SIGPR Quarterly Report to the United States Congress - June 30, 2021
- Document type
- report
- Date
- 2022-01-31
Summary
The Office of the Special Inspector General for Pandemic Recovery (SIGPR) Quarterly Report to the United States Congress for October to December 2021, with a message from Special Inspector General Brian D. Miller dated January 31, 2022. The message warns that without new appropriations the office will run out of money in July 2022, noting its initial $25 million CARES Act appropriation and a staff of 52 full-time employees. The report lists quarterly highlights, including 23 full investigations and 4 preliminary inquiries, 202 hotline complaints, a completed survey of the Main Street Lending Program and an expanded audit of the Direct Loan Program. It reports survey responses from 58 lender banks and 627 borrowers. Appendix A and Appendix B relate to a congressional inquiry from Senator Hawley and proposed legislation on SIGPR's jurisdiction.
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
October to December 2021
MESSAGE FROM THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
Unless Congress acts, my office will run out of money in July 2022. This could
be my second-to-last Quarterly Report.
In the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020,
Congress granted the Special Inspector General for Pandemic Recovery
(SIGPR) an initial appropriation of $25 million to stand up a new agency
dedicated to fighting pandemic fraud. Due to my colleagues’ outstanding
work, SIGPR has proven to be an excellent return on Congress’s investment.
Earlier this month, on January 20, a recipient of a loan from the Main Street
Lending Program in Oklahoma pleaded guilty to bank fraud and money
laundering in a case that SIGPR investigated.
But $25 million in start-up funds is not enough money to establish a new law
enforcement agency and maintain it through a five-year term. We spent
about half that sum in the first 15 months on overhead to the Department of
the Treasury (Treasury), leasing offices, and paying 55 full-time employees.
Determining whether businesses lied on their loan applications, laundered
money, or impermissibly double-dipped into various programs is expensive
and labor-intensive work. We estimate that there is about $22.5 billion in
outstanding Treasury loans and investments within our oversight. Offices
with comparable missions operate on greater budgets. Congress, for
example, gave the Special Inspector General for the Troubled Assets Relief
Program $50 million in start-up funds and additional funds each year.
For over a year, SIGPR has worked with Treasury, the Office of Management
and Budget, and Congress to enter the annual appropriations cycle. We
appreciate the support that we have received from agency officials, key
i SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
congressional members, and staff, including those of you with whom we
spoke, to fund us this fiscal year. The President’s budget requested SIGPR
receive $25 million; the Senate appropriations bill would provide us with $10
million. Congress, however, has not yet reached agreement on appropriations
and has instead kept funding at 2021 levels by a continuing resolution.
Because SIGPR has not been part of the annual appropriations cycle, we do
not receive a pro rata share of last year’s budget. As a result, SIGPR is
nearing exhaustion of its CARES Act appropriation.
During my confirmation hearings, I told Congress I planned to build SIGPR to
a staff of at least 75 to 100 full-time employees. We currently have only 52
full-time employees. All plans to add staff are now on hold. In addition to the
hiring freeze, SIGPR has had to stop entering new contracts, even for a
much-needed e-discovery tool. And even on the existing appropriation,
SIGPR cannot fund operations through the end of Fiscal Year 2022.
Even while operating on an overstretched budget, my outstanding staff have
continued to advance our mission of conducting audits and investigations
into pandemic fraud, waste, and abuse. To date, SIGPR’s investigative efforts
have led to an indictment and a guilty plea in federal court. In addition,
SIGPR’s experience in combatting fraud through a staff that includes current
and former federal prosecutors resulted in our office providing assistance on
another indictment for fraud relating to the Main Street Lending Program.
Furthermore, the Office of Investigations increased its caseload by about
400 percent over nine months last fiscal year and is actively working 27 open
cases. SIGPR’s proactive initiatives accounted for more than 80 percent of its
casework. We have served numerous subpoenas and have executed search
and seizure warrants to gather evidence.
The Office of Audits has completed its survey of the Main Street Lending
Program’s lender banks and borrowers and expanded an audit of the Direct
Loan Program.
The COVID-19 pandemic is not over, and Congress’s unprecedented
investment in the American economy has been prey to unprecedented levels
of crime and fraud. We are grateful for the bipartisan support to fund SIGPR
in the anticipated omnibus budget bill, or should that not pass, through an
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 ii
anomaly under a continuing resolution. Without such funding, for the first time in
history, an inspector general office will close prematurely for want of funding.
The CARES Act promised American taxpayers something better. In just two years,
SIGPR has proven to be a force-multiplier. We have partnered with law enforcement
agencies and offices of inspectors general in critical audits and investigations. And
our work has already resulted in criminal charges and recovered funds.
I appeal to all members of Congress to stand up for oversight and fund SIGPR.
Respectfully,
Brian D. Miller
Special Inspector General for Pandemic Recovery
January 31, 2022
iii SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
HIGHLIGHTS
THIS QUARTER SIGPR:
• Completed a survey of the Main Street Lending Program.
• Expanded an audit of the Direct Loan Program.
• Launched a separate audit of Treasury’s monitoring of the Direct Loan
Program.
• Managed 23 full investigations and 4 preliminary inquiries.
• Received and vetted 202 hotline complaints, referring 100 to other
agencies.
• Completed an investigation that resulted in an indictment alleging bank
fraud and false statements in connection with applications for CARES Act
funding. 1
• Continued an investigation that, on January 20, 2022, ultimately resulted
in a guilty plea for bank fraud and money laundering related to a loan
obtained through the Main Street Lending Program. 2 Because the plea
occurred after the reporting period, it will appear in the investigative
activities for SIGPR’s next quarterly report. That report will also discuss
the case in more detail.
1
See U.S. Attorney’s Office for D. Md., Baltimore Woman Facing Federal Indictment for Allegedly
Obtaining More Than $1.6 Million in Federal Funds Intended to Relieve Financial Distress Caused by the
Covid-19 Pandemic (Dec. 15, 2021), https://www.justice.gov/usao-md/pr/baltimore-woman-facing-
federal-indictment-allegedly-obtaining-more-16-million-federal.
2
See U.S. Attorney’s Office for W.D. Okla., Edmond Woman Pleads Guilty to Cares Act Main Street
Lending Program Fraud (Jan. 20, 2022), https://www.justice.gov/usao-wdok/pr/edmond-woman-pleads-
guilty-cares-act-main-street-lending-program-fraud.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 iv
PROFILE
ABOUT
SIGPR is an independent organization within 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
In mid-Fiscal Year 2020, SIGPR received an initial appropriation of $25 million to
establish its framework and to commence operations. In Fiscal Year 2021, SIGPR
requested $25 million. SIGPR’s Fiscal Year 2021 budget request was not supported,
and SIGPR did not receive additional funding. SIGPR’s Fiscal Year 2022 budget
request for $25 million was included in the President’s budget. Unfortunately, it was
not included in the House Appropriations bill, although the Senate Appropriations
bill did include $10 million for SIGPR. Progress halted when Congress passed a
continuing resolution, which continues funding at current levels. A continuing
resolution does not help SIGPR because, as noted, SIGPR was left out of the Fiscal
Year 2021 budget. At this point, SIGPR has slightly less than one third of the original
$25 million remaining.
Faced with the challenge of continuing its congressionally mandated and critical
mission on a reduced budget, SIGPR cut projected staffing levels by 20 full-time
employees. Plans to staff up to the optimal level of 76 positions are on hold due to
SIGPR’s severe financial constraints. In addition to the hiring freeze, SIGPR has
ceased entering any new contracts. SIGPR’s inability to enter new contracts seriously
impedes its ability to conduct operations and accomplish its mission. Most recently,
SIGPR has had to delay acquiring a much-needed investigative analytics tool that is
critical to supporting the Office of Investigations and Office of General Counsel.
Since SIGPR’s Fiscal Year 2021 budget request was not supported, during Fiscal Year
2021 SIGPR designed a careful strategy to ensure that its initial $25 million
appropriation would support operations until Fiscal Year 2022. Many cost-reduction
measures followed. For example: SIGPR acquired free office furniture from GSA’s
local warehouse instead of new furniture; SIGPR purchased minimal quantities of
office supplies; having scrapped the planned acquisition of the investigative
analytics tool, SIGPR instead considered licensing and using the existing Treasury
v SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
data analytics system; and, SIGPR has asked staff to do more with less. Additionally,
because SIGPR’s projected staffing level dropped from 76 to a new cap of 56
positions, SIGPR successfully negotiated an approximate reduction of 30 percent
from its initial $1 million cost allocation from the Administrative Resource Center of
the Bureau of the Fiscal Service. Unfortunately, similar attempts to proportionately
reduce the $1.8 million cost allocation from Treasury Shared Services have been
unsuccessful. Even with these creative, expeditious, and austere actions, it is not
possible for SIGPR to stretch its remaining budget allocation through the remainder
of Fiscal Year 2022 to bridge the gap until a Fiscal Year 2023 appropriation is
received.
With a lean monthly spend rate of $1.3 million, SIGPR anticipates that its funds will
be exhausted by early July 2022, only two years into Congress’s mandated five-year
program.
This means that absent any supplemental funding, SIGPR will be forced to initiate
program phasedown actions to avoid non-compliance with the Antideficiency Act,
resulting in the cessation of SIGPR’s operations.
The unfortunate timing of the continuing resolution creates a challenge for SIGPR,
but we are meeting the challenge and working with Treasury, the Office of
Management and Budget, and key members of Congress to get SIGPR fully funded.
SIGPR remains confident that Congress will provide more funding for SIGPR so that
it can accomplish its mission.
Through the end of the quarter, SIGPR had 52 full-time employees on board. 3
3
The quarter ended on December 31, 2021. SIGPR now has 52 full-time employees.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 vi
CONTENTS
SIGPR OVERSIGHT
Audits 2
Investigations 5
FINDINGS AND DEVELOPMENTS
Direct Loans and Other Investments 11
Other Developments 18
APPENDICES
Appendix A 21
Appendix B 25
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 completed its survey of the Main Street Lending
Program’s lender banks and borrowers. The office also expanded its
work on the Direct Loan Program by initiating attestation reviews of
recipients’ application submissions and creating a new audit to review
Treasury’s monitoring of borrowers’ compliance with program
requirements.
• The Office of Investigations vetted 202 hotline complaints. It also
initiated 2 new preliminary and full investigations, bringing the total
number of open investigative matters to 27. In addition, the office
secured a criminal indictment through its participation in the
Pandemic Response Accountability Committee (PRAC) Fraud Task
Force.
Audits
The Office of Audits conducts audits and evaluations of loans, loan
guarantees, and other investments made by Treasury under programs within
SIGPR’s jurisdiction. 4
Engagements
During this quarter, the Office of Audits has worked on the following projects:
Survey of the Main Street Lending Program. SIGPR completed its survey of
the Main Street Lending Program’s lender banks and borrowers. The Main
Street Lending Program was established pursuant to section 13(3) of the
Federal Reserve Act by the Federal Reserve, with approval of the Secretary of
the Treasury to support lending to small and mid-sized businesses and non-
profit organizations. The Federal Reserve Bank of Boston operates the
program. To implement it, the Federal Reserve Bank of Boston established a
Special Purpose Vehicle (SPV) to purchase participations in loans originated
by eligible lenders. The SPV consists of the Federal Reserve Bank of Boston
as the Managing Member and Treasury as the Preferred Equity Member, as
4
See CARES Act § 4018(c)(1).
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 2
SIGPR OVERSIGHT
Treasury originally made a $37.5 billion equity investment in the SPV using
funds appropriated by the CARES Act. 5 Banks that participated in the Main
Street Lending Program and issued loans under the program retained a 5
percent stake in the loans, while the SPV purchased 95 percent.
SIGPR’s survey team distributed surveys to all program participants and
received responses from 58 lender banks and 627 borrowers. The survey
asked lenders and borrowers about their opinions on the program and
questions about the application process. SIGPR published the results of the
survey on January 27, 2022.
Overall, the survey results demonstrated that feedback on the program was
positive. Both lenders and borrowers responded that the program enabled
businesses to continue operating during the pandemic and that the program
met their expectations. In addition, nearly all surveyed lenders and borrowers
responded that they would be willing to participate in a similar program in the
future. However, the responses did contain some critiques of the program.
Although most lenders and borrowers described the loan application process
as “acceptable” or better, some borrowers and lenders indicated that they
thought the process was complex and that loan eligibility requirements made
it difficult to qualify for a loan. In addition, some borrowers commented that it
was difficult to find banks that were willing to participate in the program.
Audit of the Direct Loan Program. The Office of Audits continued its review
of the Direct Loan Program. This program was established under the CARES
Act and 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.
SIGPR continues to partner with the Department of Defense Office of
Inspector General in its audit of national security designations for businesses.
5
On May 29, 2020, Treasury committed to an initial equity investment of $37.5 billion into the
SPV. See Am. & Restated Ltd. Liab. Co. Agreement of MS Facilities LLC ¶ 12 (May 29, 2020),
https://www.bostonfed.org/supervision-and-regulation/credit/special-facilities/main-street-
lending-program/facility-agreements.aspx. On November 19, 2020, the Secretary of the
Treasury requested the return of Treasury’s excess capital in the SPV. See Letter from Steven
Mnuchin, Secretary of the Treasury, to Jerome H. Powell, Chair of the Board of Governors of
the Federal Reserve System (Nov. 19, 2020),
https://home.treasury.gov/system/files/136/letter11192020.pdf. On January 8, 2021, the
Federal Reserve Bank of Boston caused the SPV to return the unused funds in the amount of
$20.9 billion, leaving a remainder of $16.6 billion of equity investment as of January 31, 2021.
See Letter from Senior Vice President and Chief Financial Officer, Federal Reserve Bank of
Boston, to Principal Deputy Assistant Secretary of the Treasury, Financial Markets, and
Principal Deputy Assistant Secretary of the Treasury, International Monetary Policy (Jan. 11,
2021), https://www.bostonfed.org/-/media/Documents/special-lending-
facilities/mslp/legal/2021_01_11_Letter_to_UST.pdf.
3 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
This joint effort evaluates how the Department of Defense determined that
businesses were critical to maintaining national security for loans under
section 4003(b)(3) of the CARES Act.
The Office of Audits is also initiating a new set of attestation reviews of each
loan recipient’s application submission. This effort will help SIGPR determine
whether Treasury acquired all required documents from each applicant prior
to approving the applicant for funding from the Direct Loan Program.
Audit of Treasury’s Monitoring of the Direct Loan Program. SIGPR’s audit of
the Direct Loan Program originally included plans to audit Treasury’s
monitoring of borrowers’ compliance with the program. During this quarter, to
convey timely results to Treasury, the Office of Audits detached the
monitoring portion from the broader review and administered the monitoring
portion as a distinct audit. Treasury provided SIGPR with access to, and a
walkthrough of, Salesforce, its main system for monitoring borrowers’
compliance. SIGPR held an entrance conference with Treasury on December
1, 2021.
Data Analysis
The Office of Audits Data Analytics Division continues to play an integral role
in SIGPR’s mission and success. The division handles all issues at SIGPR
involving data and analysis. SIGPR’s data analytic platform uses sophisticated
software and tools that process large quantities of data and analyze them to
detect potential program fraud and misuse. These tools are valuable not only
for SIGPR’s audit work, but also for other proactive initiatives. The division has
developed a data library containing over 72 million rows of CARES Act
funding information, drawn from both public and sensitive sources, and
updates the library at least quarterly to maintain accurate and relevant
information. In all, the Data Analytics Division:
• proactively creates complex risk assessment metrics by identifying,
cleansing, normalizing, and joining relevant data tables;
• maintains a growing library of data tables to support the detection of
anomalies;
• creates interactive dashboards and visualizations to assist users in
better understanding and prioritizing program areas for audits,
investigations, and evaluations;
• shares analytic methodologies and processes with various external
government agencies, including the Department of Homeland
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 4
SIGPR OVERSIGHT
Security, Department of Defense, U.S. Agency for International
Development Office of Inspector General, Pandemic Response
Accountability Committee, Department of Health and Human Services,
Amtrak, National Aeronautics and Space Administration, Department
of Education, Small Business Administration Office of Inspector
General, General Services Administration Office of Inspector General,
and others; and
• collaborates with various inter-governmental agencies, committees,
and third-party vendors to stay informed about emerging analytic
technologies, techniques, tools, and methodologies.
Investigative Support
The Office of Audits provides forensic auditing services, including financial
records analysis, in support of investigations conducted by the Office of
Investigations. The Office of Audits is examining several requests for
investigative support that it received during the reporting period.
Investigations
The Office of Investigations conducts criminal and civil investigations
regarding allegations of fraud, waste, 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 members of
the public to report fraud, waste, abuse, or misconduct.
Investigative Activities
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. The office continued to
expand these efforts throughout the first quarter of the fiscal year.
In addition, SIGPR conducts investigations in partnership with various U.S.
Attorneys’ Offices, the U.S. Department of Justice (DOJ), the PRAC Fraud Task
Force, and other federal law enforcement partners.
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.
5 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
SIGPR Investigative Activity – October 1, 2021 through December 31, 2021
Hotline Complaints
Hotline Complaints Received 202
Referrals to Other Agencies 100
Preliminary Inquiries
Opened 1
Closed 1
Converted to Full Investigation 8
Ongoing 4
Investigations
Opened 9
Closed 1
Ongoing* 23
Criminal Actions †
Referrals to the Department of Justice 3
Referrals to State/Local Prosecuting Authorities 0
Indictments/Informations** 1
Arrests 1
Convictions/Pleas 0
Sentencings 0
Civil Actions
Referrals to the Department of Justice 2
Civil Judgments/Settlements 0
Note: Investigative data maintained via SIGPR’s electronic case management system.
* Includes all SIGPR program-related cases, including PRAC Fraud Task Force investigations and joint
investigations with other agencies.
† Actions reported include those resulting from PRAC Fraud Task Force investigations and joint
investigations with other agencies.
** The total number includes all charging documents resulting from any prior referrals to prosecutorial
authorities.
Pandemic Response Accountability Committee (PRAC) Fraud Task Force
In January 2021, the PRAC established a Fraud Task Force to serve as a
resource for the Inspector General (IG) community by surging investigative
resources into the areas of greatest need. Currently, the area of greatest
need is pandemic loan fraud. Agents from Offices of Inspectors General
across the government are detailed to work on Task Force cases. These
agents have partnered with prosecutors at DOJ’s Fraud Section and at U.S.
Attorneys’ Offices across the country.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 6
SIGPR OVERSIGHT
The PRAC extended its authority to investigate pandemic-related fraud to
SIGPR through a Memorandum of Understanding. Currently, SIGPR has four
agents assigned to the PRAC Fraud Task Force on a part-time basis. These
agents are assigned Paycheck Protection Program (PPP) cases while
continuing to work their SIGPR investigative caseload. This initiative allows
SIGPR to make a broader contribution to the IG community by assisting with a
range of critical investigations that might otherwise remain unstaffed.
The following case summary highlights our investigative work in support of
the PRAC Fraud Task Force during this reporting period.
MARYLAND WOMAN INDICTED FOR ALLEGEDLY OBTAINING
MORE THAN $1.6 MILLION IN FEDERAL COVID-19 PANDEMIC
RELIEF FUNDS
In December 2021, a Baltimore, Maryland woman was indicted by a federal
grand jury and charged with providing false statements and bank fraud in
connection with fraudulent applications for Economic Injury Disaster Loans
(EIDL) and PPP loans, totaling more than $1.6 million. SIGPR and Federal
Bureau of Investigation special agents determined that in April 2020, the
woman allegedly filed fraudulent applications on behalf of her businesses
through the EIDL and PPP programs. The programs were intended to provide
emergency financial assistance to American businesses suffering from the
economic effects caused by the COVID-19 pandemic. According to the
indictment, the woman used the CARES Act funds for personal expenses
such as plastic surgery, home renovations for both herself and relatives, rent
and utilities for personal residences, as well as other family expenses. In
addition, she filed six PPP Second Draw Borrower applications, and again
allegedly included false statements and misrepresentations as to her
businesses and number of employees. She also allegedly asserted that the
initial PPP loan was used to pay allowable expenses, and she included
fraudulent documentation, such as IRS forms that had never been filed with
the IRS.
SIGPR Hotline Activity
The SIGPR hotline accepts reports of potential fraud, waste, abuse, and
mismanagement related to 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,
7 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
all of whom wish to report fraud, waste, abuse, mismanagement, or reprisal
actions under the jurisdiction of SIGPR.
During this reporting period, SIGPR received 202 hotline complaints, as
indicated in the table below.
Complaints by Category
Received October 1, 2021 – December 31, 2021
Category Total
Title I – Paycheck Protection Program 14
Title IV, Subtitle A – 13(3) Facilities (MSLP) 1
Title IV, Subtitle B – Payroll Support Program 1
Title V – Coronavirus Relief Fund 25
Other
COVID-19 Economic Injury Disaster Loans 1
Economic Impact Payments 8
Income Tax Related 1
Non-Program Related 93
Rental and Housing Assistance Programs 39
Social Security Benefits Related 2
Unemployment Insurance Programs 7
Grand Total 202
Almost one third of the complaints received were determined to be non-
program-related, as indicated in the chart below.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 8
SIGPR OVERSIGHT
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).” 6
Accordingly, below are the categories of loans and other investments made
by Treasury under CARES Act section 4003,7 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). 8 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. 9 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
6
CARES Act § 4018(f)(1)(B).
7
Treasury did not establish a program for “loan guarantees” under CARES Act section 4003.
8
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, https://home.treasury.gov/data/other-programs (last visited Jan. 28, 2022).
9
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. 10
The following table contains an overview of the relevant categories and
amounts of Treasury’s obligations remaining under CARES Act section
4003(b)(1)–(4) through December 31, 2021:
Funding Program Outstanding Amount as of December 31, 2021
Direct Loans to Passenger Air Carriers
$402,890,105
and Related Businesses
Direct Loans to Cargo Air Carriers $2,325,225
Direct Loans to Businesses Critical to
$747,160,070
Maintaining National Security
Treasury Investment Remaining as of
Funding Program
December 31, 2021
Main Street Lending Program (MS $15,690,731,466
Facilities, LLC)
Term Asset-Backed Securities Loan $1,400,000,000 (plus interest)
Facility (TALF II, LLC)
Primary and Secondary Market
Corporate Credit Facility (Corporate $0
Credit Facilities, LLC)
Municipal Liquidity Facility (Municipal $420,000,000 (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). 11
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.
10
Id. § 1005.
11
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),
https://home.treasury.gov/system/files/136/Procedures and Minimum Requirements for
Loans.pdf.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 12
FINDINGS AND DEVELOPMENTS
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
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. 12 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 13
Loan Receipts
Amount 14
Aero
Hydraulics, 10/26/2020 10/24/2025 $450,000 $450,000 $497,103 $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 $341,741
Corporation
9/26/2020
American (amended
6/30/2025 $7,500,000,000 $550,000,000 $0 $10,257,500
Airlines, Inc. 10/21/2020
and 1/15/2021)
12
See U.S. Dep’t Treasury, Report Under Section 4026(b)(1)(C) of the CARES Act on Loans to Air
Carriers, Eligible Businesses, and National Security Businesses (Jan. 1, 2022),
https://home.treasury.gov/system/files/136/4026b1CLoanReport01012022.pdf; see also 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 (last updated Jan. 21,
2021).
13
“‘Disbursements’ includes all loan disbursements.” See U.S. Dep’t Treasury, Report Under
Section 4026(b)(1)(C) of the CARES Act on Loans to Air Carriers, Eligible Businesses, and National
Security Businesses (Jan. 1, 2022),
https://home.treasury.gov/system/files/136/4026b1CLoanReport01012022.pdf.
14
“‘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.” Id.
13 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
Total Cash
Maturity Total Loan Disbursements
Recipient Loan Date Outstanding Interest
Date Amount 13
Loan Receipts
Amount 14
American Jet
International 11/5/2020 11/5/2025 $1,162,124 $1,162,124 $1,181,571 $65,328
Corp
Aviation
Management 11/5/2020 11/5/2025 $4,026,705 $4,026,705 $4,224,071 $0
& Repairs, Inc.
Bristin Travel,
10/26/2020 10/24/2025 $549,651 $549,651 $583,391 $9,320
LLC
Caribbean 11/5/2020
Sun Airlines, (amended 11/5/2025 $6,768,749 $6,768,749 $7,248,321 $0
Inc. 12/7/2020)
Eastern
10/28/2020 10/28/2025 $15,000,000 $15,000,000 $16,182,485 $0
Airlines, LLC
11/9/2020
Elite Airways,
(amended 11/7/2025 $2,630,274 $2,630,274 $2,819,786 $0
LLC
12/1/2020)
9/28/2020
Frontier
(amended 9/26/2025 $574,000,000 $150,000,000 $150,000,000 $4,997,417
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 $316,264 $0
Inc.
9/29/2020
JetBlue
(amended
Airways 11/29/2025 $1,948,000,000 $115,000,000 $0 $3,330,113
11/3/2020 and
Corporation
1/15/2021)
Legacy
10/20/2020 10/25/2025 $1,817,306 $1,817,306 $2,008,961 $0
Airways, LLC
Mesa Airlines,
10/30/2020 10/30/2025 $195,000,000 $195,000,000 $203,068,632 $0
Inc.
Ovation Travel
10/15/2020 10/15/2025 $20,000,000 $20,000,000 $0 $181,881
Group, Inc.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 14
FINDINGS AND DEVELOPMENTS
Total Cash
Maturity Total Loan Disbursements
Recipient Loan Date Outstanding Interest
Date Amount 13
Loan Receipts
Amount 14
Republic
11/6/2020 11/6/2025 $58,000,000 $58,000,000 $0 $1,622,308
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 $140,614
Express, LLC
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 $1,505,068 $0
Systems, LLC
Timco Engine
11/5/2020 11/5/2025 $8,390,240 $8,390,240 $9,019,916 $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 Maintaining 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. 15
15
See U.S. Dep’t Treasury, Report Under Section 4026(b)(1)(C) of the CARES Act on Loans to Air
Carriers, Eligible Businesses, and National Security Businesses (Jan. 1, 2022),
https://home.treasury.gov/system/files/136/4026b1CLoanReport01012022.pdf; see also 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 (last updated Jan. 21,
2021).
15 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
Total Cash
Loan Maturity Total Loan Disbursements Outstanding
Recipient Interest
Date Date Amount 16
Loan Receipts
Amount 17
Channel
11/12/2020 11/12/2025 $2,500,000 $2,500,000 $2,541,835 $142,372
Logistics, LLC
Core Avionics &
11/5/2020 11/5/2025 $6,000,000 $6,000,000 $5,567,930 $188,933
Industrial, Inc.
Map Large, Inc. 11/2/2020 10/31/2025 $10,000,000 $10,000,000 $11,020,815 $0
Meridian Rapid
Defense Group, 10/30/2020 10/30/2025 $7,100,000 $7,100,000 $7,744,211 $79,019
LLC
Ovio
Technologies, 11/2/2020 10/31/2025 $1,186,900 $1,186,900 $1,308,060 $0
Inc.
Semahtronix,
11/13/2020 11/13/2025 $1,999,100 $1,999,100 $0 $777
LLC
Semantic AI,
11/13/2020 11/13/2025 $506,300 $506,300 $544,596 $0
Inc.
SpinLaunch,
11/13/2020 11/13/2025 $2,519,200 $2,519,200 $2,519,200 $182,800
Inc.
Visual
10/30/2020 10/30/2025 $1,053,200 $1,053,200 $1,148,761 $11,722
Semantics, Inc.
Wiser Imagery
10/30/2020 10/30/2025 $3,069,700 $3,069,700 $3,385,490 $0
Services, LLC
Yellow
7/8/2020 9/30/2024 $700,000,000 $700,000,000 $711,379,172 $19,323,222
Corporation 18
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
16
“‘Disbursements’ includes all loan disbursements.” See U.S. Dep’t Treasury, Report Under
Section 4026(b)(1)(C) of the CARES Act on Loans to Air Carriers, Eligible Businesses, and National
Security Businesses (Jan. 1, 2022),
https://home.treasury.gov/system/files/136/4026b1CLoanReport01012022.pdf.
17
“‘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.” Id.
18
YRC Worldwide changed its name to Yellow Corporation. Id.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 16
FINDINGS AND DEVELOPMENTS
other interests” directly from the issuer or through secondary markets, and
“making loans, including loans or other advances secured by collateral.” 19
The Federal Reserve established several liquidity programs (Facilities)
pursuant to section 13(3) of the Federal Reserve Act. 20 That provision, used
extensively during the 2008 financial crisis and amended by the Dodd-Frank
Wall Street Reform and Consumer Protection Act, 21 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.” 22
The Federal Reserve Board was required to consult with the Secretary of the
Treasury prior to the Board’s 2015 issuance of regulations governing
emergency lending under the statute. 23 The Federal Reserve may not
establish any emergency lending program under section 13(3) without prior
approval of the Secretary of the Treasury. 24
Of note, as of December 31, 2021, MS Facilities, LLC—an SPV jointly formed
by Treasury and the Federal Reserve Bank of Boston to operate the Main
Street Lending Program—has recognized approximately $17 million in actual
loan losses. 25 In addition, an evaluation of loan participations purchased by
the MS Facilities, LLC resulted in a reported loan loss allowance in the
amount of $2.3 billion. 26 The allowance for loan losses is estimated based
upon MS Facilities, LLC’s holdings as of September 30, 2021. 27
19
CARES Act § 4003(b)(4)(A)–(C).
20
See 12 U.S.C. § 343(3).
21
Pub. L. 111-203, 124 Stat. 1375.
22
12 U.S.C. § 343(3)(A); see also 12 C.F.R. § 201.4(d).
23
12 U.S.C. § 343(3)(B)(i).
24
12 U.S.C. § 343(3)(B)(iv).
25
See Bd. of Governors of the Fed. Reserve Sys., Periodic Report: Update on Outstanding
Lending Facilities Authorized by the Board under Section 13(3) of the Federal Reserve
Act (Jan. 10, 2022), https://www.federalreserve.gov/publications/files/13-3-report-
20220111.pdf.
26
See id.
27
See id.
17 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
The following table summarizes the total amount of remaining CARES Act
funds that Treasury invested in MS Facilities, LLC and each other SPV as of
December 31, 2021. 28
Treasury Investment Remaining as
Recipient
of December 31, 2021
MS Facilities, LLC $15,690,731,466
TALF II, LLC $1,400,000,000 (plus interest)
Corporate Credit Facilities, LLC $0
Municipal Liquidity Facility, LLC $4,200,000,000 (plus interest)
These facilities have stopped extending loans or purchasing obligations.
Transaction-specific details for the facilities are available on the Federal
Reserve’s website. 29 The Federal Reserve has indicated that because the Main
Street Lending Program ceased purchasing participations on January 8, 2021,
it will not provide additional transaction-specific disclosures about the Main
Street Lending Program on a periodic basis going forward.
Other Developments
Over the past quarter, SIGPR continued to work with Treasury and Congress
on the budget and appropriations issues discussed above in the Staffing and
Budget section. SIGPR also responded to a Congressional inquiry from
Senator Hawley concerning the airline industry, 30 and SIGPR’s response to
that inquiry may be found in Appendix A. Finally, SIGPR worked with
members of the Senate Homeland Security and Governmental Affairs
Committee (HSGAC) as they thoughtfully considered proposed legislation
respecting SIGPR’s jurisdiction, which may be found in Appendix B.
28
See id.
29
See Bd. of Governors of the Fed. Reserve Sys., Reports to Congress Pursuant to Section 13(3)
of the Federal Reserve Act in response to COVID-19,
https://www.federalreserve.gov/publications/reports-to-congress-in-response-to-covid-
19.htm (last updated Jan. 11, 2022).
30
U.S. Senator Josh Hawley, Senator Hawley Demands Answers on Airlines’ use of Pandemic
Funds, Widespread Layoffs from Biden Vaccine Mandate (Oct. 18, 2021),
https://www.hawley.senate.gov/senator-hawley-demands-answers-airlines-use-pandemic-
funds-widespread-layoffs-biden-vaccine-mandate.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 18
FINDINGS AND DEVELOPMENTS
SIGPR is grateful to all the members of Congress, Congressional staff,
Treasury officials, and others who devoted time and attention to SIGPR over
the past quarter. We are hopeful that with their support, SIGPR will secure the
funding it needs to continue beyond July and aggressively pursue its mission
to protect the taxpayers’ hard-earned money and ensure that federal relief
benefits those it is designed to help.
19 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SECTION 3 APPENDICES
APPENDICES
Appendix A
21 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
APPENDICES
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 22
APPENDICES
23 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
APPENDICES
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 24
APPENDICES
Appendix B
25 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
APPENDICES
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 26
APPENDICES
27 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
APPENDICES
REPORT TO CONGRESS | OCTOBER – DECEMBER 2021 28
HELP FIGHT
FRAUD,
WASTE, AND
ABUSE.
BY EMAIL: hotline@sigpr.gov
BY PHONE: 202-927-7899
www.sigpr.gov
File and source
- File
- REPORT_SIGPR_special-inspector-general-pandemic-recovery-quarterly-report_2022-01-31.pdf
- Size
- 20,407,274 bytes
- SHA-256
- 11247565113257df84924ede822033ac8c577aa579669e91676f3b8e3927db6e
- Original
- www.oversight.gov