CORONAVIRUS UPDATE: What We Are Doing to Protect Our Clients
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The CARES ACT: Whistleblowers and False Claims Act Violations

FraudTobias, McCormick & Comer can provide assistance for whistleblowers documenting fraud relative to PPP and SBA loans.

The Federal government, through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), initially spent $2.0 trillion-plus dollar in an effort to combat the economic impacts of the COVID-19 pandemic. These funds were earmarked to support hospitals and struggling businesses in these difficult times. The CARES Act initially included approximately $100 billion dollars to support healthcare providers, $349 billion dollars in funding for small and medium-sized businesses (500 or fewer employees), and $500 billion dollars for large corporations. The funding quickly depleted, and Congress already passed additional spending bills to supplement the fund.

All of these federal funds under the CARES Act come with terms and conditions. For example, under the Paycheck Protection Program, companies must certify “the uncertainty of current economic conditions make necessary the loan request to support the ongoing operations of the business.” Any misrepresentations made to obtain, or misuses of funds acquired from, the CARES Act could expose a company to liability under the “False Claims Act” codified at 31 U.S.C. § 3729. The False Claims Act prohibits knowingly presenting, or causing to be presented, a fraudulent claim for payment of federal funds. See 31 U.S.C. 3729(a)(1)(A).

If an employee or other individual discovers such a violation, he or she can bring a civil qui tam action to recover the fraudulently obtained funds. If the Federal Government elects to take over and proceed with the action to recover the funds, the individual could be eligible for an award of up to 25% of the proceeds recovered from the action. 31 U.S.C. 3730(d)(1) (“If the Government proceeds with an action … such person … shall … receive at least 15 percent but not more than 25 percent of the proceeds.”). If the Federal Government elects not to take and proceed with the case, the individual may still proceed with the case individually, at which point he or she could be entitled to “not less than 25 percent and not more than 30 percent of the proceeds recovered.” 31 U.S.C. 3730(d)(2).

Civil actions under the False Claims Act must be brought within 6 years of the date of the violation, 31 U.S.C. 3731(b)(1), or within 3 years of the date “when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation occurred.” 31 U.S.C. 3731(b)(2).

Additionally, the False Claims Act contains a whistleblower provision protecting employees who report fraudulent conduct in furtherance of a qui tam action from retaliation by their employers. Relief under the whistleblower provision can include “reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. 31 U.S.C. 3730(h)(2). To pursue a whistleblower provision claim, suit must be brought within 3 years of the date the retaliation occurred. 31 U.S.C. 3730(h)(3).

Unfortunately, it is not surprising the largest emergency economic stimulus package in U.S. history is generating instances of alleged fraudulent conduct. Recently, the U.S. Attorney General issued a Memorandum instructing “[e]very U.S. Attorney’s Office … to prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.” Additionally, whistleblowers across the country have already begun reporting companies for potential violation of the False Claims Act in connection with funds received from the CARES Act.

Suspect fraud regarding PPP or SBA loans?

If you have questions about the potential applicability of the False Claims Act to proceeds received by companies pursuant to the CARES Act, please contact the lawyers at Tobias, McCormick & Comer, LLC. We are local, Mobile, Alabama personal injury attorneys with extensive experience in false claims act litigation.

37 U.S.C. 3729.
37 U.S.C. 3730.
31 U.S.C. 3731.
“COVID-19- Department of Justice Priorities,” 03/16/20, Office of the Attorney General.
“Whistleblower Lawyer Prep for COVID -19 Litigation Boom,” 5/01/20 Reuters Legal 11:14:35.

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