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Webinar: Compliance Considerations and Enforcement Trends Surrounding the CARES Act

June 18, 2020 - 1:00pm to 2:00pm

Nancy DePodesta, Partner, Litigation
Natashia Tidwell, Partner, Litigation

With more than $2 trillion marked for COVID-19 relief, the U.S. Department of Justice is prioritizing to act swiftly against pandemic-related irregularities. This presentation will cover best practices for risk management and compliance surrounding the financial stimulus. In addition, the program will recap lessons learned from the 2008 financial crisis to forecast and survey likely enforcement trends in the post-COVID-19 economic landscape.

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Three Key Compliance Considerations and Enforcement Trends Related to the CARES Act

  1. Borrowers should remain alert to the risk of potential investigations and enforcement actions in connection with PPP loans even when acting in good faith. The DOJ has prioritized swift action against those suspected of pandemic-related illegal activity as evidenced by the first reported federal prosecution of PPP fraud in Rhode Island in which the borrowers did not act in good faith. For borrowers who are acting in good faith, be aware of potential investigations and enforcement actions against you because you may later be viewed as having obtained loans that were not “necessary” in light of murky (or even contradictory) guidance.
  2. Large and small borrowers should still give careful thought to their need for SBA loans, and how they will demonstrate such necessity in the event of a later inquiry or audit. Borrowers should document efforts to obtain alternate financing or liquidity from other sources, and preserve documentary evidence of the results of those efforts. Similarly, borrowers should maintain accurate books and records on the disposition of loan proceeds received in order to be able to demonstrate that funds were ultimately used for their intended purpose.
  3. Lessons learned from the 2008 financial crisis serve as a forecast for likely enforcement trends post-COVID-19. More than 400 individuals, both borrowers and lenders, were criminally charged for fraud in relation to the 2008 financial crisis relief packages. It is likely that CARES Act prosecutions will increase in time, so borrowers and lenders should be forewarned and forearmed.