INSIGHT: SIGTARP Offers Road Map for CARES Act IG, 12 Years Later

It’s difficult to explain in simple terms what caused the financial crisis and Great Recession—something about derivatives, no-cash adjustable-rate mortgages, and the price of homes in Florida. The current economic downturn is easier—Covid 19.

Congress is again using the tools at its disposal to provide economic support in these difficult times. What that means is that unprecedented amounts of money are flowing from government coffers to individuals and impacted companies. With that money comes the responsibility to avoid fraud, waste, and abuse. To that end, Congress also created the Special Inspector General for Pandemic Recovery, or SIGPR.

President Trump nominated Brian D. Miller, the former inspector general of the General Services Administration, to serve as the SIGPR. Miller currently serves as an associate White House counsel, and while at the GSA, developed a reputation for investigating waste and abuse cases. Miller was confirmed by the Senate June 2 in a 51-40 vote.

In response to the financial crisis over a decade ago, Congress created the Troubled Asset Relief Program, or TARP. TARP also contained a provision for a special inspector general, or SIGTARP. The goal of SIGTARP was the same as the goal of SIGPR—to detect and punish fraud, waste and abuse in connection with disbursement of the money Congress allocated in response to the crisis. SIGTARP may, therefore, provide a roadmap to predict the path forward for SIGPR.

The CARES Act and SIGPR

The Coronavirus Aid, Recovery, and Economic Security (CARES) Act, passed by Congress on March 27, provides over $2 trillion in relief to individuals, businesses, and industry sectors impacted by the Covid-19 pandemic and created SIGPR to “conduct, supervise, and coordinate audits and investigations” of the CARES Act’s financial assistance programs for businesses. It will also oversee other Treasury programs created by the Act, have an initial budget of $25 million, and exist until March 2025.

Under the CARES Act, the SIGPR must submit quarterly reports to Congress and is limited to programs established by the Department of Treasury, although it will coordinate with other offices and agencies. SIGPR’s role is to prevent and detect fraud and abuse, and to facilitate the prosecution of those participants charged with fraud or abuse by the Department of Justice.

The CARES Act created the Small Business Administration’s Paycheck Protection Program (PPP), and provides grants for businesses applying for an SBA economic injury disaster loan and features a section providing aid to American workers, families, and businesses, as well as relief to severely impacted industry sectors, such as airlines and businesses critical to maintaining national security.

SIGPR has authority to request information and assistance from any federal, state, or local authority, as well as issue subpoenas. It also has law enforcement authority, which includes making arrests, seeking and executing warrants for arrest, search of a premises, and seizure of evidence.

SIGTARP Has Provided TARP Oversight Since 2008

In predicting how the SIGPR might operate going forward, a review of how Congress and the executive branch responded to the 2008-2009 financial crisis through TARP and SIGTARP may be informative.

The Emergency Economic Stabilization Act of 2008 (EESA) created the TARP, the initial mission of which was to administer up to $700 billion in relief. It also established SIGTARP, with the responsibility to conduct TARP-related audits and investigations to “prevent fraud and abuse, identify wasteful spending, and drive improvements.” SIGTARP was given an initial operating budget of $50 million, and no specified ending date.

SIGTARP has recovered $11 billion since inception and investigations have resulted in criminal charges against 443 persons, with 384 convictions, and 302 sentenced to prison. It is still active today and noted in a recent report that, as of 2019, there was still $5 billion in TARP funds remaining to be spent.

The Path Forward: Follow the Money

The CARES Act, associated legislation, and the ongoing Covid-19 pandemic is dynamic. Guidance is still being issued, and the landscape continues to evolve (including proposals for additional, sweeping financial stimulus programs). Although SIGPR’s initial mandate will expire in 2025, given the sheer size of economic relief provided by the CARES Act, as well as the number of investigations it is likely to conduct, we can probably expect Congress to extend its lifespan.

Based on recent activity under the CARES Act, including new rule changes, we can expect SIGPR to develop protocols for investigations and audits of businesses receiving funds under both the PPP and other programs. It is also expected to scrutinize loans and other benefits taken by larger businesses and industry sectors.

The SIGPR’s first areas of focus could include audits of large corporations who have received CARES Act funds, as well provide additional support for investigations already been initiated by entities such as the SEC and DOJ.

As was the case with SIGTARP, the goal of SIGPR will be to detect and punish fraud, waste and abuse. Although the methodology employed to reach that goal may be complicated, if SIGTARP’s history is any indication, then the path forward for SIGPR is relatively clear: Follow the money.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Ivan B. Knauer is a partner at Snell & Wilmer LLP in their Washington, D.C., and Salt Lake City offices. He focuses his practice on securities litigation and enforcement.

Tanya N. Lewis is an attorney with Snell & Wilmer LLP in their Salt Lake City office. She focuses her practice on commercial litigation, emphasizing the financial services industry.