SIGPR Quarterly Report to Congress (April–June 2021)
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2021-06-30
- Case
- Sigpr Quarterly 2021 06 30 Sigpr Quarterly Report To The United States Congress April To June 2021
Summary
The Quarterly Report to the United States Congress for April to June 2021 from the Office of the Special Inspector General for Pandemic Recovery (SIGPR), opening with a message from Brian D. Miller dated July 30, 2021. It reports that SIGPR worked on 20 preliminary inquiries and full investigations, 16 developed internally, and received 620 hotline complaints, referring 201 to other agencies. The Office of Audits continued an audit of the Direct Loan Program and launched an audit of the Main Street Lending Program, in which Treasury invested more than $16.5 billion. The report states the CARES Act gave SIGPR $25 million for a five-year term and asks Congress to include SIGPR in the annual budget. It proposes oversight of all pandemic-related Treasury programs and a right of access to borrower and lender records in future emergency lending programs.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR
PANDEMIC RECOVERY
Quarterly Report to the United States
Congress
April to June 2021
\
MESSAGE FROM THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
The Coronavirus Aid, Relief and Economic Security (CARES) Act was an
unprecedented infusion of cash into the domestic economy. Sadly, that
investment has been prey to unprecedented levels of fraud and other crime.
Already the Justice Department has charged nearly 500 persons with criminal
offenses arising out of fraud schemes involving the pandemic. To that end,
SIGPR is proudly partnering with law enforcement organizations, task forces,
and United States Attorneys’ Offices from coast to coast to ensure that those
who sought to profit illegally from the COVID-19 pandemic are brought to
justice.
Last month was my first anniversary as Special Inspector General for
Pandemic Recovery (SIGPR). When we published our first quarterly report in
September 2020, we had an initial staff of 13 persons who were recruiting
additional staff, developing audit protocols, and working on three complaints
under review. I am now pleased to report that SIGPR is operational. We are
now staffed by 46 full-time public servants working on two major audits of
CARES Act programs and some 20 investigations, 16 of which SIGPR
developed internally from our proactive efforts.
This growth has allowed us to begin or expand several important projects.
We are particularly proud to report the launch of a SIGPR-initiated pilot
project that will bring together several federal agencies to investigate
significant pandemic relief fraud using, among other things, Bank Secrecy
Act information. This pilot is one of several proactive efforts to further the
“multiple-dipper” initiative that SIGPR began last year and highlighted in our
very first report.1 Our audit work now includes Treasury’s Direct Loan
1
See Special Inspector General for Pandemic Recovery, Initial Report to Congress 49–50 (Aug.
3, 2020).
i SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
Program, as well as the lenders and recipients of the Federal Reserve facility
that provided Treasury-backed liquidity to the main street market.
We have built in-house expertise on CARES Act programs and their legal
requirements. Additionally, we expanded our audit and investigative
programs through the use of state-of-the-art data analytics, which includes a
functional and interactive informational dataset of nearly 70 million rows of
data covering billions of dollars of CARES Act funding.
To ensure this important work can continue, SIGPR respectfully requests that
Congress grant SIGPR a place in the annual federal budget. The CARES Act
gave SIGPR $25 million to carry out its duties for a five-year term. That lump
sum appropriation, about $5 million per year, is not adequate to sustain our
important investigative and audit work for the remainder of SIGPR’s term. We
are undertaking important investigations and critical audits. Let’s not begin to
wind down now. Consistent with the President’s budget proposal, we ask that
Congress include SIGPR in the annual budget.
I am grateful for my dedicated and growing team at SIGPR, as well as for the
invaluable public service by them and our partners in the inspector general
and law enforcement communities.
Respectfully,
Brian D. Miller
July 30, 2021
REPORT TO CONGRESS | APRIL–JUNE 2021 ii
HIGHLIGHTS
THIS QUARTER SIGPR:
• Worked on 20 preliminary inquiries and full investigations, 16 of which
were developed by SIGPR’s own proactive efforts;
• Received and vetted 620 hotline complaints, referring 201 to other
agencies; and
• Announced an audit of the Main Street Lending Program while continuing
an audit of the Direct Loan Program.
TO ENHANCE PANDEMIC OVERSIGHT, SIGPR PROPOSES THAT CONGRESS:
• Grant SIGPR oversight jurisdiction over all pandemic-related Treasury
programs; and
• In future emergency lending programs such as the Main Street Lending
Program, in which the Federal Reserve provides liquidity to the financial
system backed by public funds from Treasury, ensure that inspectors
general of jurisdiction have a right of access established by law or
contract to the relevant records of borrowers and private lenders.
iii SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
PROFILE
ABOUT
SIGPR is an independent organization within the U.S. Department of the Treasury
whose mission is to promote the economy, efficiency, effectiveness, and integrity of
CARES Act funds and programs. SIGPR was established by Section 4018 of the
CARES Act with duties, responsibilities, and authority under the Inspector General
Act of 1978.
STAFFING AND BUDGET
Congress appropriated $25 million to SIGPR for the entirety of its five-year term, or
about $5 million per year. SIGPR requested $25 million in its Fiscal Year 2022
budget request, which is included in the President’s Budget. The receipt of additional
funding is critical to SIGPR’s success. Without it, SIGPR will not have the ability to
continue its oversight mission. It is imperative that SIGPR receive additional funding
to continue its work through its sunset date of March 27, 2025.
As of June 30, SIGPR had 43 full-time employees on board.
REPORT TO CONGRESS | APRIL–JUNE 2021 iv
CONTENTS
SIGPR OVERSIGHT
Audits 2
Investigations 5
FINDINGS AND DEVELOPMENTS
Direct Loans and Other Investments 11
CHALLENGES AND PROPOSALS
Jurisdiction 20
Access to Information 20
SECTION 1 SIGPR OVERSIGHT
SIGPR OVERSIGHT
SIGPR employs proactive efforts to prevent, detect, and investigate fraud,
waste, and abuse involving CARES Act funds and programs within SIGPR’s
jurisdiction.
Below is a summary of SIGPR’s activities during the reporting period:
• The Office of Audits has launched an audit of the Main Street Lending
Program and continued its audit of the Direct Loan Program;
• The Office of Investigations
o worked on 20 preliminary inquiries and full investigations, 16 of
which were developed by SIGPR’s own proactive efforts;
o received and vetted 620 hotline tips, and opened seven new
investigations while continuing work on 12 others; and
• SIGPR continues to build partnerships and has initiated a pilot project with
other agencies.
Audits
The Office of Audits conducts audits and evaluations of loans, loan
guarantees, and other investments made by the U.S. Department of the
Treasury under programs within SIGPR’s jurisdiction.2
Engagements
During this quarter, the Office of Audits has worked on the following projects:
Audit of the Direct Loan Program. The Office of Audits is continuing its work
on the Direct Loan Program, which is a CARES Act program that authorized
Treasury to provide loans, loan guarantees, and other investments to
passenger air carriers and related businesses, cargo air carriers, and
businesses critical to maintaining national security. On May 6, 2021, the
Office of Audits held an entrance conference with Treasury officials.
Since the entrance conference, the audit team has reviewed Treasury’s
underwriting guidance for the Direct Loan Program and other applicable
program policies and procedures. The audit team obtained relevant
documents to better understand Treasury’s evaluation and decision-making
processes to approve loan applications. The audit team contacted all 35
businesses that received a direct loan to obtain feedback on the program’s
effectiveness from the borrowers’ perspective. The audit team also evaluated
Treasury’s monitoring processes to ensure that outstanding loans continue to
2
See CARES Act § 4018(c)(1).
REPORT TO CONGRESS | APRIL–JUNE 2021 2
SIGPR OVERSIGHT
be performing and that Treasury is taking all necessary measures to protect
taxpayer interests.
The audit team developed a survey for businesses whose loan applications
were either withdrawn or rejected from the program. The audit team plans to
distribute this survey to 220 unsuccessful loan applicants. The results of this
survey should provide insight to develop recommendations to improve future
program effectiveness.
The Office of Audits is partnering with the Department of Defense Office of
Inspector General (DoD OIG) in a review of national security designations for
businesses. This joint effort will evaluate how the Department of Defense
made the determination that businesses were critical to maintaining national
security for loans under section 4003 of the CARES Act. An entrance
conference was held on May 25, 2021, and included Department of Defense
personnel, the DoD OIG audit team, and SIGPR’s audit team. Currently, the
DoD OIG audit team is awaiting a response to its initial request for
information.
Audit of the Main Street Lending Program. The Federal Reserve established
the Main Street Lending Program (MSLP) to support lending to small and
mid-sized businesses and nonprofit organizations, with Treasury investing
more than $16.5 billion in MSLP loans. The Office of Audits had an entrance
conference with Treasury officials on July 1, 2021, to discuss audit objectives
and establish points of contact for an audit of the MSLP. The office has also
requested an entrance conference with Federal Reserve officials.
The audit team has prepared a survey to distribute to MSLP lenders and
borrowers. Pending access to lender and borrower contact information, the
Office of Audits plans to send the survey to the program’s 319 lenders and
1,830 borrowers. Responses will be used to assess (1) the overall ease and
efficiency that lenders and borrowers experienced with the administration of
the MSLP and (2) compliance with the requirements set forth in the CARES
Act. The Office of Audits expects to receive feedback that will allow it to
reach sound conclusions and guide future audit work.
Implementation Review of SIGPR Access. The Office of Audits conducted an
implementation review to determine whether Treasury took corrective actions
to address a SIGPR recommendation from July 2020. On July 28, 2020, the
Office of Audits recommended that Treasury expressly include SIGPR in the
list of entities entitled to “timely and unrestricted access” to information from
the borrower in all loan agreements under section 4003 of the CARES Act. On
3 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
July 30, 2020, Treasury agreed to implement the change in future loan
agreements.
In the implementation review, the Office of Audits reviewed the subsequent
loan agreements under CARES Act sections 4003(b)(1)– (3) and found that
Treasury had taken appropriate corrective action to address the
recommendation. In the 34 loan agreements signed after Treasury’s July 30,
2020 response to SIGPR, Treasury expressly included SIGPR in the loan
document section titled “Treasury Access.” The Office of Audits
communicated the results of the implementation review to Treasury on May
19, 2021, and determined that no further action was necessary.
Termination of Audit on Treasury Funding for Postal Service. As a result of
the Department of Justice (DOJ) Office of Legal Counsel opinion determining
that the CARES Act limited SIGPR’s jurisdiction, the Office of Audits
terminated an audit concerning Treasury funding for the Postal Service. As
part of the CARES Act, later amended by the Consolidated Appropriations
Act, 2021, the Postal Service has been authorized to receive up to $10 billion
in funding from Treasury for operating expenses. The purpose of this audit
was to determine if the Postal Service has a system in place to identify
COVID-19 related expenses and to track its use of the additional funding in
compliance with the CARES Act requirements. On May 4, 2021, the Office of
Audits sent a letter to the Postal Service about the audit termination.
Closing Evaluation of the Coronavirus Relief Fund. The CARES Act
established the $150 billion Coronavirus Relief Fund (CRF) to assist state,
local, and tribal governments with necessary expenditures incurred due to
the COVID-19 public health emergency. In December 2020, SIGPR sought to
open an evaluation into the CRF to identify and assess the activity associated
with the CRF, determine vulnerabilities based on risk-based analysis, and
determine specific areas that warrant audit work. As a result of the Office of
Legal Counsel opinion determining that the CARES Act limited SIGPR’s
jurisdiction, further work in this area was discontinued, and all information
gathered for this effort was transferred to the Department of Treasury Office
of Inspector General.
Data Analysis
The Office of Audits continues to work on data analytics concerning programs
within SIGPR’s oversight jurisdiction. In its analytical work, the Office of
Audits:
• identifies and creates applicable datasets;
REPORT TO CONGRESS | APRIL–JUNE 2021 4
SIGPR OVERSIGHT
• maintains a growing data library to remain in sync with changing information;
• creates interactive dashboards and visualizations to assist users in
determining program areas for audits and evaluations; and
• participates with various inter-governmental agencies, committees, and third-
party vendors to stay informed about emerging analytical tools, techniques,
and methodologies.
The current supporting informational datasets, as compiled and developed by
the Office of Audits, has expanded to nearly 70 million rows of data, covering
billions of dollars in CARES Act funding. The Office of Audits has continued
developing risk assessment models to identify areas of potential
vulnerabilities and financial risk in CARES Act programs under its purview.
The Office of Audits continues its collaboration with other SIGPR offices in
developing custom proactive analytics and technical support to identify
abuse and fraudulent schemes.
Ongoing Activities
The Office of Audits has begun developing the Fiscal Year 2022 audit plan.
Office of Audits officials conducted meetings with the Special Inspector
General, Deputy Inspector General, Senior Advisors, the Assistant Inspector
General for Investigations, and Senior Legal Counsel to identify potential
areas for audit in the next fiscal year. The Office of Audits is in the process of
scheduling external planning meetings with officials from Treasury, the
Federal Reserve, the Office of Management and Budget, the White House,
and congressional oversight personnel. The Office of Audits will issue an
audit plan for Fiscal Year 2022 by September 30, 2021.
The Office of Audits continues its close partnership with the Pandemic
Response Accountability Committee (PRAC), other inspectors general, the
Treasury’s Bureau of the Fiscal Service, the Treasury’s Office of the Chief
Information Officer, and other federal government entities.
Investigations
The Office of Investigations conducts criminal and civil investigations
regarding allegations of fraud, abuse, or misconduct involving CARES Act
funds and programs within SIGPR’s jurisdiction. In addition, the office
manages SIGPR’s hotline, which serves as a primary avenue for reporting
fraud, waste, abuse, or misconduct.
5 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Investigative Activities
To effectively carry out its responsibilities, the Office of Investigations
routinely collaborates with the rest of the SIGPR team, including auditors,
analysts, and attorneys, to vet complaints, develop proactive initiatives, and
pursue investigations.
During this reporting period, the office continued its investigative and
proactive efforts to uncover and vigorously pursue fraud and wrongdoing
related to CARES Act funding under title IV, subtitle A. The following table
highlights SIGPR’s investigative activities for the period.
SIGPR Investigative Activity – April 1, 2021 through June 30, 2021
Hotline Complaints Received 620
Referrals to Other Agencies 201
Preliminary Inquiries
Opened 12
Closed (or Converted to Full Investigation) 4
Ongoing 8
Investigations
Opened* 7
Closed 1
Ongoing 12
*Includes a PRAC task force investigation
SIGPR’s investigations are conducted in partnership with various U.S.
Attorney’s Offices, DOJ, and other federal law enforcement partners.
SIGPR Hotline Activity
The SIGPR hotline accepts reports of potential fraud, waste, abuse, and
mismanagement related to the CARES Act funding, programs, and
personnel. The hotline also accepts whistleblower complaints from federal
employees, former federal employees, employment applicants, employees of
contractors, subcontractors, grantees and subgrantees, and personal service
contractors, all of whom wish to report fraud, waste, abuse, mismanagement,
or reprisal actions under the jurisdiction of SIGPR.
During this reporting period, SIGPR received 620 hotline complaints, none of
which fell within SIGPR’s jurisdiction.
REPORT TO CONGRESS | APRIL–JUNE 2021 6
SIGPR OVERSIGHT
Complaints by Category
Received April 1, 2021 – June 30, 2021
Category Total
Title I – Paycheck Protection Program 223
Title IV, Subtitle B – Payroll Support Program 1
Title V – Coronavirus Relief Fund 44
Other
Economic Impact Payments 37
Emergency Income Disaster Loans 4
Income Tax Related 10
Non-Program Related 256
Rental and Housing Assistance Programs 27
Social Security Benefits Related 1
Unemployment Insurance Programs 17
Grand Total 620
Table 1.1
More than a third of the allegations pertained to the Paycheck Protection
Program, and more than forty percent of complaints were determined to be
non-program related matters (Chart 1.1).
Chart 1.1
7 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Self-Disclosure Protocol
To further the government’s strong interest in allowing companies and
individuals engaged in misconduct to voluntarily disclose such conduct,
SIGPR has added a “Self-Disclosure” page to its website.
Voluntary self-disclosure benefits the government by revealing previously
unknown fraud, waste, and abuse. It may also enable the government to
gather and preserve evidence that would otherwise be lost. DOJ publishes
guidelines that “identify factors that will be considered and the credit that
will be provided when entities or individuals voluntarily self-disclose
misconduct that could serve as the basis for False Claims Act (FCA) liability
and/or administrative remedies, take other steps to cooperate with FCA
investigations and settlements, or take adequate and effective remedial
measures.”3 The Justice Manual further provides that “even in the absence of
a formal program, prosecutors may consider a corporation's timely and
voluntary disclosure, both as an independent factor and in evaluating the
company’s overall cooperation and the adequacy of the corporation's
compliance program and its management's commitment to the compliance
program.”4 Any company or individual who wants to make a voluntary
disclosure to SIGPR on a matter that may be of interest to SIGPR should do so
by making the report to SIGPR’s hotline:
• Phone: (202) 927-7899
• Email: hotline@sigpr.gov
• Web: https://www.sigpr.gov/report-fraud-waste-abuse/submit-complaint
Self-disclosure to SIGPR does not change any preexisting obligation an entity
or individual has under the law to report to or cooperate with the federal
government.
Outreach Efforts
Throughout the quarter, the Office of Investigations continued its coalition-
building efforts to further SIGPR’s investigative mission by participating in
task forces and working groups within the federal law enforcement and
inspector general communities, including PRAC subcommittees.
3
See Justice Manual Section 4-4.112.
4
See id. Section 9-28.900.
REPORT TO CONGRESS | APRIL–JUNE 2021 8
SIGPR OVERSIGHT
Building Partnerships
SIGPR continues to build partnerships to strategically leverage resources and
capabilities in support of lead-development, audits, investigations, and case
referrals. In addition, the Special IG continues to serve as a member on the
PRAC and the Council of the Inspectors General on Integrity and Efficiency
(CIGIE) Legislation Committee.
In support of joint efforts to protect the integrity of pandemic relief programs,
SIGPR continues to forge partnerships across the federal law enforcement
and United States Attorney’s Office communities, including participation in
not only the DOJ COVID-19 Fraud Task Force but also the PRAC Fraud Task
Force to build capacity and leverage inter-disciplinary fraud-fighting
expertise.
SIGPR is particularly proud to report that among its efforts is a SIGPR-
initiated pilot project that will bring the unique capabilities of several
agencies to proactively build investigations of potential fraud by entities that
received pandemic funds from the highest number of programs and the
highest aggregated dollar amount, using the Bank Secrecy Act and other
information. SIGPR looks forward to providing additional information as this
pilot gets underway.
9 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SECTION 2
FINDINGS AND
DEVELOPMENTS
FINDINGS AND DEVELOPMENTS
The CARES Act requires SIGPR to regularly report “a detailed statement of all
loans, loan guarantees, other transactions, obligations, expenditures, and
revenues associated with any program established by the Secretary under
section 4003, as well as the information collected under subsection (c)(1).”5
Accordingly, below are the categories of loans and other investments made
by the Treasury under CARES Act section 4003,6 including, where applicable
and known, a list of the loans and investments made under each category and
the eligible businesses to which loans were made.
Direct Loans and Other Investments
Introduction
CARES Act section 4003(a) authorized the Secretary “to make loans, loan
guarantees, and other investments in support of eligible businesses, States,
and municipalities that do not, in the aggregate, exceed $500,000,000,000.”
The CARES Act further divided these loans and investments into four
categories. The first three, described in sections 4003(b)(1)–(3), cover loans
and loan guarantees to passenger air carriers and related businesses ($25
billion), cargo air carriers ($4 billion), and businesses critical to maintaining
national security ($17 billion).7 The fourth category, described in section
4003(b)(4), authorized the Secretary to invest in various liquidity programs
established by the Federal Reserve under section 13(3) of the Federal
Reserve Act ($454 billion).
The Consolidated Appropriations Act, 2021, amended the CARES Act to
rescind unobligated balances of funds ($429 billion) in these programs.8 It
also specified that after December 31, 2020, the Federal Reserve “shall not
make any loan, purchase any obligation, asset, security, or other interest, or
make any extension of credit” through the liquidity programs or facilities in
which Treasury had invested CARES Act funds, except for facilities in the
5
CARES Act § 4018(f)(1)(B).
6
Treasury did not establish a program for “loan guarantees” under CARES Act section 4003.
7
Treasury has posted on its website the contracts it has entered in connection with the
administration of loans under section 4003(b)(1), (2), and (3). See U.S. Dep’t Treasury, Other
Programs.
8
See Consolidated Appropriations Act, 2021, Pub. L. 116-260, div. N §§ 1003, 1005.
11 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
Main Street Lending Program, that were authorized to purchase loans until
January 8, 2021, for applications submitted by December 14, 2020.9
An overview of the relevant categories and amounts of Treasury’s obligations
remaining under CARES Act section 4003(b)(1)–(4) through June 30 is
reflected in the following table:
Funding Program Outstanding Amount as of June 30, 2021
Direct Loans to Passenger Air Carriers
$570,798,921
and Related Businesses
Direct Loans to Cargo Air Carriers $2,229,627
Direct Loans to Businesses Critical to
$724,301,519
Maintaining National Security
Main Street Lending Program (MS $16,582,833,244
Facilities, LLC)
Term Asset-Backed Securities Loan $3,500,000,000 (plus interest)
Facility (TALF II, LLC)
Primary and Secondary Market
Corporate Credit Facility (Corporate $13,897,383,461
Credit Facilities, LLC)
Municipal Liquidity Facility (Municipal $6,300,000,000 (plus interest)
Liquidity Facility, LLC)
Direct Loans
On March 30, 2020, Treasury first announced guidelines for businesses
interested in applying for loans under CARES Act section 4003(b)(1)–(3).10
Those guidelines incorporated several mandatory loan terms and conditions,
with many designed to protect American taxpayers. A summary of these
terms and conditions can be accessed in SIGPR’s previous quarterly reports.
Air Carrier Loan Program
CARES Act section 4003(b)(1)–(2) allocated $25 billion for loans and loan
guarantees to passenger air carriers, aviation-maintenance facilities certified
9
Id. § 1005.
10
U.S. Dep’t Treasury, Procedures and Minimum Requirements for Loans to Air Carriers and
Eligible Businesses and National Security Businesses under Division A, Title IV, Subtitle A of
the Coronavirus Aid, Relief, and Economic Security Act (Mar. 30, 2020).
REPORT TO CONGRESS | APRIL–JUNE 2021 12
FINDINGS AND DEVELOPMENTS
under 14 C.F.R. Part 145, and air-transportation ticket agents, as well as $4
billion for cargo air carriers.
The following table summarizes the section 4003(b)(1)–(2) loans current
through this quarter.11 Of note, Alaska Airlines Inc., American Airlines Inc.,
Hawaiian Airlines Inc., Ovation Travel Group Inc., SkyWest Airlines Inc., Sun
Country Inc., and United Airlines Inc. paid in full all outstanding principal and
interest.
Total Cash
Maturity Total Loan Disbursements
Recipient Loan Date Outstanding Interest
Date Amount 12
Loan Receipts
Amount13
Aero
Hydraulics, 10/26/2020 10/24/2025 $450,000 $450,000 $476,016 $0
Inc.
9/28/2020
Alaska (amended
9/26/2025 $1,928,000,000 $135,000,000 $0 $2,538,900
Airlines, Inc. 10/30/2020
and 1/15/2021)
Allflight
11/5/2020 11/5/2025 $4,721,260 $4,721,260 $4,721,260 $182,862
Corporation
9/26/2020
American (amended
6/30/2025 $7,500,000,000 $550,000,000 $0 $10,257,50
Airlines, Inc. 10/21/2020
and 1/15/2021)
American Jet
International 11/5/2020 11/5/2025 $1,162,124 $1,162,124 $1,162,124 $45,667
Corp
Aviation
Management 11/5/2020 11/5/2025 $4,026,705 $4,026,705 $4,085,433 $0
& Repairs, Inc.
Bristin Travel,
10/26/2020 10/24/2025 $549,651 $549,651 $564,244 $9,320
LLC
11
U.S. Dep’t Treasury, Loans to Air Carriers, Eligible Businesses, and National Security
Businesses https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-
industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses.
12
“Disbursements” includes all loan disbursements.
13
“Total Outstanding Loan Amount” includes all loan disbursements and increases of loan
principal amount arising from payment-in-kind (PIK) interest, less any repayments of principal.
13 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
Total Cash
Maturity Total Loan Disbursements
Recipient Loan Date Outstanding Interest
Date Amount 12
Loan Receipts
Amount13
Caribbean 11/5/2020
Sun Airlines, (amended 11/5/2025 $6,768,749 $6,768,749 $7,010,424 $0
Inc. 12/7/2020)
Eastern
10/28/2020 10/28/2025 $15,000,000 $15,000,000 $15,651,359 $0
Airlines, LLC
11/9/2020
Elite Airways,
(amended 11/7/2025 $2,630,274 $2,630,274 $2,727,238 $0
LLC
12/1/2020)
9/28/2020
Frontier
(amended 9/26/2025 $574,000,000 $150,000,000 $150,000,000 $0
Airlines, Inc.
1/15/2021)
9/25/2020
Hawaiian (amended
6/28/2024 $622,000,000 $45,000,000 $0 $450,450
Airlines, Inc. 10/23/2020
and 1/15/2021)
Island Wings,
11/5/2020 11/5/2025 $294,350 $294,350 $305,884 $0
Inc.
9/29/2020
JetBlue
(amended
Airways 11/29/2025 $1,948,000,000 $115,000,000 $115,000,000 $0
11/3/2020 and
Corporation
1/15/2021)
Legacy
10/20/2020 10/25/2025 $1,817,306 $1,817,306 $1,923,743 $0
Airways, LLC
Mesa Airlines,
10/30/2020 10/30/2025 $195,000,000 $195,000,000 $199,382,778 $0
Inc.
Ovation Travel
10/15/2020 10/15/2025 $20,000,000 $20,000,000 $0 $181,881
Group, Inc.
Republic
11/6/2020 11/6/2025 $58,000,000 $58,000,000 $58,000,000 $1,114,905
Airways, Inc.
9/29/2020
SkyWest (amended
9/29/2025 $725,000,000 $60,000,000 $0 $1,196,767
Airlines, Inc. 10/28/2020
and 1/15/2021)
Southern
Airways 10/28/2020 10/28/2025 $1,838,501 $1,838,501 $1,838,501 $78,745
Express, LLC
REPORT TO CONGRESS | APRIL–JUNE 2021 14
FINDINGS AND DEVELOPMENTS
Total Cash
Maturity Total Loan Disbursements
Recipient Loan Date Outstanding Interest
Date Amount 12
Loan Receipts
Amount13
Sun Country,
10/26/2020 10/24/2025 $45,000,000 $45,000,000 $0 $77,125
Inc.
Thomas
Global 11/9/2020 11/7/2025 $1,400,000 $1,400,000 $1,455,670 $0
Systems, LLC
Timco Engine
11/5/2020 11/5/2025 $8,390,240 $8,390,240 $8,723,874 $0
Center, Inc.
9/28/2020
(amended
United
11/6/2020, 9/26/2025 $7,491,000,000 $520,000,000 $0 $9,517,733
Airlines, Inc.
12/8/2020,
and 1/15/2021)
Businesses Critical to National Security
CARES Act section 4003(b)(3) allocated $17 billion for loans and loan
guarantees to “businesses critical to maintaining national security.” The
following table summarizes the section 4003(b)(3) loans current through this
quarter.14
Total Cash
Loan Maturity Total Loan Outstanding
Recipient Disbursements 15
Interest
Date Date Amount Loan Receipts
Amount16
Channel
11/12/2020 11/12/2025 $2,500,000 $2,500,000 $2,500,000 $100,078
Logistics, LLC
Core Avionics &
11/5/2020 11/5/2025 $6,000,000 $6,000,000 $5,331,743 $188,933
Industrial, Inc.
Map Large, Inc. 11/2/2020 10/31/2025 $10,000,000 $10,000,000 $10,553,320 $0
Meridian Rapid
Defense Group, 10/30/2020 10/30/2025 $7,100,000 $7,100,000 $7,415,707 $79,019
LLC
14
YRC Worldwide changed their name to Yellow Corporation.
15
“Disbursements” includes all loan disbursements.
16
“Total Outstanding Loan Amount” includes all loan disbursements and increases of loan
principal amount arising from payment-in-kind (PIK) interest, less any repayments of principal.
15 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
Total Cash
Loan Maturity Total Loan Outstanding
Recipient Disbursements 15
Interest
Date Date Amount Loan Receipts
Amount16
Ovio
Technologies, 11/2/2020 10/31/2025 $1,186,900 $1,186,900 $1,252,574 $0
Inc.
Semahtronix,
11/13/2020 11/13/2025 $1,999,100 $1,999,100 $2,077,805 $0
LLC
Semantic AI,
11/13/2020 11/13/2025 $506,300 $506,300 $526,722 $0
Inc.
SpinLaunch,
11/13/2020 11/13/2025 $2,519,200 $2,519,200 $2,519,200 $98,025
Inc.
Visual
10/30/2020 10/30/2025 $1,053,200 $1,053,200 $1,100,031 $11,722
Semantics, Inc.
Wiser Imagery
10/30/2020 10/30/2025 $3,069,700 $3,069,700 $3,241,880 $0
Services, LLC
Yellow
7/8/2020 9/30/2024 $700,000,000 $681,100,000 $687,782,537 $8,008,368
Corporation
Other Investments
CARES Act section 4003(b)(4) allocated at least $454 billion for “loans and
loan guarantees to, and other investments in, programs or facilities
established by the Board of Governors of the Federal Reserve System for the
purpose of providing liquidity to the financial system that supports lending to
eligible businesses, States, or municipalities” by “purchasing obligations or
other interests” directly from the issuer or through secondary markets, and
“making loans, including loans or other advances secured by collateral.”
The Federal Reserve established several liquidity programs (Federal Reserve
facilities) using its emergency lending powers under section 13(3) of the
Federal Reserve Act.17 That provision, used extensively during the 2008
financial crisis and amended by the Dodd-Frank Wall Street Reform and
Consumer Protection Act,18 allows the Federal Reserve to lend money in
“unusual and exigent circumstances” to participants in “any program or
facility with broad-based eligibility” who are “unable to secure adequate
credit accommodations from other banking institutions.”19 The Federal
17
See 12 U.S.C. § 343(3).
18
Pub. L. 111-203, 124 Stat. 1375.
19
See 12 U.S.C. § 343(3); 12 C.F.R. § 201.4(d).
REPORT TO CONGRESS | APRIL–JUNE 2021 16
FINDINGS AND DEVELOPMENTS
Reserve, however, may not lend to insolvent entities, and its programs must
be approved by the Secretary of the Treasury.
The following table summarizes the total amount of remaining CARES Act
funds that Treasury invested in each Special Purpose Vehicle (SPV) as of June
30, 2021.20
Treasury Investment Remaining as
Recipient
of June 30, 2021
Corporate Credit Facilities, LLC $13,897,383,461
Municipal Liquidity Facility, LLC $6,300,000,000 (plus interest)
TALF II, LLC $3,500,000,000 (plus interest)
MS Facilities, LLC $16,582,833,244
The following table summarizes the portfolio holdings of the facilities as of
the July 1, 2021 release of the Federal Reserve’s balance sheet. 21
Outstanding
Amount of
Treasury
Purchased Loan
Facility Contributions and Total
Participations,
Other Assets
Notes, and Other
Securities
Corporate Credit
$10,174,000,000 $15,727,000,000 $25,902,000,000
Facilities, LLC
Municipal Liquidity
$4,771,000,000 $5,969,000,000 $10,740,000,000
Facility, LLC
TALF II, LLC $1,622,000,000 $3,067,000,000 $4,689,000,000
MS Facilities, LLC $13,542,000,000 $17,004,000,000 $30,547,000,000
Effective June 30, 2021, the bond holdings of Corporate Credit Facilities, LLC,
are presented on a market value basis, reflecting the change in accounting
treatment from hold-to-maturity to trading securities due to the intent to
actively wind down the portfolio.
20
See Periodic Report: Update on Outstanding Lending Facilities Authorized by the Board
under Section 13(3) of the Federal Reserve Act (July Periodic Report) (Jul. 12, 2021).
21
See Board of Governors of the Federal Reserve System, Factors Affecting Reserve Balances
- H.4.1, https://www.federalreserve.gov/releases/H41/.
17 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
An evaluation of loan participations purchased by the Main Street Facilities,
LLC, resulted in it recording a loan loss allowance in the amount of $2.7
billion as of March 31, 2021. This allowance for loan losses is estimated based
upon its holdings as of March 31, 2021, and does not indicate actual losses
experienced by the program. As of June 30, 2021, Main Street Facilities, LLC,
has recognized approximately $4 million in actual loan losses.
SIGPR’s last quarterly report describes the functioning of these facilities,
which have stopped extending loans or purchasing obligations. Transaction-
specific details for the facilities are available on the Federal Reserve’s
website.
REPORT TO CONGRESS | APRIL–JUNE 2021 18
SECTION 4
CHALLENGES AND
PROPOSALS
CHALLENGES AND PROPOSALS
Jurisdiction
As a result of the Department of Justice’s Office of Legal Counsel opinion
finding that the CARES Act limited SIGPR’s jurisdiction to title IV, subtitle A
of the CARES Act, SIGPR has ended multiple audits and investigations.
SIGPR respectfully asks that Congress consider legislation granting SIGPR
jurisdiction over all pandemic-related federal programs managed by the
Treasury Department.
Access to Information
Access to borrower and lender information is critical to preventing and
remediating fraud, waste, and abuse in CARES Act programs.22 Both
Treasury’s Direct Loan Program and the Main Street Lending Program (MSLP)
required applicants to certify their eligibility for assistance and, to some
degree, provide documentation demonstrating that eligibility. Both programs
also require periodic updates from borrowers to their lender. But SIGPR has
only limited access-as-of-right to that information for the MSLP.
Treasury, as the direct lender in its loans to aviation and national security
businesses, has required borrowers to provide Treasury with access to their
books and personnel. Borrowers have agreed to provide
Treasury, the Treasury Inspector General, the Special Inspector
General for Pandemic Recovery, and such other entities as are
authorized by Treasury timely and unrestricted access to all
documents, papers, or other records, including electronic records, of
the Borrower related to the Loan, to enable Treasury, the Treasury
Inspector General, and the Special Inspector General for Pandemic
Recovery to make audits, examinations, and otherwise evaluate the
Borrower’s compliance with the terms of the Agreement. This right
also includes timely and reasonable access to the Borrower’s and its
Affiliates’ personnel for the purpose of interview and discussion
related to such documents.
This access is essential to ensuring the proper administration of this program
and the protection of the billions of taxpayer dollars put into it.
22
SIGPR explained the importance of data access, and the difficulty of using subpoenas to
collect the bulk information in CARES Act programs, in SIGPR’s last quarterly report. See
Special Inspector General for Pandemic Recovery, Quarterly Report to the United States
Congress 37–38 (Apr. 30, 2021). In this report, we expand on solutions to that issue, including
the use of contractual, as well as statutory, provisions to improve access to borrower and
lender information.
REPORT TO CONGRESS | APRIL–JUNE 2021 20
CHALLENGES AND PROPOSALS
Neither Treasury nor SIGPR, however, enjoy a contractual right of access to
documents or personnel in the MSLP. To implement the MSLP, the Federal
Reserve Bank of Boston set up a special purpose vehicle (SPV) to purchase
participations in loans originated by eligible lenders. Borrowers in the
program promise to retain records containing the basis for their eligibility and
compliance under the CARES Act and to make that information available to
the Federal Reserve Bank of Boston or to external auditors. Borrowers must
submit a great deal of data quarterly and annually to their lenders as well.
Lenders promise to retain records containing the basis for their certification
and compliance regarding CARES Act-defined conflicts of interest and to
make that information available to the Federal Reserve Bank of Boston or to
external auditors. And in turn, the Federal Reserve Bank of Boston relied on
lenders’ underwriting processes to ensure its loan-participation purchases
are viable. The SPV is managed by the Federal Reserve Bank of Boston and
funded, in part, by CARES Act-appropriated funds invested by Treasury. Yet
neither borrowers nor lenders promise to make records available to Treasury
or SIGPR, despite Treasury’s tens of billions of dollars pledged to absorb
losses on the loans.
Ready access is especially needed in the MSLP because it connects private
borrowers, private lenders, the Federal Reserve Bank of Boston, and Treasury.
SIGPR is housed in Treasury, not the Federal Reserve, so SIGPR’s immediate
rights of access are limited to one entity in the relationship. And the other
entities are not government agencies, which can also create legal barriers to
information. Our colleagues at the Federal Reserve and the Federal Reserve
Bank of Boston have been extremely helpful partners, but in the absence of
superseding statutory provisions or contractual provisions routinizing
regulatory requirements, the default legal framework requires that our
information requests be subject to discretionary accommodation and
cooperation,23 rather than that the information be shared fully and rapidly as
of right. The Main Street SPV’s LLC agreement does not ameliorate this issue,
as it states that the Federal Reserve Bank of Boston only “agrees to provide
[Treasury] reporting and documentation as mutually agreed to by [the Bank]
23
See 12 C.F.R. § 261.22(c), (e) (granting the Federal Reserve Board’s general counsel
discretionary authority to disclose nonpublic information to government agencies, upon
meeting certain conditions).
21 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
CHALLENGES AND PROPOSALS
and [Treasury], which at a minimum will include all information necessary for
[Treasury] to comply with its statutory reporting obligations.”24
This is not the first time a Treasury special inspector general has noted the
need for readier access to information in a Federal Reserve program where
billions of Treasury dollars—taxpayer dollars—are at risk. A similar issue
arose a decade ago in the first Term Asset-Backed Securities Loan Facility
program (TALF 1). Beginning in 2009, the Federal Reserve extended loans to
borrowers who pledged certain highly rated asset-backed securities as
collateral. These loans came with a “haircut”—the collateral’s value had to
exceed that of the loan by a certain percentage. The loans were nonrecourse.
For borrowers who walked away, the Federal Reserve Bank of New York
created an SPV, TALF 1, to dispose of their collateral and, hopefully, recover
fully the loaned amount. Funds lent from Treasury backed TALF 1, and
Treasury agreed to absorb any losses from ultimately insufficient collateral.25
TALF 1 included some contractually guaranteed oversight for the Special
Inspector General for the Troubled Asset Relief Program (SIGTARP).
Treasury’s lending agreement provided that the SPV and the Federal Reserve
Bank of New York shall permit Treasury, SIGTARP, and GAO “access to
personnel and any books, papers, records or other data . . . delivered to it . . . to
the extent relevant to ascertaining compliance with the terms and conditions
set forth in the Loan Documents [the documents governing the relationship
between Treasury, the Bank, and the SPV].”26
Yet, as SIGTARP observed, these provisions, though helpful, were not the
same as contractually guaranteed access to borrowers. SIGTARP thus
recommended—in its very first report—that borrowers agree that they are
subject to Treasury and SIGTARP oversight.27 SIGTARP also recommended
that Treasury develop “a robust compliance protocol with complete access
rights to all TALF transaction participants for itself, SIGTARP, and other
relevant oversight bodies.”28 (Treasury and the Federal Reserve Bank of New
York declined this recommendation over concerns that it would discourage
24
Amended and Restated Limited Liability Company Agreement of MS Facilities LLC § 17(c)
(May 29, 2020).
25
See generally SIGTARP, Quarterly Report to Congress 95–101 (Apr. 21, 2009).
26
Credit Agreement among TALF LLC, Fed. Res. Bank of N.Y., and U.S. Dep’t of the Treasury
§ 9.19 (Mar. 3, 2009).
27
SIGTARP, Initial Report to the Congress 100 (Feb. 6, 2009).
28
SIGTARP, Quarterly Report to Congress 189 (July 21, 2009).
REPORT TO CONGRESS | APRIL–JUNE 2021 22
CHALLENGES AND PROPOSALS
participation and in light of the Reserve Bank’s rights to inspect borrowers
and review their loan files.29)
Just as SIGTARP called for greater access to borrower information to ensure
the protection of Treasury’s TALF 1 funds, taxpayers would benefit from
greater access to borrower information to ensure the protection of Treasury’s
MSLP funds. That need is likely even greater, in fact, given that features of
the MSLP may make it a higher-risk program than TALF 1. The loans in TALF 1
were secured by collateral that exceeded its value; no equivalent requirement
exists in the MSLP. The loans in TALF 1 were extended by the Federal Reserve
Bank of New York based on collateral rated as AAA by major, nationally
recognized statistical rating organizations;30 MSLP loans were cash-flow
loans extended to borrowers that met minimum program criteria, including a
maximum debt-to-EBITDA ratio and applicable collateral requirements, by
hundreds of private lenders that employed their own underwriting practices.
In future lending programs jointly administered by the Federal Reserve and a
federal agency like Treasury, inspectors general of the agency should be
provided, by law or contract, reasonable and ready access to loan
documentation. Such programs should provide inspectors general the right to
the relevant records of borrowers and, where private lenders are used as
intermediaries, to their records as well.
The underlying principle is a simple one: an entity putting its money at risk
should be entitled to see how well that money is being protected. Federal
Reserve regulations govern the disclosure of records that contain confidential
information. Under normal circumstances, the Federal Reserve and the
Federal Reserve Banks are extremely careful about sharing confidential
supervisory information and other nonpublic information, even with federal
regulatory agencies, though they can do so.31 That regime is appropriate for
programs run exclusively by the Federal Reserve or its Reserve Banks, for
they are getting all the information they need. But in a lending program like
the MSLP where Treasury has committed to absorbing certain losses—a
program that by its joint nature is almost without precedent in the Federal
Reserve’s history—the parties stand differently. Treasury is not one of any of
dozens of government regulators in which Federal Reserve information is
incidentally needed; Treasury is a partner in the endeavor, and its money is
29
See id. at 244.
30
See id. at 97.
31
See 12 C.F.R. § 261.22(c).
23 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
CHALLENGES AND PROPOSALS
specifically and particularly at risk of loss. It should have immediate rights to
see what is happening to that money, and the legal regime should reflect that.
Such a requirement—that the government spender of money is entitled to
monitor it—is typical in other government programs. For instance, Treasury
and its inspector general have access to the records and personnel of Payroll
Support Program recipients. And broad access to records is standard
operating procedure for federal grantees and contractors. Non-construction
grant recipients must certify that they “[w]ill give the awarding agency, the
Comptroller General of the United States, and, if appropriate, the State,
through any authorized representative, access to and the right to examine all
records, books, papers, or documents related to the award.”32 Likewise,
federal contractors on many types of contracts must agree to open their
books to their contracting officers and to the Comptroller General.33 A similar
requirement for participants in federal emergency lending programs to grant
access to the relevant inspectors general would help ensure proper oversight
and lessen the need for both negotiation within the government and
subpoenas to private parties.
Enhanced access to borrower and lender information could be accomplished
in a variety of ways, with access adjusted to be less or more comprehensive
according to the relative needs for fraud and waste prevention, private-sector
participation, and agency resources. In the MSLP, for instance, a simple
solution would have been a requirement in the SPV’s LLC agreement that
Treasury and SIGPR are entitled to MSLP borrower and lender documentation
in the possession of the SPV or the Federal Reserve Bank of Boston. This
would have been information already in a “box,” so to speak, at the Bank. This
requirement would not have imposed any additional burdens on borrowers or
lenders, nor does SIGPR believe it would have discouraged participation, as
participants were already on notice that these were government-backed loans
and thus subject to government scrutiny. This requirement would have
instead simply allowed Treasury and SIGPR to look inside the box, the same
as their Federal Reserve partner.
In other jointly funded lending programs, a more rigorous regime might be in
order. For instance, a program could require that borrowers, lenders, or both,
agree by contract that they must submit their documentation, either as a
32
OMB Standard Form 424B (Rev. 7-97).
33
See 48 C.F.R. § 52.215-2.
REPORT TO CONGRESS | APRIL–JUNE 2021 24
CHALLENGES AND PROPOSALS
condition of funding or upon request, to Federal Reserve entities, Treasury,
and relevant inspectors general.
25 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
HELP FIGHT
FRAUD,
WASTE, AND
ABUSE.
BY EMAIL: hotline@sigpr.gov
BY PHONE: 202-927-7899
www.sigpr.gov
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