TAFEF COVID-19 Committees

Agriculture

The United States Department of Agriculture (USDA) administers or participates in several programs addressing the ongoing pandemic.  Under the Coronavirus Food Assistance Program, the USDA provided direct subsidies to producers of agricultural commodities that suffered price declines or supply-chain disruptions as a result of COVID-19, using $9.5 billion in funding from the CARES Act and $6.5 billion in funding from the Commodity Credit Corporation Charter Act.  The USDA has approved FFRCA funding for programs in all 50 states, the District of Columbia, and the U.S. Virgin Islands to provide Pandemic EBT (Electronic Benefits Transfer) benefits for children who temporarily lost access to free or reduced-price meals because of COVID-19-related school closures.  The USDA has extended payment deferrals for agency-guaranteed loan programs and has authorized crop insurers to extend premium and administrative-fee deadlines to address agricultural producers’ pandemic-related difficulties.  Through its Rural Broadband ReConnect program, which has delivered nearly $650 million in grant aid to expand rural access to high-speed broadband Internet services, the USDA also participates with other agencies in an initiative to increase rural access to telehealth.  Persons who provide false applications or certifications to these programs, or who use funds or grant aid for improper purposes, may subject themselves to criminal penalties or liability under the False Claims Act, among other laws.   

 

Customs

Unscrupulous contractors who intentionally sell non-compliant Personal Protective Equipment (PPE) to the Government should be subject to claims under the False Claims Act. Since the onset of the Covid-19 pandemic the Government has ramped up its efforts to obtain PPE including test kits and N95 compliant masks.  The Government has spent millions of dollars to get PPE from contractors that promise to provide safe and compliant products to address this urgent need. Unfortunately, this has created an opportunity that some contractors have sought to exploit by supplying fake and non-compliant products that have often been obtained from unreliable foreign sources. The U.S. Customs and Border Patrol has already seized several shipments of non-compliant products and initiated criminal proceedings against violators. In addition, the DOJ has already prosecuted several violators. Although the Families First Coronavirus Response Act affords limited immunity to contractors for negligent conduct, it does not shield them from intentional or willful conduct, and, therefore, they should be liable under the False Claims Act.

 

Finance

Much of the COVID-19 relief has been targeted for businesses and employees.  The CARES Act included $376 billion in funding for employees and small businesses, much of it overseen by the Small Business Administration (“SBA”) and distributed through the Paycheck Protection Program (“PPP”), Economic Injury Disaster Loans (“EIDL”), and other debt relief programs.  An additional $483 billion in funding was made available to the PPP and other SBA programs through the Paycheck Protection Program and Health Care Enhancement Act. The Federal Reserve System is making available $600 billion in loans to small and mid-sized businesses under the Main Street Lending Program.  The Treasury Department has invested $75 billion in this program through its appropriated funds under the CARES Act. The CARES Act provides an employee retention credit on federal taxes for employers that have experienced economic hardship due to COVID, and the Families First Coronavirus Response Act provides $3.4 billion for, among other things, tax credits to small and midsize businesses to cover costs of employee paid and family sick leave for reasons related to COVID-19.  The federal government has already initiated several criminal prosecutions for COVID-19 funding fraud.  The potential for False Claims Act and other Whistleblower cases arising from the improper receipt and use of this type of government relief money is enormous.  False representations in applications for funding and loan forgiveness, improperly claiming tax credits, and the misuse of relief funds that are earmarked for very specific purposes, will provide the basis for such cases going forward.   

 

Hospitals/Telemedicine

In response to the COVID-19 pandemic, the federal government launched the COVID-19 Telehealth Program to help healthcare providers and patients stay remotely connected. The $200 million in funding was part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The funding pays for telecommunication services, information services, and devices to ensure medical services are provided to patients who are unable to have in-person appointments with their providers. Similar to telehealth funding, the federal government appropriated $20 billion in funding to hospitals and other healthcare providers disproportionately impacted by COVID-19.  The funds are distributed through the U.S. Department of Health and Human Services (“HHS”) and the Health Resources and Services Administration (“HRSA”).  In addition to the CARES ACT, funding is from the Paycheck Protection Program (“PPP”) and the Health Care Enhancement Act (“HCEA”).  

 

It is safe to assume that many FCA liability theories will focus on false statements in order to obtain or retain funding.   Moreover, COVID-19 fraud will also likely include common FCA theories of liability such as, billing for medically unnecessary services, billing for services that were never provided, upcoding telemedicine virtual visits, unbundling services to obtain increased funding, and giving kickbacks to providers in exchange for testing or equipment.

 

Long Term Care

The CARES Act created a $175 billion “Provider Relief Fund” that HHS has distributed to healthcare providers “on the front lines of the coronavirus response.” HHS initially allocated $4.9 billion from this fund to Skilled Nursing Facilities (SNFs), which have been hit particularly hard by outbreaks of COVID-19. In August 2020, HHS distributed an additional $2.5 billion from the fund to SNFs to support increased testing, staffing, and PPE needs. Approximately $2 billion more in funds will be distributed by the end of December through an incentive payment program, with funds going to SNFs that keep COVID-19 infections and mortality rates low. Facilities that do not comply with the Terms and Conditions for use of these funds, including through failure to provide testing, report test results, hire staff, improve infection control, or provide residents with additional necessary services, or SNFs that use the money for unauthorized activities like executive pay above a certain threshold and lobbying efforts may be subject to FCA liability.

 

Pharmaceuticals, Biologics and Medical Devices

The government is expected to spend hundreds of billions of dollars on safe and effective vaccines, drugs, medical devices, diagnostic testing, and personal protective equipment to prevent, diagnose, and treat COVID-19. Already, over $250 billion has been added to the budgets for HHS ($140 billion), DOD ($10 billion), and the VA ($19 million). Through Operation Warp Speed, the government has awarded over $10 billion in contracts and grants for COVID-19 vaccine development, manufacture, and distribution. Potential violations of the False Claims Act and securities laws include clinical trial fraud, grant fraud, violation of current good manufacturing practices, kickbacks and conflicts of interest, price gouging and hoarding defective products, and misrepresentations to purchasers and shareholders.

 

Transportation

The CARES Act authorized more than $250 billion in grants to help businesses and state and local governments absorb the impact of the COVID-19 pandemic on the nation’s infrastructure, transportation systems, disaster recovery preparedness, and community-based institutions.  This figure includes grants to be awarded through the U.S. Treasury ($78 billion directed to the airline industry alone), FEMA ($45 billion), Department of Transportation ($36 billion), and HUD ($5 billion), among other appropriations. Potential violations of the False Claims Act and/or securities laws arising from these awards include but are not limited to bid rigging, grantee allocation of funds to pre-pandemic work, and grantee misrepresentations material to eligibility such as the degree of grantees’ economic losses and/or risk levels assigned to the specific relief needs grantees propose to address.