On April 23, the Federal Reserve Board issued a press release vowing to report information every month regarding the participants of lending and liquidity facilities it has established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). At a minimum, according to the Board, this information will include:

• Participant names and other details;
• Borrowed amounts and interest rates; and
• Overall costs, revenues, and fees for each facility.

The information will be published on the Board’s website “at least every 30 days and without redactions.” According to the Board’s announcement, this reporting relates to all liquidity and lending facilities that are established to support the economy and that incorporate equity investments provided from the U.S. Department of the Treasury via the CARES Act. Currently, these facilities include the Main Street Expanded and New Loan facilities, the expanded Primary and Secondary Market Corporate Credit Facilities, the expanded Term Asset-Backed Securities Loan Facility, and the Municipal Liquidity facility.

The publication of information about borrowers participating in the Fed’s facilities could lead to increased scrutiny from law enforcement and regulatory agencies, as well as Congress.

For example, Attorney General William P. Barr has directed all U.S. Attorneys to prioritize the investigation and prosecution of COVID-19-related fraud schemes. Three days later, Deputy Attorney General Jeffrey Rosen further directed each U.S. Attorney to appoint a Coronavirus Fraud Coordinator, to serve as the legal counsel for the district on matters relating to the COVID-19. Given the amount of government money provided by the CARES Act, as well as the need for businesses to act fast, payments made pursuant to the Act are sure to draw the attention of whistleblowers and DOJ, and may even raise issues under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq. The FCA was initially enacted in 1863 in response to fraud perpetrated on the Union Army and has expanded dramatically over the years. More recent crises, especially those that have been met with significant government spending (e.g., Hurricane Katrina, the 2008 financial crisis, and the Troubled Asset Relief Program), have led to FCA actions against a myriad of contractors and those receiving government funds. Given that the CARES Act is the largest emergency stimulus package in history, FCA enforcement actions appear virtually inevitable.

As it relates to Congress, there will be strong political incentives to profile participants that may not seem deserving of federal assistance in the facilities even if no unlawful activity may have transpired. Already, there has been controversy over certain borrowers being eligible for federal assistance where there is not a perceived need. Among other congressional committees likely to conduct oversight over federal appropriations spent under the CARES Act, we expect that the newly-established Select Subcommittee on the Coronavirus Crisis within the House Committee on Oversight and Reform to be particularly aggressive in identifying episodes of waste, fraud, and abuse.

Authored by  Ashley Hutto-Schultz, Aaron Cutler, Cole Finegan, Michele Sartori, Robert Glennon, Ivan Zapien, Ari Fridman and Robert Toll.