If you applied for pandemic relief funds and your business is in Virginia, you should be aware that civil and criminal fraud investigations and prosecutions are going to intensify in the Eastern District of Virginia (EDVA). Shown above, this geographic region includes the counties to the east of the red line. Remember back in April, when the government vowed to audit any company that received more than $2 million in stimulus funds? These promises are coming home to roost in Virginia (my professional hometown) and I am keeping a tight focus on how this will affect local stimulus funds recipients in the months and years ahead.
On July 17, 2020, the Special Inspector General for Pandemic Recovery (SIGPR) Brian D. Miller and the U.S. Attorney for the EDVA announced a formal partnership to pursue civil and criminal investigations of financial misconduct and fraud related to the CARES Act of 2020. This ceremonious association means that EDVA and SIGPR will devote substantial resources and prioritize enforcement actions in this region.
As I mentioned at the end of June, DoJ has been escalating efforts to weed out COVID-19 related fraud. In just one week, beginning on June 22, 2020, DoJ publicized a trio of new prosecutions for fraudulent PPP loan applications. This uptick reflected a marked increase in the pace of criminal prosecutions for fraud related to the CARES Act. The first PPP fraud case was indicted in Rhode Island in May. Since then, PPP indictments have been springing up all over the map from Texas to Massachusetts. Now, SIGPR Miller will take a front row seat in a setting very familiar to him. He served as an Assistant U.S. Attorney in EDVA for over a decade where he worked on a variety of civil and criminal enforcement matters.
SIGPR Miller was confirmed by the Senate on June 2, 2020 and he is off to a running start. As part of DoJ’s briefing on this key partnership, it pointed out that EDVA was a natural fit for SIGPR Miller because he is an EDVA alum who will “be physically housed within 75 yards of our office and the District Court. . .” Hint, Miller knows his way around EDVA including intimate knowledge of the practices and personas of the judges in EDVA and the Fourth Circuit Court of Appeals.
Fun fact: the motto of Virginia is Sic semper tyrannis– a Latin phrase meaning “thus always to tyrants.” It suggests that bad outcomes should or (eventually) will befall tyrants.
You can read more here about how the EDVA recently charged a Virginia couple after allegedly submitting false loan applications in the names of businesses. The allegation by EDVA prosecutors is that the couple received a payout of over$1.4 million in CARES Act loans. In Newport News, VA, another person was charged in EDVA with submitting fraudulent PPP loan applications allegedly garnering him close to $200,000.
The memorandum of understanding (MOU) between SIGPR and EDVA outlines four objectives:
- To provide a coordinated response to CARES Act funding fraud, with an emphasis on organized criminal activity, as well as criminal and civil fraud affecting federal money, vulnerable victims, and fraud recidivists;
- To facilitate legal process, case intake, and swift prosecution of CARES Act-related fraud;
- To link and associate isolated CARES Act-related complaints with larger schemes and related unlawful activity; and,
- To deter future CARES Act funding fraud through an enhanced awareness of successful criminal prosecution and civil enforcement against individuals and companies involved in CARES-related financial fraud.
The MOU also calls for EDVA to create a “streamlined, accelerated process for SIGPR investigations to obtain needed preliminary legal process, including grand jury subpoenas and court orders, subpoenas, and civil investigative demands.” This means that EDVA prosecutors and their teams will be focused, well-trained specialists who are ready to move swiftly and aggressively to sanction unlawful CARES Act-related conduct. General Deterrence only works if the beacon is seen so you can expect full-throated calls for serious consequences in these matters.
Any executive of company who is concerned about compliance or who has received inquiries, subpoenas or a request to be interviewed from SIGPR, EDVA or other entity should consult with independent legal counsel before responding. Our firm regularly counsel clients on civil and criminal investigations commenced by the EDVA and you can reach us here.