Stimulus bill business loans have surprising strings attached

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Untold numbers of businesses large and small are applying for federal assistance under the recently-passed stimulus law. That includes federal contractors. But federal loans and grants come with strings. Sometimes those strings have hooks and that can snare recipients. Dominique Casimir, a partner in the government contracts practice at the law firm Blank Rome, joined Federal Drive with Tom Temin to share what to watch out for.

Interview transcript:

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Tom Temin: Good to have you on.

Dominique Casimir: Thank you for having me, Tom.

Tom Temin: So there are lots of rules, lots of regulations. I mean, this is another one of these multi thousand page bills. What have you discovered in there that contractors applying for some sort of assistance need to watch out for?

Dominique Casimir: Well, it’s a great question. Over the next few years, the oversight provisions of the CARES Act will likely lead to hundreds or even thousands of enforcement actions against companies and individuals, and billions of dollars in penalties and fines. One of the first things that we should talk about is remembering that all existing oversight functions that apply to federal contractors will continue to exist and the CARES Act directs millions of dollars to existing inspectors general and directs them to increase their investigative and enforcement activities of programs that are tied to CARES Act funds. These people are already aggressive and they know how to do their jobs. Second, on top of the existing enforcement framework, the CARES Act creates three new oversight bodies. First is the pandemic response accountability committee. This committee will conduct, coordinate and support inspectors general in the oversight of covered funds in order to detect and prevent fraud, waste, abuse and mismanagement. And this committee has the authority to conduct independent investigations and refer matters to the Department of Justice for criminal or civil investigation. Second, there is the Special Inspector General for pandemic recovery. This inspector general is established within the Treasury Department and 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 Secretary of the Treasury.

Tom Temin: We’re gonna call that one the SIG PAR probably.

Dominique Casimir: Yes, exactly. And this inspector general will have authority to conduct investigations and issue reports and be able to refer to the matter to the Department of Justice for criminal or civil investigation. This is the post for which President Trump intends to nominate White House lawyer Brian Miller to serve as the Inspector General.

Tom Temin: And we know what Miller is capable of from his history as GSA Inspector General.

Dominique Casimir: Absolutely. And then the third barb I suppose created in this legislation is the congressional oversight commission. This will be five members selected by a majority and minority leadership from both the House and the Senate, and will have authority to conduct oversight of the implementation of the stimulus package by the Treasury and the Federal Reserve. And what’s important for contractors to remember here is that this oversight commission may be particularly aggresive in terms of holding hearings, taking testimony receiving evidence and issuing reports, and so there may be a real public relations hook right there for contractors if they are ensnared in any sort of significant allegations of fraud, waste, abuse and mismanagement.

Tom Temin: Sure. And have they also added into this law, new provisions that companies have to comply with other than what was already on the books, which was rather extensive?

Dominique Casimir: Well, yes, in terms of eligibility to receive assistance in the first place. What contractors have to show is that their employees or subcontractors are unable to perform work on site due to facility closures or other restrictions, and that their employees or subcontractors are unable to telework because their job duties cannot be performed remotely during the pandemic. And it’s a complicated situation Tom because the payments that are made available to contractors under the CARES Act must be reduced by tax credits or other relief that may be available under the Families First Coronavirus Response Act and other parts of the CARES Act. So it’s a complicated situation. And of course, the government always requires contractors to try to mitigate their losses.

Tom Temin: And so what is your advice for contractors on how to proceed? I guess let me back it up first, though, and ask what types of contractors do you think are most likely to need this kind of emergency funding? Because a lot of contracts are proceeding a pace as if people were normal circumstances.

Dominique Casimir: Right? Well, this is a $2.2 trillion economic package. And there are all sorts of contractors who could end up using some of this money. The first are contractors that need financial assistance under Section 36 10. The contractors whose employees are sitting idle because they’re not able to perform work either in facilities or telework, but then there are also a whole host of contractor Who may find new contracting opportunities within the current pandemic, such as, of course, contractors that can provide medical equipment and services, there is $300 million in the stimulus package for the government to use to procure IT equipment and increase bandwidth in order to facilitate telework. There are also billions of dollars specifically earmarked for the Department of Defense and defense industry contractors, including billions of dollars in loans, loan guarantees and other financial assistance to businesses through the Department of Treasury, including $17 billion for businesses critical to maintaining national security.

Tom Temin: Alright, so it sounds like in some of those earlier areas, like the medical or even the telework, you could have companies that are stumbling into federal contracting for the first time because the opportunity is there. Suppose I make baby onesies and I figure golly, if I can make onesies, I can make face masks for example. Just making up an absurd example. But then you could have some real newbies going into what can be quicksand.

Dominique Casimir: Absolutely. And first time government contractors are always, you know, in precarious situations as they try to learn an already existing framework of a very complicated regulations. But on top of that, you add the fact that the government is moving very quickly right now trying to get these funds out there and in many cases, using non traditional contracting authorities to get things done quickly. And there can be criminal penalties for non compliance and increased needs to protect intellectual property on the part of contractors and maybe even the need for contractors to seek special liability protections if they’re doing hazardous work.

Tom Temin: Got it. And for those experienced contractors say, if you’re not Boeing, or something that has a giant in house legal staff and can get 30 or 40 people from Blank Rome, if you can’t quite swing all of that counsel, what should you do first? What should you really focus on to make sure that you are in compliance?

Dominique Casimir: I would say the first thing is to proceed as if all of the costs that you’re incurring now will be questioned at some point in the future, maybe years into the future. So you want to be reasonable, but at the same time, create the documentation now that explains your actions, like trying to treat like costs alike and documenting your efforts to obtain relief under other legislation and your efforts to mitigate losses such as by reassigning personnel, so you want to proceed as if all of your costs incurred now are going to be questioned years into the future. You may want to designate a specific managerial level individuals a primary point of contact with government officials on coronavirus related issues. You also may want to consider maintaining access to your records now, so many companies Tom engage in it migrations that are sort of routine actions but later on when the government auditors come looking for records it makes it incredibly difficult to piece together records as they exist. At the time that the company received government funds and so you want to develop a plan to maintain the access to the files of key custodians, have those custodians keep organized files and develop a long term plan to track where key files reside in your organization’s electronic management system. And then another thing that some people might not think about is to create a file of potentially helpful documents, for instance, has government personnel praised your organization’s efforts that have been above and beyond and so save that email or put that in an email back to the government and thank them for telling you that? Did the government temporarily excuse your organization from having to provide personnel who meet a particular labor category qualification, you want to make sure to get something like that in writing, if the government has extended deadlines for deliverables or agreed to accept something less than what the contract requires, you want to pursue a formal modification and keep that in the contract file. And finally, now is really the time for enforcing your ethics and culture. compliance program and not letting it die on the vine. So it’s really important to have the chief executive or other top level managers communicate to employees in the writing bearing today’s date that the code of conduct continues to apply, that the organization expects employees to continue to comply with established processes and procedures. Because of course, when people are moving quickly, sometimes unintentionally, they fail to comply with existing processes and procedures and later on that can come to look intentional to a government auditor, and it’s a good time to remind employees of the channels that are available to them if they have questions or need to elevate an issue.

Tom Temin: All right, that seems to cover it. Attorney Dominique Casimir is a partner in the government contracts practice at the law firm blank Rome. Thanks so much for joining me.

Dominique Casimir: Thank you for having me, Tom.