Biden Administration Extends Statute of Limitations for PPP and EIDL Fraud to Ten Years

Two weeks ago, President Biden signed two laws extending the statute of limitations for civil and criminal fraud actions involving the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) to ten years.[1]

Key Takeaways

• Extending the statute of limitations provides the U.S. Department of Justice (DOJ) and its law enforcement partners with more time to investigate and pursue COVID-19 relief fraud.
• The extension highlights the administration’s clear and continued focus on enforcing the laws against COVID-19 relief fraud.
• Companies should prepare by investing in strong compliance programs and conducting timely whistleblower investigations.

Background

As explained in previous client alerts, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided early COVID-19 relief by authorizing loan programs such as the PPP and the EIDL program.[2]The PPP provided small businesses with government-backed loans that could be forgiven as long as the proceeds were used for payroll and other eligible expenses.[3]The EIDL program provided low-interest loans that could be deferred to small businesses experiencing a temporary loss of revenue.[4]Although the numbers vary, the U.S. Secret Service predicts that individuals, organized groups, and companies improperly diverted close to $100 billion in pandemic relief funds.[5]

Extending the statute of limitations for civil and criminal fraud actions connected to the PPP and the EIDL program follows a series of concerted efforts to combat COVID-19 relief fraud.These efforts began shortly after the passage of the CARES Act when the DOJ pledged to aggressively crackdown on COVID-19 fraud.[6]In May 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal resources and information-sharing across federal agencies.[7]In March 2022, the DOJ announced the appointment of the Director for COVID-19 Fraud Enforcement and the creation of Strike Teams across country.[8]

Conclusion

With resources already in place, the statute of limitations extension provides the DOJ with more time to pursue COVID-19 relief fraud.And the DOJ has no shortage of leads.A recent report from the Small Business Administration (SBA) shows that the SBA’s automated system flagged almost 40 percent of all PPP loans in 2020 for potential noncompliance with program criteria, requiring a manual review of each flagged loan.[9]The statute of limitations extension will allow the DOJ to leverage its resources and investigate these leads, as well as other large-scale, complex fraud schemes.Companies can prepare by remaining apprised of how the DOJ and its law enforcement partners pursue COVID-19 relief fraud, enabling companies to create strong compliance programs to combat misconduct and risks related to prior conduct.

[1]Bills Signed: H.R. 7334 and H.R. 7352, available at https://www.whitehouse.gov/briefing-room/legislation/2022/08/05/bills-signed-h-r-7334-and-h-r-7352/.

[2]SeeEnforcement Against COVID-19 Related Fraud: Two-Year Anniversary Update, available at https://www.mofo.com/resources/insights/220315-enforcement-against-covid-19-related-fraud#_ftn21; DOJ Enforcement Actions Involving COVID-19 Relief Fraud: An Update, available at https://www.mofo.com/resources/insights/210310-doj-enforcement-actions-covid-19-relief-fraud-update.html; DOJ Enforcement Actions Involving COVID-19 Relief Fraud: An Update (September 2021), available at https://www.mofo.com/resources/insights/210910-doj-enforcement-actions.html.

[3]Paycheck Protection Program, available at https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program.

[4]COVID-19 Economic Injury Disaster Loan, available at https://www.sba.gov/funding-programs/loans/covid-19-relief-options/eidl.

[5]See Criminals have stolen nearly $100 billion in Covid relief funds, Secret Service says, available at https://www.cnbc.com/2021/12/21/criminals-have-stolen-nearly-100-billion-in-covid-relief-funds-secret-service.html.

[6]Justice Dept. anticipates coronavirus stimulus will be a major target for fraud, available at https://www.justice.gov/ag/page/file/1258676/download.

[7]Attorney General Announces Task Force to Combat COVID-19 Fraud, available at https://www.justice.gov/opa/pr/attorney-general-announces-task-force-combat-covid-19-fraud.

[8]Justice Department Announces Director for COVID-19 Fraud Enforcement, https://www.justice.gov/opa/pr/justice-department-announces-director-covid-19-fraud-enforcement.

[9]SBA’s Paycheck Protection Program Loan Review Processes, available at https://www.sba.gov/sites/default/files/2022-02/SBA%20OIG%20Report%2022-09.pdf?utm_medium=email&utm_source=govdelivery.