Skip to content

Menu

LexBlog, Inc. logo
CommunitySub-MenuPublishersChannelsProductsSub-MenuBlog ProBlog PlusBlog PremierMicrositeSyndication PortalsAboutContactResourcesSubscribeSupport
Join
Search
Close

Congressional Investigations: A Month In, Congress Signals Close Scrutiny of CARES Act and Paycheck Protection Program

By Jeffrey M. Hanna, John Adams, Susan C. Rodriguez, Todd R. Steggerda, Mona G. Mohib, Paul J. Reagan & Carolyn J. Appel on May 1, 2020
Email this postTweet this postLike this postShare this post on LinkedIn

The CARES Act is only a month old, but plans for investigations to track the nearly $3 trillion in coronavirus relief funds are already emerging from Congress. Among the mechanisms for oversight created and funded by the CARES Act itself is the Congressional Oversight Commission, a five-member committee overseeing $500 billion in loans doled out by the Treasury Department targeting larger businesses.   Additionally, a new investigative select committee, chaired by Representative Jim Clyburn (D-SC) and operating under the House Committee on Oversight and Reform, will monitor President Trump’s implementation of coronavirus relief efforts.  And this anticipated congressional scrutiny comes on top of the expected investigative work of the new office created within the Treasury Department, the Special Inspector General for Pandemic Recovery (“SIGPR”), created to investigate how this $500B fund was utilized.

One of the programs included in the CARES Act most likely to be a target of congressional investigations—and already in the crosshairs of the media and Members of Congress from both parties—is the Paycheck Protection Program (“PPP”), which is designed to provide relief to small businesses during the COVID-19 crisis. The businesses and lenders participating in the PPP are likely to receive intense scrutiny not only because of the large sums of money that were distributed in such a short time frame (the initial program exhausted $349 billion in just 13 days, and Congress recently added another $310 billion), but also because of widespread media reports that the government-backed loans are not going to the small businesses for which the money was intended. In fact, Representative Clyburn recently announced that the new investigative committee will prioritize looking into how PPP funds went to publicly-traded companies. Representative Nydia Velazquez (D-NY), Chairwoman of the House Small Business Committee, has also publically said big firms that took funds from the PPP should pay them back. Other committees with jurisdiction could include the Senate Small Business Committee, the Senate Banking Committee, and the House Financial Services Committee.

Moreover, numerous lawmakers—including both Democrats and Republicans, each of whom have a political interest in seeing Main Street loans fulfilled—have expressed the need for more oversight in letters to the SBA and the Treasury Department and their Inspectors General, as well as to certain lending institutions, voicing concerns about where the money has gone and seeking explanations for how the Trump Administration will combat potential fraud. There can be no doubt that at least some of the concerns expressed below will translate into congressional inquiries and hearings. This recent flurry of letters regarding investigations includes:

  • Senator Elizabeth Warren (D-MA) and Representative Velazquez sent a letter to the SBA and Treasury Department Inspectors General asking those offices to open an investigation into whether (i) the PPP favored larger, wealthier, or existing customers; (ii) the SBA and Treasury Department rulemaking and guidance processes were effective in protecting against fraud, waste, and abuse; (iii) businesses that received loans were in need of those funds due to the COVID-19 pandemic; and (iv) companies with close ties to the Trump Administration or those with other political connections were able to receive PPP funds.
  • Senate Majority Leader Chuck Schumer (D-NY) and Senators Sherrod Brown (D-OH) and Benjamin Cardin (D-MD) sent a letter to the SBA Inspector General requesting that the IG investigate reports that certain lenders prioritized applications of their larger, wealthier clients to the detriment of smaller businesses, including “concierge-type services,” such as personalized assistance filling out paperwork and other administrative requirements.
  • Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, sent a letter to a number of large banking institutions requesting information on their application process amid concerns that certain lenders prioritized borrower applications, which Rubio said in a press release was a violation of congressional intent of the program. Senator Rubio has announced he will use the Committee’s subpoena powers to conduct aggressive oversight of the PPP.
  • Senators Diane Feinstein (D-CA) and Kamala Harris (D-CA) sent a letter to the Treasury Department calling for an investigation into why there were substantial funding disparities among states receiving PPP funds. Representative Jackie Speier (D-CA) wrote a similar letter to the Treasury Department and the SBA, requesting additional information on dispersal of PPP funds, including asking how SBA prioritizes lenders’ requests for funding.
  • Representatives Judy Chu (D-CA), Chairwoman of the House Small Business Subcommittee on Investigations, Oversight, and Regulations, and Representative Velazquez wrote a letter to the SBA and the Treasury Department urging new rules for PPP to ensure lenders do not set unreasonable, exclusionary, or inequitable conditions on applicants, citing concerns that lenders were only accepting applications from customers with a pre-existing business lending relationship or business checking account.
  • Representative Ron Kind (D-WI) sent a letter to the Treasury Department requesting more oversight over the second round of PPP funds to ensure the loans are going to small businesses who would not have otherwise been able to stay afloat during the COVID-19 crisis, and not to large or publicly traded businesses.

Members of Congress will also be receiving information about the loans from a group of inspectors general. The CARES Act created the Pandemic Response Accountability Committee (“PRAC”), where inspectors general from a variety of federal agencies—including SBA, FDIC, DOJ, DOD, and the Board of Governors of the Federal Reserve, among others—will have broad oversight authority. The PRAC is required to make regular reports to Congress (and the President), which will most certainly generate additional interest and likely lead to congressional investigations.

One thing these letters from Congress reveal: with such a tremendous amount of funding made available, and the pressure to pass the legislation and distribute the funds in an expeditious manner, Congress will closely scrutinize all parties to the programs. This includes the Executive agencies, the lenders, and especially the borrowers, already targets of Congress and the media.

Notably, the CARES Act provided substantial funding for oversight, and in several cases funded oversight arms into 2025. With an election cycle looming, this combination of factors—and the substantial noise out of Washington—suggests there will be years to come of political investigations.

About McGuireWoods’ Congressional Investigations Group

The Congressional Investigations practice at McGuireWoods is part of an elite Government Investigations & White Collar Litigation Department that was recently named a Law360 Practice Group of the Year for 2019. Our senior team is comprised of a deep bench of lawyers with decades of experience with investigations at the intersection of law and politics, including a former Deputy Attorney General of the United States, former U.S. Attorneys, more than a dozen federal prosecutors, an Associate Counsel to the President of the United States, and other former senior enforcement officials.  Ranging from the Major League Baseball steroid scandal, the Deepwater Horizon inquiries, and the USA Gymnastics sexual assault investigations, our Congressional Investigations lawyers have been in the trenches, representing a wide range of companies and individuals in the most high-politicized congressional investigations matters over the last few decades.  Our Congressional Investigations team also leverages the strengths of our highly regarded colleagues at McGuireWoods Consulting, our bipartisan legislative consulting arm comprised of former elected officials, senior Executive Branch officials, more than a dozen senior congressional staffers, and White House and legislative staff. Complementing our legal and legislative know-how, we maintain robust personal and professional relationships with Members of Congress and their staff, and have earned a reputation for knowing how to navigate the halls of Congress.

About McGuireWoods Consulting’s Federal Team

Our federal team assists clients in communicating with federal policymakers on complex legislative issues in every major area, from trade to healthcare to transportation. We draw on our Capitol Hill and executive branch relationships, policy experience, and strategic understanding of process to help clients fend off unwelcome initiatives and affirmatively shape sound policy environments for achieving business goals.

Photo of Jeffrey M. Hanna Jeffrey M. Hanna

Jeff’s practice includes complex litigation at the trial and appellate level, focusing on matters arising from government, regulatory, and criminal and corporate internal investigations.

Read more about Jeffrey M. HannaEmail
Photo of John Adams John Adams

John represents clients in complex litigation at the trial and appellate level, with a particular focus on matters arising out of government and criminal investigations. He has conducted internal investigations, represented clients in sensitive and complex grand jury investigations, tried cases to bench…

John represents clients in complex litigation at the trial and appellate level, with a particular focus on matters arising out of government and criminal investigations. He has conducted internal investigations, represented clients in sensitive and complex grand jury investigations, tried cases to bench and jury, and briefed and argued cases in appellate courts.

Read more about John AdamsEmail
Show more Show less
Photo of Susan C. Rodriguez Susan C. Rodriguez

Susan, co-leader of the firm’s financial institutions industry team, primarily focuses on government investigations and complex civil litigation. She has defended clients in numerous government enforcement actions by the Department of Homeland Security, Department of Justice, Consumer Financial Protection Bureau (CFPB), and the…

Susan, co-leader of the firm’s financial institutions industry team, primarily focuses on government investigations and complex civil litigation. She has defended clients in numerous government enforcement actions by the Department of Homeland Security, Department of Justice, Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC), among others. In addition to representing individuals and companies in federal and state court, Susan has experience in dealing with the financial services, communication, transportation, and defense industries. She has also represented individuals and companies in response to congressional inquiries and investigations.

Read more about Susan C. RodriguezEmail
Show more Show less
Photo of Todd R. Steggerda Todd R. Steggerda

Todd Steggerda is Chair of the firm’s Government Investigations and White Collar Litigation department, which was recently recognized by Law360 as a Practice Group of the Year. In a dynamic practice spanning nearly 20 years in Washington, Todd has resolved a diverse range…

Todd Steggerda is Chair of the firm’s Government Investigations and White Collar Litigation department, which was recently recognized by Law360 as a Practice Group of the Year. In a dynamic practice spanning nearly 20 years in Washington, Todd has resolved a diverse range of high-stakes government investigations and regulatory enforcement matters for companies operating in the defense, national security, technology, healthcare and other sectors, including dozens of matters investigated by the civil and criminal divisions of the Department of Justice and the Department of Defense. Todd previously served as Chief Counsel to a Presidential Campaign.

Read more about Todd R. SteggerdaEmail
Show more Show less
Photo of Mona G. Mohib Mona G. Mohib

Mona is a senior vice president in the Federal Public Affairs Group at McGuireWoods Consulting where she advises clients on a variety of issues and maintains many contacts on Capitol Hill. She is also a member of the firm’s national practice where she…

Mona is a senior vice president in the Federal Public Affairs Group at McGuireWoods Consulting where she advises clients on a variety of issues and maintains many contacts on Capitol Hill. She is also a member of the firm’s national practice where she serves as a primary liaison with Democratic state and local elected officials across the country.

Read more about Mona G. MohibEmail
Show more Show less
Photo of Paul J. Reagan Paul J. Reagan

Paul Reagan is a senior vice president and director of Federal Public Affairs where he assists clients with matters before Congress, the federal executive branch and regulatory agencies. Prior to rejoining McGuireWoods Consulting (MWC), Paul served as chief of staff to Virginia’s former…

Paul Reagan is a senior vice president and director of Federal Public Affairs where he assists clients with matters before Congress, the federal executive branch and regulatory agencies. Prior to rejoining McGuireWoods Consulting (MWC), Paul served as chief of staff to Virginia’s former Governor Terry McAuliffe and former U.S. Senator Jim Webb.

Read more about Paul J. ReaganEmail
Show more Show less
  • Posted in:
    Corporate Compliance, International
  • Blog:
    Subject to Inquiry
  • Organization:
    McGuireWoods LLP
  • Article: View Original Source

LexBlog, Inc. logo
Facebook LinkedIn Twitter RSS
Real Lawyers
99 Park Row
  • About LexBlog
  • Careers
  • Press
  • Contact LexBlog
  • Privacy Policy
  • Editorial Policy
  • Disclaimer
  • Terms of Service
  • RSS Terms of Service
  • Products
  • Blog Pro
  • Blog Plus
  • Blog Premier
  • Microsite
  • Syndication Portals
  • LexBlog Community
  • 1-800-913-0988
  • Submit a Request
  • Support Center
  • System Status
  • Resource Center

New to the Network

  • Boston ERISA & Insurance Litigation Blog
  • Stridon News and Insights
  • Taft Class Action & Consumer Insights
  • Labor and Employment Law Insights
  • Age of Disruption
Copyright © 2022, LexBlog, Inc. All Rights Reserved.
Law blog design & platform by LexBlog LexBlog Logo