Skadden Discusses Closer Scrutiny of Corporate Conduct Under Biden

The Biden administration is widely expected to be tougher on corporate wrongdoing than its predecessor. Although there have not yet been significant changes to existing policies, key nominations to date and early enforcement initiatives signal close scrutiny of corporate conduct to come.

Personnel. Beyond those already confirmed to lead the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), only a handful of senior leaders at these agencies are in place.

The Senate confirmed Merrick Garland as attorney general on March 10, 2021, followed by the confirmations of Lisa Monaco and Vanita Gupta as deputy attorney general and associate … Read more

Fried Frank Discusses the New Paycheck Protection Program

On December 27, 2020, the Economic Aid Act (EAA) was signed into law to provide financial relief to small businesses suffering from the impact of the COVID-19 pandemic. The EAA amends the PPP loan program that was established earlier this year under the CARES Act. As before, the PPP loans will be low-interest, forgivable loans for specified purposes, designed to encourage businesses to keep employees on the payroll during the pandemic.

The PPP program established under the CARES Act ended on August 8, 2020. At that time, PPP loans totaling $525 billion had been issued to roughly 5.2 million businesses, … Read more

Covid and the Corporate Family

My article, Corporate Family Matters, proposes a definition of and governance regime for a particular type of corporate group – the family.  I define the family as an enterprise formed by weaving corporations, partnerships, and LLCs together into a mix of public and private entities acting for the benefit of a parent corporation or for the personal gain of one or more leaders of the enterprise.  A corporation should be treated like a family when: (1) there is more than one entity with shared ownership or management or when an entity is wholly-owned by another entity and (2) that … Read more

Funding Crises: An Empirical Study of the Paycheck Protection Program

Soon after the coronavirus pandemic erupted in the spring, Congress enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, pumping $2.2 trillion into the economy. Now, nine months later, many of that law’s critical elements have ended or will soon expire. Senate Majority Leader McConnell and Speaker of the House Pelosi are engaging in talks but have yet to agree on a new stimulus package.[1] When they do, we believe they can learn several important lessons from the effects of the CARES Act. In our article, we conducted an empirical study of important elements of the CARES … Read more

Arnold & Porter Discusses Waste and Abuse of Covid-19 Relief Funds

For the last several months, Arnold & Porter has been tracking the Department of Justice’s announcements of fraud cases involving the alleged misappropriation of funds provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). So far, DOJ has launched more than 50 such criminal prosecutions for fraudulently seeking or obtaining Paycheck Protection Program (PPP) loans and other funds that Congress appropriated to help Americans cope with the pandemic and related economic challenges. Arnold & Porter’s fraud tracker collects these cases in one place and enables users to see how and where DOJ has been pursuing CARES … Read more

Skadden Discusses Enforcement Risks and the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was signed into law on March 27, 2020, provided for the establishment and expansion of a range of economic assistance programs designed to help U.S. businesses manage the financial consequences of the ongoing COVID-19 crisis. While these programs may provide a much-needed lifeline to U.S. businesses, the CARES Act also created oversight and enforcement functions, which, along with existing authorities, raise enforcement risks for businesses that choose to participate in the act’s programs. The CARES Act has already been the subject of intense scrutiny, particularly with respect … Read more

Why Many Small Companies Have So Far Missed Out on the Paycheck Protection Program

The Paycheck Protection Program (PPP) is a critical part of the CARES Act, which helps individuals and organizations ride out Covid-19’s initial damage to the U.S. economy. PPP provides for loans to small businesses, and Congress should focus on keeping money available and making it easier for small businesses without pre-existing bank relationships to get loans. (One way to do that would be to waive the anti-money-laundering rules and instruct bank regulators to create a comprehensive online list of lenders willing to make PPP loans to new clients).

Instead, the PPP is beset by controversy. Big restaurant chains like Ruth’s … Read more

Wall Street CARES!: Who Gets the Hidden Subsidies Under the CARES Act?

The CARES Act was passed under intense pressure and with minimal transparency. The consequence of this opaque process is that there are some surprising windfalls. No criticism is here expressed of the act’s purpose, but Wall Street knows one thing about federal subsidies: Charity begins at home.

The centerpiece of the CARES Act is Section 1102’s “Paycheck protection program,” which will make available some $349 billion to be lent to small businesses in loans guaranteed by the Small Business Administration (“SBA”).[1] These loans will carry a very low 1% interest rate, and the expectation is that most of the … Read more

Large Corporations Did Not Need A Bailout

The CARES Act passed in response to the COVID-19 crisis provides billions of dollars in industry-specific loans that will go to large corporations like Boeing and the major airlines. These provisions are part of a larger compromise that also puts important funds into the hands of individuals and small businesses. But one should not be fooled into thinking the provisions benefiting large corporations and their shareholders were a necessary part of a coronavirus bailout. Instead they go against the core principles that should guide policymakers in responding to a crisis of this sort.

As Eric Posner and I explained in … Read more

Wachtell Lipton on The CARES Act: Litigation and Enforcement Lessons from the Financial Crisis

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, provides $2 trillion in emergency relief to individuals, small businesses, large corporations, and financial institutions.  This includes up to $349 billion in small business loans and up to $500 billion in loans and loan guarantees to eligible businesses affected by the coronavirus crisis.  As with the stimulus initiatives following the 2008 financial crisis, the CARES Act imposes significant conditions on recipients of this aid and creates a new inspector general dedicated to enforcing compliance with these conditions.  All businesses should … Read more