CARES Act Fraud: Discussion with Bart Daniel from Nelson Mullins

Episode Date: August 30, 2023

In this episode of Stark Integrity, Bob Wade (“Captain Integrity”) is joined by Bart Daniel, Partner at Nelson Mullins, to examine one of the most significant enforcement areas to emerge from the COVID-19 era: fraud related to the CARES Act.

The CARES Act, passed in March 2020, was designed to provide rapid economic relief during an unprecedented global crisis. While the legislation succeeded in delivering critical funding, Bart Daniel explains that the speed, scale, and structure of the programs created an environment ripe for fraud and abuse.

This episode offers a practical look at how CARES Act fraud occurred, why it was so widespread, and how the government continues to pursue enforcement years later.

The CARES Act: A Lifeline with Built-In Risk

Bart Daniel begins by explaining the purpose and structure of the CARES Act, which authorized hundreds of billions—ultimately trillions—of dollars in relief funding to individuals, businesses, and healthcare providers.

Key programs included:

• The Paycheck Protection Program (PPP)
• Economic Injury Disaster Loans (EIDL)
• Provider Relief Funds (PRF) for healthcare entities

These programs were designed to:

• Stabilize the economy
• Preserve jobs
• Support struggling providers and businesses

However, as Bart Daniel notes, the urgency of the crisis meant that speed took priority over traditional safeguards, creating vulnerabilities.

Government reports later confirmed that:

• Massive funds were distributed quickly under relaxed controls
• Programs relied heavily on self-certification by applicants
• Fraud detection mechanisms were limited at the outset

This combination created what can best be described as a high-risk environment for fraud.

Why the PPP Was Particularly Vulnerable

A major focus of the discussion is the Paycheck Protection Program (PPP)—one of the most widely used and widely abused components of the CARES Act.

Bart Daniel explains that PPP fraud became so prevalent because of several factors:

• Applications relied heavily on borrower certifications rather than upfront validation
• Funds were disbursed quickly with limited review
• Loans were forgivable, creating less perceived risk for applicants
• The program’s complexity allowed for manipulation

Common fraud schemes included:

• Inflating payroll or employee counts
• Creating fictitious businesses
• Misrepresenting financial data
• Using funds for unauthorized purposes

Subsequent analyses have shown that tens of billions of dollars may have been lost to fraud, underscoring the scale of the issue.

The Role of Human Behavior: Not Just Career Criminals

One of the more interesting insights from Bart Daniel is that CARES Act fraud was not limited to sophisticated criminal enterprises.

He notes that:

• Fraud included both organized schemes and individual opportunistic behavior
• Many participants were not traditional fraudsters
• The perception that “everyone is doing it” may have influenced behavior

Government findings support this observation, noting that pandemic fraud involved individuals from a wide range of backgrounds—not just professional criminals.

This highlights an important compliance lesson:
Even well-intentioned individuals may engage in risky behavior when controls are weak and incentives are high.

How the Government Is Responding

A central theme of the episode is that CARES Act enforcement is far from over.

Bart Daniel explains that the government has adopted a multi-pronged enforcement approach, including:

• Criminal prosecutions
• Civil enforcement under the False Claims Act (FCA)
• Asset seizure and recovery efforts

Federal agencies—including the Department of Justice (DOJ) and Small Business Administration (SBA)—have mobilized significant resources to pursue these cases.

Enforcement has been extensive:

• Thousands of defendants have been charged or convicted
• Billions of dollars in fraudulent funds have been identified
• Investigations remain ongoing years after the initial disbursement

Importantly, Congress extended the statute of limitations for PPP fraud, ensuring that enforcement activity will continue well into the future.

The Critical Role of Whistleblowers

Another major area of focus in the episode is the role of whistleblowers in CARES Act enforcement.

Bart Daniel highlights that:

• Many cases are initiated through insider complaints
• The False Claims Act allows whistleblowers (relators) to bring cases on behalf of the government
• Whistleblowers may receive a portion of recovered funds

This creates powerful incentives for individuals to report misconduct.

In fact, whistleblower actions remain a primary driver of healthcare fraud enforcement, and this trend has continued in pandemic-related cases.

Healthcare-Specific Risks

While CARES Act programs extended far beyond healthcare, Bart Daniel discusses how healthcare organizations face unique exposure.

For example:

• Provider Relief Funds required certifications regarding use of funds and compliance
• Misreporting or misuse may lead to False Claims Act liability
• Documentation requirements are critical for defending the use of funds

Recent audits and investigations have identified issues such as:

• Improper allocation of relief funds
• Failure to meet program requirements
• Inaccurate reporting

This underscores that healthcare providers must treat CARES Act funding as a high-risk compliance area—not just financial assistance.

Key Compliance Failures That Led to Fraud

Throughout the discussion, Bart Daniel points to several recurring themes in CARES Act fraud cases:

• Overreliance on self-certified information
• Lack of internal controls or oversight
• Failure to understand program requirements
• Poor documentation of how funds were used

These failures often transformed what could have been administrative errors into enforcement actions.

Lessons for Healthcare Organizations

Although the CARES Act was a unique event, the compliance lessons are broadly applicable.

Organizations should take away the following:

• Rapid funding programs still require strong internal controls
• Certifications to the government must be accurate and verifiable
• Documentation is critical—particularly when funds come with conditions
• Compliance programs must adapt quickly to changing regulatory environments
• “Crisis conditions” do not eliminate enforcement risk

Perhaps most importantly, organizations must recognize that government funding always carries compliance obligations—regardless of the urgency in which it is delivered.

Practical Takeaways

The key takeaway from Bart Daniel’s insights is that CARES Act fraud represents a perfect storm of urgency, scale, and weak controls.

Healthcare organizations should:

• Review any past participation in CARES Act programs
• Ensure documentation supports all certifications and use of funds
• Monitor for potential whistleblower concerns
• Strengthen internal compliance and auditing processes
• Be prepared for ongoing government inquiries and investigations

Final Thoughts

This episode reinforces a critical point:
The CARES Act may have been temporary, but its enforcement consequences are long-term.

Through Bart Daniel’s perspective, it becomes clear that pandemic-related fraud is not just a historical issue—it is an active and evolving enforcement priority.

Organizations that treat CARES Act compliance as an afterthought risk significant exposure. Those that proactively assess and address potential issues will be far better positioned to navigate this continuing wave of investigations.

Click here to listen to this Stark Integrity Podcast Episode:
https://podcasts.apple.com/us/podcast/cares-act-fraud-discussion-with-bart-daniel-from/id1588939373?i=1000626148278&l=fr-FR