program has been leading an international effort to combat online and intellectual property fraud, resulting in significant seizures of mislabeled and counterfeit medicines, medical supplies and other illicit goods. The DOJ has additionally shut down online scams selling fake and unlawful COVID-19 treatments and cures, “including industrial bleach, ozone gas, vitamin supplements and colloidal silver ointments,” as well as pesticides. Some of those scammers have been health care providers and others posing as health care providers. The DOJ partnered with HHS to distribute medical supplies confiscated from price gougers, and is now working to prevent and deter vaccine-related fraud.

The DOJ credits the “unprecedented pace and tempo of these efforts” to a wide range of enforcement partners, including HHS, whose Office of Inspector General (“OIG”) has prioritized the investigation of COVID-19 fraud scams billed to federal health programs. Since the pandemic took root early last spring, the OIG has added a number of audits to its work plan, for example, targeting home health services provided as telehealth, contracts awarded for COVID-19 testing, Medicare Part B laboratory services and telehealth services, inpatient discharges with COVID-19 diagnoses, COVID-19 add-on lab testing, general and targeted distributions from Provider Relief Funds and compliance with Provider Relief Fund reporting requirements, among others. The DOJ remarked late last year that it expects “the inevitable fraud schemes” to include false representations regarding eligibility, misuse of program funds and false certifications of compliance with program requirements. The OIG’s audit results are expected to begin to roll out soon, and any related fraud prosecutions by the DOJ will likely follow.

Practical Takeaways

The DOJ has obviously embarked on an aggressive enforcement initiative regarding individuals and entities that have tried to take advantage of the current pandemic. While many of the examples referred to above could be considered clear-cut fraud, it may be only a matter of time until the enforcement agencies move into more “gray” areas regarding the disbursement of CARES Act subsidies. Once that occurs, the DOJ could once again turn to the FCA to aid in those efforts. Recipients of CARES Act subsidies in the health care arena should therefore be prepared for further government scrutiny in the near future regarding entitlement to those funds. To that end, recipient of CARES Act subsidies should consider their ongoing compliance obligations associated with those funds and implement timely and appropriate auditing and monitoring to ensure compliance with the receipt and use of those subsidies.