The Justice Department has widened its crackdown on COVID-19 fraud, announcing the first criminal case alleging misuse of federal relief funds designated for medical providers. The egregious nature of the alleged fraud and relatively small amount of funds involved provide valuable clues about the pace, breadth and focus of future prosecutions.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted March 29, 2020, established the Provider Relief Fund, which distributed funds to medical providers for use in responding to the pandemic. Earlier this month, the Justice Department criminally charged the owner of a Michigan home health services business, alleging that she misused relief funds designated for medical treatment and care of COVID-19 patients by issuing checks to her family for their personal use. It is likely the first of many such cases, as federal investigators scrutinize distribution of Provider Relief Fund dollars and the use of such funds by recipients.
The CARES Act
The CARES Act was intended to provide emergency financial assistance to those suffering economic losses related to the COVID-19 pandemic. It included the Provider Relief Fund, which targeted funding to medical providers to cover the costs of pandemic response and COVID-19 patient care.
The Government’s First Prosecution
The owner of the home health services business, Amina Abbas of Michigan, was indicted February 10, 2021 on charges of embezzling government property. The Justice Department’s Criminal Division alleges that Abbas intentionally misappropriated government funds that were allocated to aid medical providers in the treatment of patients suffering from COVID-19. Abbas is the first person to be criminally charged for the intentional misuse of funds intended to provide relief to health care professionals during the coronavirus pandemic.
Abbas previously owned 1 on 1 Home Health, which closed prior to the pandemic. Nonetheless, the shuttered company allegedly received approximately $38,000 through the Provider Relief Fund to pay for the medical treatment of COVID-19 patients. The government alleges that Abbas instead distributed the funds to her family members.
The investigation was carried out by the Office of Inspector General of the United States Department of Health and Human Services (HHS-OIG) and the FBI.
Predictions for Upcoming Prosecutions
Abbas allegedly embezzled less than $40,000, a relatively small amount. However, as we have previously written, the initial Paycheck Protection Program fraud prosecutions addressed loans ranging from as little as $30,000 to $24 million. That the Justice Department’s first Provider Relief Fund prosecution involves a relatively small loan suggests that the government will be aggressively prosecuting these matters. Accordingly, we can expect to see a steady influx of new criminal cases focused on government embezzlement in the months to come.
Further, as we discussed previously, the initial PPP fraud prosecutions also appeared to represent the most egregious cases. Similarly, the government appears to be concentrated on the most brazen examples of embezzlement. In this case, Abbas allegedly used 1 on 1 Home Health, a company that was no longer in existence, to receive government money through the Provider Relief Fund and provide it to her family members. We can expect that the first wave of prosecutions will include similarly egregious matters pertaining to phantom companies.
Just as the PPP loan fraud cases came swiftly, we should anticipate the same rapidity of prosecutions as it relates to the Provider Relief Fund. The government provides a national hotline and an online complaint form available to anyone with information about wrongdoing related to COVID-19.
That multiple federal agencies investigated the Abbas matter also suggests that not only will the government be spending considerable time and resources on prosecuting these matters, but that there will also be several different government agencies involved in investigating such cases.
Any business owner concerned about compliance with the CARES Act Provider Relief Fund should immediately consult counsel and not wait to be contacted by law enforcement. Those who have already received a subpoena or inquiry from any law enforcement agency should immediately consult with counsel who can assess the full potential for civil and criminal exposure before responding.
PPP Fraud Prosecution Tracker
Fox Rothschild’s White-Collar Criminal Defense & Regulatory Compliance Practice Group is tracking in real time all federal criminal cases alleging PPP loan violations.
To access our PPP Fraud Prosecution Tracker, contact White-Collar Criminal Defense & Regulatory Compliance Practice Group Co-Chairs Matthew S. Adams at email@example.com or 973.994.7573, and Matthew D. Lee at firstname.lastname@example.org or 215.299.2765.