Here's an illustration of the money flow, from the source to the see (sic), all courtesy of Covington & Burling LLP.
GAO Report Reveals New Insights Into Lobbying Disclosure Act Compliance and Enforcement:
"The 2020 annual report from the Government Accountability Office (“GAO”) provides new details regarding the state of Lobbying Disclosure Act (“LDA”) compliance and enforcement. By statute, the GAO is charged with conducting random audits of LDA compliance and submitting reports reflecting the results to Congress. This year’s audit reviewed approximately 100 quarterly “LD-2” reports filed by lobbyist employers and lobbying firms and about 160 semi-annual “LD-203” reports that disclose political contributions and politically-related contributions.
"Many takeaways from this year’s review were consistent with past reports. Lobbying registrants still often neglect to round their lobbying expenses and lobbying income to the nearest $10,000. Many registrants also fail to disclose the prior covered government positions held by newly-registered lobbyists. And many LDA reports continue to be amended after a registrant learns of the audit — a fact that GAO believes “suggests that our contact may spur some lobbyists to more closely scrutinize their reports than they would have without our review.”
"But the 55-page report does include some interesting new nuggets:
• "Missing Political Contributions. Almost half (45%) of audited registrants failed to report political contributions on their semi-annual LD-203 political contribution reports. GAO described this as a “statistically significant” increase over prior years. This is a preventable error. Prior to filing, registrants should consider cross-checking the LD-203 reports versus Federal Election Commission reports to ensure there are no missing contributions.
• "JACK Act Certifications. Pursuant to a new statute, the JACK Act, lobbyists are now required to certify they have not been convicted of certain crimes. This year, GAO audited the accuracy of these reports, including by conducting criminal background checks on names listed in the reports. While it found no errors, GAO’s background checks underscore the importance of conducting due diligence to confirm the accuracy of these representations.
• "Naming and Shaming. The report singles out, by name, two lobbying firms that “declined to meet with us following our initial letters.” The failure to meet led to GAO reporting the names of these firms to Congress.
• "Low Enforcement Levels. While there has only been a trickle of LDA civil enforcement cases in the last decade, the trickle has begun to dry in recent years. Only one civil attorney now handles LDA enforcement part-time (down from two in 2017). Moreover, GAO announced that “no suits have been initiated or cases settled since our 2018 lobbying report.” Those prior cases, GAO emphasized, have all involved “chronic offenders”."
Whistleblowers Watch Stimulus Money From Inside from the firm Squire Patton Boggs.
"Whistleblowers, with their unique access to business operations, follow the money to learn whether the business abides by the strings attached to that money. Whistleblowers look for an opportunity to cash in on what they consider fraudulent conduct. What’s a business to do?
Strings Attached
"We recently advised about the many strings attached to the trillions of dollars available from the stimulus packages. Government watchdogs aggressively will scrutinize what happens to that money from the outside. If they find fraudulent conduct, they will seek recovery under the federal False Claims Act (FCA) not just for the amount of loss to the government but for up to three times that amount (known as treble damages).
Whistleblower Incentives
"Whistleblowers are employees on the inside who know what procedures are in place, what procedures they think should be in place, and the people to who make decisions about those procedures. The FCA incentivizes whistleblowers to capitalize on their invaluable insight by filing a lawsuit (a qui tam suit) reporting what appears to be fraudulent conduct to the government watchdogs. The rewards are great. Whistleblowers receive 15% to 30% of the amount of any recovery. In addition, the business is required to pay attorney’s fees to the whistleblower.
"Those incentives work. Whistleblowers are the source of most recoveries under the FCA. We reported that qui tam law suits in 2019 were being filed at the rate of more than 12 per week. Whistleblowers personally recovered more than $271 million in payments. The government itself recovered more than $2.2 billion in those qui tam suits. This far outstrips direct enforcement actions brought by the government without a whistleblower. Now that trillions of dollars are flowing, whistleblowers know the rewards are even greater.
Proactive Action
"A business that needs a recovery stimulus should obtain the relief that is available. From small businesses, nonprofits, venture-backed startups, higher education institutions, and healthcare to trade, supply chains and defense, and other regulated industries, Squire Patton Boggs attorneys are here to help you receive the much-needed assistance.
"But vigilance also is needed. Prepare to account for the money received by, for example, ensuring
• Protocols are established to handle the money
• Compliance programs are in place
• Compliance programs operate effectively
• Clear and readily available channels handle complaints remotely
• Tone at the top encourages employees to report problems to leadership"
Past as Prologue: The Wave of Investigations to Follow the Pandemic Recovery and Actions that Companies Can Take Now to Prepare from, again, Covington & Burling LLP.
"On March 30, 2020, the inspectors general of several major agencies selected the Department of Defense Inspector General, Glenn Fine, to lead a newly created federal oversight entity that will investigate waste, fraud, and abuse in connection with the massive new coronavirus economic relief legislation. The inspectors general were exercising new authority contained in the legislation, but these actions also echo Congress’s past approach to oversight of recovery efforts. This client alert examines the new investigative authorities in the legislation and provides advice for companies, based on past examples.
"Throughout American history, when Congress has confronted a national emergency and authorized a major government response, the economic recovery has almost always been accompanied by significant congressional, civil, or criminal investigations. This paradigm dates back at least to the Civil War, with Congress’s Joint Committee on the Conduct of the War. In modern times, the savings and loan crisis and bailout of the late 1980s led to criminal convictions and the Keating Five lobbying scandal.
"Most recently, after the 2008 financial crisis, Congress sought to formalize and institutionalize the oversight and investigation of recovery efforts through the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) and other oversight bodies. A Congressional Oversight Panel held 26 hearings over more than two years on the causes, symptoms, and effects of the economic crisis and government response and reform efforts. Investigations by just one entity, the Recovery Accountability and Transparency Board, resulted in 1,665 convictions, pleas, or judgments, along with more than $157 million in recoveries, forfeitures, seizures, and other savings.
"In the newly enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Congress again provided that oversight and investigations will accompany the $2 trillion relief program:
"The bill establishes a Special Inspector General for Pandemic Recovery within the Department of the Treasury. The Special Inspector General will be presidentially appointed, as was the SIGTARP. The Special Inspector General will be responsible for conducting, supervising, and coordinating audits and investigations of the making, purchase, management, and sale of loans, loan guarantees, and other investments by the Treasury under the CARES Act. Like the SIGTARP, the Special Inspector General for Pandemic Recovery will also be responsible for providing quarterly reports to Congress. Congress dedicated $25 million of new Treasury funds for the Special Inspector General to carry out these duties.
"The bill establishes a Pandemic Response Accountability Committee within the Council of Inspectors General on Integrity and Efficiency to prevent and detect fraud, waste, abuse, and mismanagement of funds and to mitigate risks across programs and agencies. Congress appropriated $80 million for the Committee. This new Committee appears to be modeled on the Recovery Accountability and Transparency Board established by the American Recovery and Reinvestment Act of 2009 (ARRA), which is generally viewed as having successfully protected against the misuse of recovery funds. Although the Recovery Board was required to coordinate its activities with various agency inspectors general, the new Pandemic Committee is created within the Inspectors General Council. This may mean that the Pandemic Committee will have a heightened degree of autonomy and a greater ability to act quickly and with better coordination than was the case for the Recovery Board. The Pandemic Committee is authorized to issue subpoenas to persons outside of the government.
"The bill authorizes the creation of a bipartisan Congressional Oversight Commission charged with oversight of the Treasury Department and Federal Reserve, as they work to provide economic stability in the wake of the coronavirus. Like the TARP Congressional Oversight Panel, the CARES Act’s Congressional Oversight Commission will consist of five members appointed by the leaders of Congress. Also like its predecessor, the Congressional Oversight Commission will have significant authority to conduct oversight and investigations, including holding hearings and taking testimony.
"In addition to these new entities, existing authorities are certain to continue to investigate. For example, the House Oversight and Reform Committee has already launched an investigation of travel insurance companies and their coverage decisions related to travel cancelled due to the coronavirus. It is likely that congressional committees will examine the administration’s preparedness and response to the crisis, along with the activities of deeply affected companies and industries, especially those that receive federal aid. If history is a guide, these investigations will continue for many years into the future. For example, as late as last year, the House Financial Services Committee held a hearing that focused on bank accountability “10 years after the Financial Crisis.” The CEOs of Citigroup, JP Morgan Chase, Morgan Stanley, Bank of America, Goldman Sachs, and others all testified.
"Criminal authorities will also continue to investigate. Attorney General William Barr has directed federal prosecutors to prioritize investigations and prosecutions of coronavirus fraud schemes, and Deputy Attorney General Jeffrey Rosen directed each U.S. Attorney’s Office to identify a prosecutor to serve as the lead coronavirus fraud coordinator. These developments mirror actions that were taken after the financial crisis. For example, SIGTARP investigations related to fraud involving TARP funds resulted in enforcement actions against nine financial institutions and in the successful criminal prosecutions of 51 bank officers and executives. The Department of Justice—including through a Financial Fraud Enforcement Task Force and a Residential Mortgage-Backed Securities Working Group—investigated fraud related to the financial crisis itself, ultimately resulting in several multi-billion dollar civil settlements with financial institutions.
"Of course, the investigations that will follow the coronavirus recovery will not be exactly the same as the investigations of the financial crisis or the savings and loan bailout. Each new crisis has its own unique attributes and characteristics. Nonetheless, based on our experience defending companies and individuals involved in similar investigations, we can offer the following five tips for being prepared:
1. Invest in compliance now to avoid problems in the future. Companies need to understand the implications of taking federal money and establish systems that ensure compliance. For example, companies that benefit from increased federal investment in pandemic responses may have increased compliance obligations as a result of contracting with the government. Certain of the federal relief programs contain restrictions on executive compensation. Even the process of seeking federal assistance may implicate laws that regulate lobbying, depending on the agencies or officials contacted.
2. Consider the public and political dynamics of corporate actions. Congressional investigators often follow where the press leads, and investigative reporters will be looking for juicy stories to highlight. Some recipients of prior federal funds were criticized for paying bonuses, moving jobs overseas, or even for their executives’ vacation arrangements. By seeking and accepting public funds, companies will often be held by the public and Congress to a higher standard.
3. Understand your company’s areas of vulnerability. Companies in certain industries already face a high risk of investigation. Industries involved in the response to the crisis—including the biopharmaceutical, technology, consumer goods, and medical device industries—could have their actions scrutinized closely. Sometimes companies with the best intentions, such as rushing to respond to a pandemic, will take risks that would not be warranted upon reflection. Companies should have a clear understanding of these vulnerabilities and a clear and compelling answer to after-the-fact criticisms.
4. Involve your legal department in business decisions. With the vast majority of employees working from home, and business situations moving rapidly, there are significant risks that business decisions can be made in “silos” without proper examination by all relevant parts of the company, including the legal department. The coronavirus pandemic has placed pressure on government regulators, including the Food and Drug Administration and others, to relax tightly controlled regulatory regimes. This dynamic also creates opportunities for industry, including for companies that may seek to develop new product lines or otherwise re-tool their manufacturing processes to meet current demand for hand sanitizers, facial masks, and other products and supplies needed during the pandemic. It is critical to involve the legal and compliance functions in these business decisions in order to mitigate a host of risks, including missteps with the federal government that could lead to regulatory or criminal exposure.
5. Carefully vet all applications for assistance and other submissions to the federal government. In order to review applications and other submissions quickly and exercise judgment about the suitability of individual institutions to receive funds, the government will need to rely on representations, attestations, and certifications made by applicants. Companies and their counsel should carefully vet such statements with an eye toward the potential civil and criminal risks associated with submissions to the government. Civil and criminal authorities will focus on such submissions and other disclosures in any eventual investigations, and companies should seek to mitigate this risk with proper planning and legal review processes on the front-end."
UPDATE TO THIS STORY:
As reported in the final article above,"The [Congress']bill establishes a Pandemic Response Accountability Committee within the Council of Inspectors General on Integrity and Efficiency to prevent and detect fraud, waste, abuse, and mismanagement of funds and to mitigate risks across programs and agencies. ... This new Committee appears to be modeled on the Recovery Accountability and Transparency Board established by the American Recovery and Reinvestment Act of 2009 (ARRA), which is generally viewed as having successfully protected against the misuse of recovery funds. ... the new Pandemic Committee is created within the Inspectors General Council. This may mean that the Pandemic Committee will have a heightened degree of autonomy...."NOT SO FAST. Fine, but...
Trump Removes Acting Pentagon IG Slated to Lead Pandemic Oversight Last week, the Council of the Inspectors General on Integrity and Efficiency tapped Fine to chair the Pandemic Response Accountability Committee, an oversight body created by the $2.2 trillion CARES Act to ensure taxpayer money is spent wisely. The law empowered CIGIE to name the committee chair, but stipulates that only current IGs can hold the position, so Trump’s removal of Fine from his acting position prevents the well-regarded watchdog from leading the oversight committee.The Constitutional "authority" the President of the United States cited doesn't appear to quite fit this particular Bill which, remember, was intended "to prevent and detect fraud, waste, abuse, and mismanagement of funds." Article II, Section It says, the President "shall take Care that the Laws be faithfully executed...." Instead, the President seems more interested in taking care that no independent voice is heard, and no such Inspector seen.
Over the course of his presidency, Trump has flouted transparency precedents and bristled at the role of IGs, whose work is critically important to holding agencies and the administration accountable for protecting the public’s health, among other things. Fine’s removal is part of a larger shakeup to the IG community.
Trump signaled in a signing statement on March 27 that he would not enforce some of the oversight provisions in the $2.2 trillion CARES Act. He specifically objected to the creation of a special IG for pandemic recovery at Treasury empowered to request information from other agencies and report to Congress any delays in receiving that information: “I do not understand, and my administration will not treat, this provision as permitting the SIGPR to issue reports to the Congress without the presidential supervision required by the Take Care Clause, Article II, section 3,” the statement said."
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