DOJ gears up for post COVID-19 criminal prosecutions

In the words frequently attributed to Mark Twain, “History doesn't repeat itself, but it often rhymes.” In many respects, the COVID-19 pandemic will turn out to be unprecedented in modern history. But in others – including the Department of Justice’s response – we should expect it to follow the same rhythm as other recent crises.

We’ve seen signs of this in just the past several days, as Attorney General Barr has directed all U.S. Attorney’s Offices and the DOJ to prioritize the investigation and prosecution of coronavirus-related fraud schemes. His directives include mandating that each U.S. Attorney appoint a “Coronavirus Fraud Coordinator” to “serve as the legal counsel for the federal judicial district on matters relating to the coronavirus, direct the prosecution of coronavirus-related crimes, and to conduct outreach and awareness.” Signaling the types of cases to come, the DOJ has suggested that “coronavirus-related crimes” could include:

•  Individuals and businesses selling fake cures for COVID-19 online and engaging in other forms of fraud.
•  Phishing emails from entities posing as the World Health Organization or the Centers for Disease Control and Prevention.
•  Malicious websites and apps that appear to share coronavirus-related information to gain and lock access to your devices until payment is received.
•  Seeking donations fraudulently for illegitimate or non-existent charitable organizations.
•  Medical providers obtaining patient information for COVID-19 testing and then using that information to fraudulently bill for other tests and procedures.

While these examples are helpful in predicting future enforcement efforts, it is clear they represent just a portion of what is to come. In addition to the DOJ’s efforts, the government’s response to the pandemic will include the formation of entirely new investigative resources. Passed last night by the Senate with House approval expected shortly, the Coronavirus Aid, Relief, and Economic Security (CARES) Act – which will result in the disbursement of over $2.2 trillion of stimulus funds – includes a provision allocating $25 million to create an additional investigative component: the Treasury Department Special Inspector General for Pandemic Recovery. The office will audit and investigate the loans, loan guarantees and other investments made by Treasury under CARES Act programs. It is reasonable to assume that these will not be the only efforts by the DOJ and various inspector generals. In particular, we can expect HHS-OIG and the inspector generals of other federal agencies to take a hard look at allocations under the CARES Act for potential signs of fraud or misuse.

The government’s playbook for enforcement under these circumstances is of relatively recent vintage. In the immediate aftermath of Hurricane Katrina, the DOJ established the Hurricane Katrina Fraud Task Force. As part of the effort, individual U.S. Attorney’s Offices, particularly those in the South and Southeast, appointed “Katrina Fraud Coordinators” who worked with dedicated agents. Task Force prosecutors and investigators – many of whom were exclusively detailed to the effort – worked to identify fraudulent conduct designed to secure relief funds paid out in the aftermath of Katrina. The Task Force remained in existence for several years and ultimately brought federal charges against more than 900 individuals in over 40 federal judicial districts across the country.

The government employed similarly aggressive and even broader measures in the wake of the 2008 Economic Crisis. In addition to the DOJ’s directive that U.S. Attorney’s Offices and existing investigative agencies identify and prosecute criminal conduct relating to the near collapse of the world’s economy, Congress passed the Emergency Economic Stabilization Act of 2008, which appropriated $700 billion to purchase toxic assets from distressed financial institutions. As part of the legislative response to that economic crisis, Congress also created the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). At its peak, SIGTARP employed over 150 investigators and staff and maintained an annual budget exceeding $40 million. Its efforts led to more than 300 prosecutions, including over 100 senior financial institution officers.

The Hurricane Katrina Task Force and SIGTARP were the first two iterations of the government’s fraud control efforts in the face of massive government special assistance programs. The COVID-19 response is the third. The CARES Act disbursements are almost three times as large as the Emergency Economic Stabilization Act of 2008, however, so it is reasonable to expect the effort to audit and recover improperly received and expended funds will ultimately be substantially, if not proportionately, larger. We have learned from history that when large amounts of government money are paid out under exigent circumstances, the follow-on effort to confirm that those funds were validly received and properly spent triggers a hefty allocation of government resources. Once designated, all of those prosecutors and investigators take their assigned mission to heart, and spend years seeking to fulfill it. Those on the receiving end of that scrutiny – or even just finding themselves in its path – will be better equipped by understanding what came before, even if the cadence is not exact.