Key Points

• The DOJ's new National Fraud Enforcement Division consolidates federal fraud resources, including tax, health care, and consumer fraud units, into a centralized enforcement group laser-focused on protecting tax dollars.
• Any company doing business with entities that receive public funding should expect heightened scrutiny, more subpoenas and aggressive civil investigation demands as the division rapidly expands prosecutorial capacity nationwide.
• This isn't just talk. The division announced successful prosecutions within 24 hours of its launch, signaling that COVID-relief fraud, PPP abuse and benefits fraud remain squarely in the crosshairs.

Companies of all types that do business with entities receiving public funding should brace for additional scrutiny under the acting U.S. Attorney General’s launch of the National Fraud Enforcement Division within the U.S. Department of Justice (DOJ).

This newly announced division, detailed in a memorandum, is intended to centralize and expand the DOJ’s efforts to investigate and prosecute fraud involving taxpayer dollars and taxpayer‑funded programs. The National Fraud Enforcement Division’s stated mission is to “zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars.”

How will the Department of Justice pursue fraud investigations?

To accomplish the mission, the National Fraud Enforcement Division plans to develop systems and processes to efficiently detect and identify fraud involving taxpayer funds. It will also deploy “state-of-the-art tools and resources” to prosecutors and law enforcement to help detect fraud.

The government plans to redirect existing DOJ resources to the new division. The division is expected to assume operation control of the Criminal Division’s Tax Section, the Health Care Fraud Unit, and the Market, Government, and Consumer Fraud Unit. The government also advised that there is a “reasonable presumption” that any criminal unit or section with a mission similar to that of the National Fraud Enforcement Division will be brought within it.

The memorandum also stated that every U.S. Attorney’s Office must integrate the new division’s mission into district‑level operations by designating an experienced prosecutor to the National Fraud Enforcement Division to administer its mission within that district. That A.U.S.A must then ensure that the operations are adequately staffed and diligently pursued. With the new Division, the government plans to begin hiring to “rapidly and substantially increase prosecutorial resources across the country.”

The government also plans to create a National Fraud Detection Center dedicated to investigating fraud across taxpayer‑funded programs and generating leads for investigators and prosecutors.

The memorandum also confirmed that the government will review applicable laws, regulations and guidelines related to fraud investigations, prosecutions and penalties, and provide recommendations to the Deputy Attorney General for “strengthening” those authorities.

What to Expect

DOJ plans to spend significant prosecutorial resources on fraud related to taxpayer dollars and taxpayer‑funded programs. Because of the expansive nature of this new division, including all investigations of fraud related to tax, health care, the market and consumers, all companies can expect an increase in subpoenas and civil investigation demands from the government. Given the significant resources the government is dedicating to this division, it will be expected to produce results. In fact, the division already announced successful prosecutions one day after the memorandum was released. The prosecutions related to fraudulent COVID-19-related tax refunds, fraudulent receipt of government benefits from the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program, and multiple state unemployment insurance programs, and receiving fraudulent benefits from Social Security disability.

In the current climate, businesses should consult with counsel to assess risks and ensure they are in compliance as the DOJ continues to prosecute.

For additional information on this and other issues related to DOJ enforcement initiatives, contact the author Marissa Koblitz Kingman at mkingman@foxrothschild.com

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the authors and not necessarily this law firm or its clients.