Coronavirus Enforcement Trends

Monday, September 14, 2020

Sheppard Mullin’s COVID-19 Oversight and Enforcement Response Crew has tracked civil and felony federal enforcement actions across the nation because the passage of the Coronavirus Support, Aid, and Financial Safety Act (the “CARES Act”) in March 2020. New circumstances are famous in our COVID-19 Enforcement Actions Tracker. These circumstances illustrate the federal authorities’s curiosity in punishing wrongdoing associated to COVID-19 and CARES Act funding. Listed below are some tendencies now we have seen from March by way of August 2020:

The federal authorities has principally responded by way of felony enforcement actions by U.S. Lawyer’s workplaces, with new felony indictments launched practically day by day. Prosecutions have largely centered on conventional fraudsters that made intentional misrepresentations to defraud the federal government, monetary establishments, or non-public residents. Per DOJ’s acknowledged coverage, now we have but to see enforcement actions for unintentional misrepresentations, that are extra widespread in investigations of company defendants unrelated to COVID-19.

Enforcement circumstances have principally included felony enforcement actions by U.S. Lawyer’s Workplaces, although the Securities and Alternate Fee (“SEC”) has introduced some civil circumstances in opposition to corporations for deceptive buyers by way of false statements associated to COVID-19. The Congressional Oversight Committee introduced in late July that it could examine a CARES Act mortgage to a transport firm, and the Small Enterprise Affiliation (“SBA”) introduced that it could be auditing PPP loans bigger than $2 million. Nonetheless, now we have not seen civil enforcement actions by administrative companies moreover the SEC.

Enforcement has primarily centered on fraud associated to CARES Act reduction funds, such because the Paycheck Safety Program (“PPP”). These early circumstances have principally prosecuted defendants who submitted false or fraudulent functions for PPP funds. For instance, many defendants have been accused of submitting functions that misrepresent the applicant companies’ payroll bills—in essentially the most excessive circumstances, candidates falsified names of staff for companies that, in actuality, had no staff in any respect. Many PPP circumstances alleged misuse of funds for private bills, comparable to buying sports activities vehicles, jewellery, and paying off private money owed. The federal government has prosecuted PPP fraud in lots of jurisdictions all through the nation. The federal government has prosecuted these circumstances beneath a variety of felony expenses, together with wire fraud, making a false assertion to a monetary establishment, cash laundering, and conspiracy.

Different widespread enforcement actions have included prosecutions for selling faux COVID-19 remedies. Defendants had been accused of promoting remedies that had been unproven and never FDA-approved for treating COVID-19, comparable to faux vaccines, natural treatments, and chemical mixtures. Whereas most defendants had been small companies, the president of a major California medical expertise firm was prosecuted for selling a faux take a look at for COVID-19, just like the blood take a look at expertise touted by Theranos.

The federal government has additionally prosecuted defendants for hoarding and worth gouging of Private Protecting Tools (“PPE”) beneath the Protection Manufacturing Act. These circumstances famous the defendants’ patterns of reselling the PPE at costs with exorbitant markups.