It is hard to imagine a more all-encompassing global situation occurring during our lifetimes that will have as prolonged an impact on society writ large as the coronavirus. A large part of the U.S. implemented lockdowns of some form starting in March 2020, and by the end of March, well over 100 countries had instituted lockdowns of varying degrees. The resulting economic catastrophe compelled Congress to take greater action than even that seen during the 2007-08 financial crisis through the Troubled Asset Relief Program (TARP). Whereas Congress authorized TARP to purchase $700 billion in "toxic assets" from troubled financial institutions, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has set aside $2 trillion in aid for vast swaths of the American economy, including $500 million for corporate relief. In the decade since TARP was implemented, the Special Inspector General charged with oversight of TARP funds (SIGTARP) recovered over $11 billion and obtained 380 convictions. Given the scope and scale of the CARES Act, it is inevitable that investigations, prosecutions and convictions of both the outright fraudsters as well as the unwise recipients of funds will dwarf those obtained under TARP in the months and years to come.

The CARES Act designates three layers of oversight of the government's response to the pandemic:

  • A special inspector general, to be appointed by the president;
  • A Congressional Oversight Commission, a five-member panel appointed by leaders in Congress; and
  • A Pandemic Response Accountability Committee (PRAC) of at least nine federal inspectors general.

With various moving parts and competing priorities, effectiveness of this oversight will likely depend on who ultimately serves in those leadership roles, whether those individuals have executive and congressional support, and the public perception of favoritism, bias and overall success in keeping oversight transparent and effective. Interestingly, the original head of PRAC was removed by President Trump after only a few days on the job, leading to speculation of politicization of the post before its work had even begun in earnest. Combined with Congress allocating only half the budget received by the SIGTARP and the Congressional Oversight Commission's lack of subpoena power, an ongoing power vacuum in the PRAC and Congress could lead to inconsistent and irregular enforcement generally.

One of the major flaws resulting from Congress' rush to provide aid to a sputtering economy is persistent vagueness and over-generality in much of the CARES Act. This problem has already led to the public shaming of large companies, like Shake Shack, who received PPP loans, multiple revisions to official government advice, and a formal amendment to the law on April 24, 2020. While Treasury Secretary Steven Mnuchin warned that "[A]nybody that took the money that they shouldn't have taken — one, it won't be forgiven, and two, they may be subject to criminal liability, which is a big deal," the limited prosecutorial resources available and imprecise language of the CARES Act likely mean enforcement, prosecutions and regulatory action are subject more to the political whims of Washington than to strict interpretation of a vague statute.

Fortunately for individuals and business who are struggling to navigate the ever-changing rules of the CARES Act, the rule of lenity requires courts to resolve any statutory ambiguity in favor of a criminal defendant. In practice, one can expect that in all but the most egregious examples of misfeasance, proactive documentation of attempted compliance with the often confusing rules and regulations concerning the CARES Act can be a strong defense against investigations and enforcement actions.

In spite of the vagueness of the statute and perceived – if not actual – dysfunction in the oversight mechanisms devised by Congress, businesses and individuals should anticipate investigations in many, if not all, of the areas listed below, although in the shadow of the 2020 presidential election, it also seems safe to assume CARES Act enforcement will also follow the whims of partisan politics.

Financial Fraud – In light of the significant reporting and certifications required of businesses participating in CARES Act programs, investigations into all sorts of alleged financial misconduct relating to financial frauds, fraudulent accounting practices, cyber-crime, and other white-collar transgressions are certain to abound for the foreseeable future.

Corruption – Many segments of the economy have experienced supply-chain troubles during this crisis, providing ongoing opportunities for wrongdoers to exploit real needs through bribery and corruption. Both private and public officials should be wary of asking for or receiving bribes, kickbacks or other improper benefits in exchange for prioritized treatment. Investigations are likely to focus on licensing, import and export transactions, and public/private partnerships.

Antitrust – The unfortunate but reoccurring offshoots of crises are price fixing, price gouging and bid rigging. Expect the DOJ's new Procurement Collusion Strike Force and individual companies, like 3M, to be vigilant in exposing the sale of products to federal, state and local agencies, as well as the public, at inflated or improper price points.

Procurement – Government contractors and other recipients of federal grants and loan dollars should bear in mind the potential for False Claims Act lawsuits and government investigations resulting from the COVID-19 crisis. Massive federal spending to address the spread of COVID-19 already totals in the billions of dollars, so the DOJ and whistleblowers will undoubtedly examine how, where and why those funds are spent.

Healthcare – If history is any predictor of the future, the vast healthcare spending associated with COVID-19 and the CARES Act will be shadowed by vigorous whistleblower activity and False Claims Act investigations.

A transformative crisis like COVID-19 exposes the risks and opportunities for all manner of misdeeds, intentional or negligent. Even if you or your company do not work in a field directly impacted by the crisis or have not received government funds tied to the national response, risks for investigation and even prosecution will exist for the foreseeable future. A persistent focus on ethics, compliance, internal policies and procedures, staying out of the limelight, and obtaining sophisticated counsel to guide you through the ever-changing circumstances can mitigate some of the inherent risks in this unprecedented time.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.