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Who Will Investigate PPP Fraud Under the Biden Administration?

Dec. 18, 2020, 9:01 AM

Under court order, the Small Business Administration recently released important information that was previously not public: the names of everyone who received a Paycheck Protection Program (PPP) loan and exactly how much they borrowed. The SBA has previously noted that there are “strong indicators of widespread potential abuse and fraud” on the PPP, and these disclosures are likely to further fuel such reports.

Given the controversies surrounding the program, we expect the Biden administration to place a high priority on investigating and prosecuting PPP fraud. Such investigations are likely to go beyond the blatant fraud cases that have been brought so far and address more complex schemes carried out by corporations and small business owners.

Inspector General Questions His Own Authority

A recent report by the Special Inspector General for Pandemic Recovery (SIGPR), however, raises the question of just who would conduct these investigations. To investigate fraud on the PPP and other CARES Act relief programs, Congress created specific pandemic relief oversight mechanisms, including the SIGPR. The U.S. Senate confirmed Brian Miller, a former White House lawyer, to the post in June.

Until recently, it was widely assumed that Miller and his office would play a central role in investigating potential fraud on the PPP, which has proved to be the CARES Act’s most controversial program. Indeed, as the PPP came under intense scrutiny last spring, it seemed only a matter of time before SIGPR would begin aggressively investigating loan recipients, including whether recipients misled the Small Business Administration by certifying that that the loans were “necessary” to the operation of their business.

But, all these months later, there is no indication that SIGPR has actively pursued any PPP-related investigations. How come? In his most recent quarterly report, Miller took the unusual step of questioning, seemingly out of the blue, whether his office has jurisdiction to investigate PPP fraud.

Vowing to “exercise only the authority ultimately given by the consent of the governed,” Miller stated that SIGPR’s jurisdiction over the PPP “remains unclear.” He promised to take a “definitive position” in a future report while inviting Congress to clarify its intent, and just this month indicated that SIGPR “continues to assess relevant information” with respect to its jurisdiction over the PPP.

Miller’s decision to publicly question his office’s jurisdiction is puzzling. No one else had doubted SIGPR’s authority to conduct PPP-related investigations. In fact, Senators from both parties have assumed that the CARES Act grants the inspector general oversight authority with respect to all CARES Act relief programs, including the PPP.

This past August, for example, 29 Republican senators urged Miller to investigate Planned Parenthood, beginning their letter with what then seemed like an uncontroversial statement: “As the newly confirmed [SIGPR], you have the authority to investigate and audit all loans made or managed by the Secretary of the Treasury, including those made under the [PPP].”

Perhaps Miller’s analysis of his own authority is a diplomatic way to avoid confronting demands that he conduct politically charged investigations. Even if so, this highly unusual questioning by an inspector general of his own authority may have long-lasting effects.

It is unclear whether Miller will remain as SIGPR in the Biden administration. Whether he or someone else serves as SIGPR, however, the question remains whether the next administration will feel bound by the current one’s equivocation on an issue as central to SIGPR’s mission as its authority to investigate PPP fraud.

Either way, by raising questions about his own jurisdiction, Miller has likely complicated the job of the office.

Other PPP Investigations Will Continue

To be clear, whether or not SIGPR investigates PPP fraud, PPP-related investigations will proceed. The FBI and other law enforcement agencies will continue to pursue fraud on the program, as they have been doing, and prosecutors across the country will continue to bring PPP-related cases.

That said, these agencies, which are not specifically dedicated to rooting out CARES Act program fraud, have competing priorities. So unless they dedicate specific resources to investigate PPP fraud—beyond the Coronavirus Task Forces put in place at the U.S. Department of Justice to investigate all manner of misconduct associated with the pandemic—it will be hard for them to systematically investigate the program the way SIGPR was expected to do.

Indeed, the SBA has previously suggested that it would not refer PPP loan recipients for criminal prosecution based on representations made by the recipients regarding the “necessity” of their PPP loans.

If SIGPR ultimately concludes that it lacks jurisdiction to investigate PPP fraud, Congress could act to clarify SIGPR’s jurisdiction, or other agencies will need to fill the void. We suspect the incoming Biden administration will take this into account and act accordingly.

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

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Author Information

Amanda Kramer and Daniel Suleiman are partners, and Ashley Nyquist is special counsel, in Covington & Burling LLP’s white collar defense and investigations practice. Kramer is a former federal prosecutor in the U.S. Attorney’s Office in Manhattan and Suleiman is a former senior official in the Department of Justice’s Criminal Division.