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What TARP Investigations Can Teach Us About Stimulus Fraud
For more than 10 years, federal investigators, led by the Special Inspector General for the TARP (SIGTARP) have, in coordination with the Department of Justice (DOJ), Federal Bureau of Investigations (FBI), Securities Exchange Commission (SEC), Internal Revenue Service (IRS), Financial Crimes Enforcement Network (FinCEN), Small Business Administration (SBA) and other investigative agencies, investigated criminal conduct in connection with the 2008 recession-era TARP program. From those investigations, U.S. Attorneys across the country brought cases and earned convictions for offenses spanning the federal criminal code.
We can expect that these same agencies will use the same techniques and strategies to investigate crimes and bring cases involving fraud related to the COVID-19 stimulus packages. Just over a month removed from passage of the CARES Act, it has already begun. The SEC has halted trading and brought enforcement actions against companies misrepresenting their ability to fight COVID-19 and the financial impact the pandemic has and will continue to have on their businesses. The DOJ has charged individuals for allegedly defrauding the Payroll Protection Program (PPP). The Treasury Department has announced the automatic audit of large recipients of PPP loans. Yet, these actions do not even represent the tip of the iceberg; they are merely foreshadowing.
TARP Fraud: Who Investigated It and How
SIGTARP was established by the Emergency Economic Stabilization Act of 2008 (EESA) and authorized to conduct, supervise and coordinate audits and investigations of any actions taken under the TARP. SIGTARP was and remains a proactive investigative agency. To detect fraud in connection with TARP spending, SIGTARP employs investigative techniques analyzing transactional data for trends and patterns that might indicate fraud. Taking an analytical approach, SIGTARP has been able to identify industry hotspots for fraud, characteristics indicating potential fraudulent conduct and profiles of potential fraudsters and with that information obtain nearly 400 convictions and recover more than $11 billion.
But, SIGTARP has not operated on analytics alone. Around half of SIGTARP's investigations were spurred by tips from victims, insiders and other members of the public. Also, importantly, SIGTARP has worked extensively with other law enforcement agencies to expand its reach and leverage its resources. SIGTARP's partnerships has enabled it to reach beyond crimes solely related to acquisition of funds through TARP to other associated offenses including accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage modification fraud, wire fraud, false statements to the government, false entries on bank records, obstruction of justice, money laundering and more.
Representative TARP Prosecutions
Investigations flowing from TARP snared fraudsters of all stripes: individuals and businesses stealing money from the stimulus programs, executives deceiving investors, bank employees exploiting the crisis for their personal gain, professionals assisting those wrongdoers and many others.
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