Office of the Special Inspector General for Pandemic Recovery: Quarterly Report to the United States Congress, April through June 2023
- Document type
- Order
- Date
- 2023-05-12
Summary
The thirteenth Quarterly Report to the United States Congress from the Office of the Special Inspector General for Pandemic Recovery, covering April through June 2023, with an opening message from Special Inspector General Brian D. Miller. The message states that lender banks reported over $859 million in Main Street Lending Program loans in default, impaired, delinquent or involving material misrepresentation, and asks for a five-year extension beyond the office's 2025 sunset date. The audits section describes a May 11, 2023 final audit report on Treasury's $700 million direct loan to YRC Worldwide, Inc. and a May 31, 2023 report on Treasury's monitoring of direct loans, with their recommendations. It tabulates responses from 39 lender banks to subpoenas, and the report closes with tables of remaining Treasury investments in special purpose vehicles as of June 30, 2023.
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
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“Office of the Special Inspector General for Pandemic Recovery: Quarterly Report to the United States Congress, April through June 2023.”
Original at www.sigpr.gov, dated 2023-05-12. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2023-05-12-sigpr-quarterly-report/
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OFFICE OF THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
Quarterly Report to the United States Congress
April through June 2023
MESSAGE FROM THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
I am pleased to present our thirteenth Quarterly Report to Congress. During this reporting period, the
Special Inspector General for Pandemic Recovery (SIGPR) has issued two interim reports based on Main
Street Lending Program loan information received as part of subpoena requests to the lender banks.
These banks reported over $859 million in loans that were either in default, impaired, had delinquent
interest payments, or were loans where the borrower made material misrepresentations during the loan
process. Our May 12, 2023, interim report included a comparison between loan loss data of the loan
portfolio and 11 commercial banks with a similar volume of loan participations. The data shows that the
allowance for loan losses, loans in non-accrual status, and charge-offs are far greater with the Main
Street Lending Program loan portfolio than they are with loans from comparable banks.
During this reporting period, SIGPR also issued two audit reports. One report covered Treasury’s
monitoring of its direct loans, and one report looked at the approval process for the largest direct loan.
In addition, we are currently conducting a significant number of investigations within SIGPR’s jurisdiction,
as well as continuing to enhance other pandemic oversight efforts through our active participation in
the Pandemic Response Accountability Committee’s (PRAC) Fraud Task Force (TF). Unlike many agencies
that work primarily on cases referred to them, SIGPR has focused most of its efforts on developing its
own leads for cases. Eighty-four percent of matters currently under investigation at SIGPR came from
self-generated leads, and those investigations involve potential fraud arising from more than $350
million in CARES Act loans.
This quarter SIGPR’s investigations resulted in two guilty pleas for illegally obtaining over $7 million of
Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) funds for unauthorized
purposes and for their own personal enrichment. SIGPR was also responsible for 15 individuals being
indicted and arrested in connection to a $53 million fraud scheme, that included over $13 million in
CARES Act funds.
I want to thank the auditors, special agents, attorneys, and administrative staff of SIGPR, all of whom are
professional public servants who share one goal—to protect the American people from fraud, waste and
abuse.
As I have noted in previous correspondence and other communications with Congress, in order for this
work to continue, we are asking for a five-year extension beyond our sunset date of 2025. We need this
time to see our investigations through to completion. Most loans within our jurisdiction mature in 2025:
should defaults then occur, without an extension SIGPR will sunset just when we are most needed. We
at SIGPR will continue our mission and look forward to working with you in the future.
Very respectfully,
Brian D. Miller
Special Inspector General for Pandemic Recovery
i SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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
SIGPR has 51 employees on board. We continue to be judicious in the execution of our budget in support
of the SIGPR mission.
CONTENTS
SIGPR OVERSIGHT
Audits 1
Investigations 5
FINDINGS AND DEVELOPMENTS
Direct Loans and Other Investments 11
REPORT TO CONGRESS | APRIL – JUNE 2023 ii
SECTION 1
SIGPR OVERSIGHT
SIGPR employs proactive efforts to 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:
Audits
The Office of Audits conducts audits and evaluations of loans and other investments made by Treasury
under programs within SIGPR’s jurisdiction. 1
Engagements
During this quarter, the Office of Audits worked on several engagements related to the Direct Loan
Program and one audit of the Main Street Lending Program. The Direct Loan Program was established
under section 4003 of 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. Treasury made direct loans to 35 such businesses, providing
them with liquidity to withstand losses incurred as a result of the coronavirus pandemic.
The Main Street Lending Program (MSLP) supported lending to small and medium-sized for-profit
businesses and nonprofit organizations that were in sound financial condition before the onset of the
pandemic. The Federal Reserve Bank of Boston, which manages the program, set up a Special Purpose
Vehicle to purchase 95 percent of participations in MSLP loans from lender banks. These purchases were
backed by a $16.6 billion equity investment by Treasury.
Audit of Treasury’s Process for Approving Its Direct Loan to YRC Worldwide, Inc.
On May 11, 2023, SIGPR issued its final audit report on the Audit of the U.S. Department of the
Treasury’s Process for Its Direct Loan to YRC Worldwide, Inc. (Yellow) Under Section 4003 of the CARES
1 See CARES Act § 4018(c)(1)
1 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Act. The audit objective was to determine if Treasury followed requirements under Section 4003 of the
CARES Act and other appropriate regulations and guidance.
The report highlighted internal control weaknesses in the development and implementation of
Treasury’s approach to reviewing, approving, and disbursing a $700 million direct loan to Yellow.
Treasury did not have specific, measurable objectives, nor did it have finalized loan approval policies and
procedures in place prior to the approval and disbursement of Yellow’s loan. Treasury also developed its
own definition of “businesses critical to maintaining national security,” under which Yellow’s eligibility
was determined, which had a broader scope than the definition later added as an amendment to 15
U.S.C. 9041 by the Consolidated Appropriations Act, 2021.
Based on the audit findings, SIGPR made four recommendations to Treasury’s Chief Recovery Officer:
1. finalize/codify program objectives in its policies and procedures before any new programs are
established and executed;
2. ensure that appropriate policies and procedures are in place prior to rolling out new programs
where American tax dollars are at risk;
3. develop a contingency plan for financial disasters that provides a framework for future direct
lending programs to reduce implementation time and the possibility of errors or omissions; and
4. develop a “Lessons Learned” report that discusses the strengths and weaknesses/successes and
failures of the processes used to approve Yellow’s NSLP loan.
Treasury’s Chief Recovery Officer generally agreed with the first two of our recommendations but
insisted that “in certain emergency situations…it may be necessary to design programs concurrently
with their implementation.” The Chief Recovery Officer also agreed to develop a contingency plan for
future financial disasters by compiling “program documents, policies, and procedures from prior lending
programs…so that they will be readily available to future policymakers in the event of a future financial
crisis.” However, the Chief Recovery Officer disagreed on the appropriate timing to publish a “Lessons
Learned” report and preferred to defer the decision to evaluate and report until the Yellow loan “has
reached maturity or is fully repaid.”
Audit of Treasury’s Monitoring of the Direct Loan Program
On May 31, 2023, SIGPR issued a final audit report on weaknesses in Treasury’s monitoring of CARES Act
loans. We found that Treasury did not conduct timely monitoring of loans made under Section
4003(b)(1)-(3) of the CARES Act for Calendar Year 2021 Quarters 1, 2, and 3. Although the first quarter
covered by Treasury’s monitoring program was Calendar Year 2020 Quarter 4, Treasury did not create a
policy to guide the monitoring program until May 2022. Without timely monitoring, Treasury cannot
detect and appropriately respond to loan borrowers’ lack of compliance with loan requirements or
jeopardized ability to repay the loans.
We also found that though Treasury has a program to monitor borrowers’ compliance, the level of
monitoring varies widely among loan requirements. We did not find evidence of a risk assessment that
would show the likelihood or impact of non-compliance for each requirement. Such an analysis could
have led Treasury to increase its monitoring in any high-risk or medium-risk areas. For requirements
with weaker monitoring, Treasury may not catch areas of non-compliance.
We recommend that Treasury:
1. update its monitoring policy to add deadlines to avoid significant monitoring delays;
2. ensure that it has an effective policy in place to monitor any future emergency loan programs in
REPORT TO CONGRESS | APRIL – JUNE 2023 2
SIGPR OVERSIGHT
a timely manner; and
3. conduct a risk assessment of loan requirements to determine whether any areas of monitoring
should increase for future quarterly reviews.
Treasury generally agreed with the findings and the intent of the recommendations.
Audit of Direct Loan Program Borrower – Mesa Airlines, Inc.
Mesa Airlines, Inc. received a $195 million direct loan from Treasury pursuant to section 4003(b)(1) of
the CARES Act. The loan agreement includes covenants by Mesa Airlines to comply with certain
restrictions on employee compensation, stock repurchases, dividends, and other areas as required by
the CARES Act. We are doing an audit to ensure the terms of the loan agreements between Mesa
Airlines and Treasury are being met.
During the course of the audit, the audit team reviewed Mesa Airlines’ responses to Salesforce review
card questions that are designed to monitor compliance with the loan agreement and conducted a site
visit to Mesa Airlines’ headquarters to review supporting documentation and interview Mesa Airlines’
officials. This is the first in a series of planned audits to ensure compliance with the terms of the loan
agreements between Treasury and the loan recipients.
Audit of Direct Loan Program Borrower – MapLarge, Inc.
MapLarge, Inc. received a $10 million direct loan from Treasury pursuant to section 4003(b)(3) of the
CARES Act. The loan agreement includes covenants by MapLarge to comply with certain restrictions on
employee compensation, stock repurchases, dividends, and other areas as required by the CARES Act.
We are performing the audit to ensure the terms of the loan agreements between MapLarge and
Treasury are being met.
The Office of Audits held an entrance conference with individuals at MapLarge to discuss audit
objectives. The audit team has reviewed MapLarge’s responses to Salesforce review card questions that
are designed to monitor compliance with the loan agreement. We plan to conduct a site visit to
MapLarge’s headquarters to review supporting documentation and interview MapLarge officials.
Audit of the Effects the Main Street Lending Program’s Loan Loss Have on Treasury’s Investment in the
Program
On March 14, 2023, SIGPR issued an engagement letter notifying Treasury of this audit that will focus on
the identification of Main Street Lending Program (MSLP) loans that went into default or became
impaired and determine the reasons for the defaults/impairments and the effects they will have on
Treasury’s investment in the program. As part of this audit, SIGPR issued a draft alert memorandum to
Treasury on March 20, 2023, notifying Treasury of the closure of Signature Bank, a bank that issued five
MSLP loans worth $113.4 million. In addition, SIGPR has issued two interim reports based on MSLP loan
information received as part of subpoena requests to the MSLP lender banks. The latest report, issued
on May 12, 2023, is based on responses received from 39 lender banks. Statistics on the banks’
responses are as follows:
Summary of Responses Received Compared to All MSLP Loans
Subpoena MSLP % of
Responses Universe MSLP Universe
Number of Banks 39 319 12%
Number of Loans Issued 1,008 1,830 55.1%
$ Value of Loans Issued $8,509,622,697 $17,459,024,461 48.7%
3 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Summary of 39 Subpoena Responses
Count $ Loan Value
Defaults 48 $560.1 million
Delinquent Interest Payments 22 $98.2 million
Delinquent Financial Reporting 209 $1.1 billion
Impaired Loans 30 $192.3 million
Material Misrepresentation 3 $8.9 million
Paid Off 237 $2.1 billion
Our May 12, 2023, interim report also included a comparison between loan loss data of the MSLP loan
portfolio, and 11 commercial banks with a similar volume of loan participations. The data shows that the
allowance for loan losses, loans in non-accrual status, and charge-offs are far greater with the MSLP loan
portfolio than they are with loans from comparable banks.
SIGPR will continue to monitor bank closures and Main Street loans that become impaired.
Data Analysis
The Office of Audits data analytics program plays an important role in SIGPR’s mission. The data
analytics platform uses various software and tools that process and analyze large quantities of data to
detect potential red flags and anomalies. These tools are valuable not only for SIGPR’s audit work, but
also for other proactive initiatives throughout SIGPR. The program has developed a data library
containing over 150 million rows of CARES Act funding information, drawn from both public and
sensitive government sources. The program updates the library at least quarterly to maintain accurate
and relevant information.
The data analytics program:
• maintains complex risk assessment metrics by creating analytics that identify audit red flags;
• harmonizes, cleanses, normalizes, and joins relevant data tables;
• maintains a growing library of data tables that provide information and support the detection of
irregularities;
• 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 Security, Department of Defense, U.S. Agency for
International Development Office of Inspector General, PRAC, Department of Health and Human
Services, Amtrak, National Aeronautics and Space Administration, Department of Education
Office of Inspector General, Small Business Administration Office of Inspector General, General
Services Administration Office of Inspector General, Treasury’s Office of the Chief Data Officer,
and others;
• collaborates with various inter-governmental agencies, committees, and third-party vendors to
stay informed about emerging analytic technologies, techniques, tools, and methodologies; and
• continues to work closely with CIGIE’s Pandemic Analytics Center of Excellence’s data sharing
program and analytics effort in mining data for the benefit of many government agencies and
Offices of Inspectors General.
REPORT TO CONGRESS | APRIL – JUNE 2023 4
SIGPR OVERSIGHT
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 reporting 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.
In addition, SIGPR’s investigations are conducted 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 tables highlight SIGPR’s investigative activities for the period.
SIGPR OI MSLP/Direct Loan
Proactive
Cases Involving Other
MSLP/Direct Loan Cases
CARES Act Funding
11%
16%
Proactive 89%
84%
Cases
SIGPR cases associated with other
Non- CARES Act Funding
Proactive SIGPR cases solely with MSLP or
Direct Loans
SIGPR Investigative Activity – April 1, 2023, through June 30, 2023
Hotline Complaints
Hotline Complaints Received 190
Referrals to Other Agencies* 15
Preliminary Inquiries
Opened 3
5 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Closed 2
Converted to Full Investigation 2
Ongoing 4
Investigations**
Opened 2
Closed 2
Ongoing 33
Criminal Actions †
Referrals to the Department of Justice 0
Referrals to State/Local Prosecuting Authorities 0
Indictments/Informations 15
Arrests/Summons 16
Convictions/Pleas 2
Sentencings 0
Civil Actions
Referrals to the Department of Justice 0
Civil Judgments/Settlements 0
Other Enforcement Actions
IG Subpoenas Issued 20
Suspension/Debarment Recommendations 0
Investigative Monetary Results
Funds Seized/Forfeitures 0
Restitution Ordered 0
Fines and Penalties 0
Civil Judgments/Settlements 0
***Recoveries 20,816,000
Note: Investigative data maintained via SIGPR’s electronic case management system.
* Includes referrals from SIGPR proactive work.
** Includes all SIGPR program-related cases, including PRAC Fraud Task Force investigations and joint
investigations with other agencies.
*** Includes MSLP funds repaid following notification of investigation.
† Actions reported include those resulting from PRAC Fraud Task Force investigations and joint
investigations with other agencies.
REPORT TO CONGRESS | APRIL – JUNE 2023 6
SIGPR OVERSIGHT
Throughout the third quarter of the fiscal year, the Office of Investigations continued to expand its
investigative oversight work through SIGPR’s collaborative and proactive efforts as exhibited below.
TWO VIRGINIA MEN PLEAD GUILTY IN $7 MILLION COVID-19 FRAUD SCHEME
In May 2023, a Manassas business owner, and a Bealeton man pled guilty in federal court to conspiring
to defraud banks and the federal Small Business Administration
(SBA) of more than $7 million in COVID-19 relief funds.
Between April 2020 and March 2021, one of the men falsified payroll
records, created fake IRS business tax returns, and falsified revenue
reports of multiple companies and then submitted them to the SBA to
obtain over $7 million in Paycheck Protection Program (PPP) and
Economic Injury Disaster Loan (EIDL) loans. The other man obtained
$1.4 million of the total and re-distributed approximately $620,000
back to his accomplice’s company.
The investigation revealed PPP funds were used to invest in crypto
currency, make home renovations, purchase vehicles, pay private high school and college tuition
bills, as well as pay other personal expenses.
CFO, CONTROLLER, AND CORPORATE OFFICERS CHARGED IN $53 MILLION FRAUD SCHEME
cheme INVOLVING PANDEMIC RELIEF
Fifteen individuals who allegedly bilked the Paycheck Protection Program (PPP), a COVID-era financial
program, and numerous financial institutions out of more than $53 million in loan proceeds were
federally charged.
In June 2023, the defendants were arrested in Texas, California, and
Oklahoma by special agents of the Special Inspector General for Pandemic
Recovery (SIGPR), the Federal Deposit Insurance Corporation Office of
Inspector General (FDIC-OIG), and the Federal Bureau of Investigation
(FBI).
According to a series of indictments, several of the charged defendants
purportedly operated a group of affiliated recycling companies. They
allegedly submitted at least 29 PPP loan applications that falsified payroll
expenses, as well as altered both bank statements and Internal Revenue
Service tax forms to falsely inflate business income. They then routed PPP loan funds through a series of
bank accounts to create a false paper trail of payroll expenses.
At least two of the defendants also allegedly submitted false applications to financial institutions on
behalf of their purported recycling companies to fraudulently obtain, in the aggregate, millions of dollars
in business loan proceeds. And one defendant allegedly lied to the Federal Deposit Insurance
Commission (FDIC) by stating that he did not know several of his other alleged coconspirators.
7 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
RECOGNITION OF SIGPR’S CASEWORK
Tampa Region Financial Crimes and Inspectors General Council
On May 16, 2023, the Tampa Region Financial
Crimes and Inspectors General Council
honored the U.S. v. Daniel Tisone investigative
team with a Special Achievement Award.
SIGPR Senior Special Agent Rogelio De Sedas
(far right) was recognized for his outstanding
work. The team was comprised of the MFL
USAO, FBI, IRS, and FRB OIG. Tisone was
convicted in connection with a CARES Act
fraud scheme and sentenced to 87 months
incarceration. The Court ordered Tisone to
forfeit properties, an engagement ring, boat,
ammunition, and cash seized from bank
accounts. He was also ordered to pay over
$2.6 million in court ordered restitution.
Pandemic Response Accountability Committee
The PRAC recognized SIGPR’s Senior Special Agent
Nenette Day (center) with an award in recognition of
her outstanding work on the PRAC Fraud Task Force.
On June 14, 2023, SIGPR’s Deputy Inspector General
Barbara Bruin (right) and AIGI Chris Cherry (left)
presented SSA Day with the award recognizing her for
work that resulted in two individuals pleading guilty in
federal court for engaging in a scheme to defraud
banks and the Small Business Administration of over $7
million in COVID relief funds. At the time, she was
responsible for the PRAC Fraud Task Force’s largest
financial case.
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. The Fraud Task Force brings together agents from 16
Inspectors General to investigate fraud involving a variety of programs, including
the Paycheck Protection Program. Task force agents who are detailed to the PRAC
receive expanded authority to investigate pandemic fraud as well as tools and
training to support their investigations. These agents have partnered with prosecutors at
DOJ’s Fraud Section and at United States Attorneys’ Offices across the country.
Due to the large scale of CARES Act related fraud, the PRAC extended its authority to SIGPR to investigate
additional pandemic-related fraud through a Memorandum of Understanding. Currently, SIGPR has five
special agents assigned to the PRAC Fraud Task Force on a part-time basis. These special agents are
REPORT TO CONGRESS | APRIL – JUNE 2023 8
SIGPR OVERSIGHT
assigned CARES Act (PPP/EIDL) related cases while continuing to work their SIGPR investigative
caseloads (MSLP/Direct Loans). 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.
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, all
of whom wish to report fraud, waste, abuse, mismanagement, or reprisal
actions under the jurisdiction of SIGPR.
During this reporting period, SIGPR received 190 hotline complaints, of which all pertained to matters
outside SIGPR’s jurisdiction, as indicated in the table and chart below.
Complaints by Category
Received April through June 2023
Category Total
Title I – Paycheck Protection Program 5
Title V – Coronavirus Relief Fund 15
Multiple CARES Act Programs 4
Economic Impact Payments 4
Emergency Income Disaster Loans 1
Income Tax Related 5
Non-Program Related 96
Rental and Housing Assistance Programs 14
Social Security Benefits 43
Unemployment Insurance Programs 3
Grand Total 190
9 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
PUBLIC LAW 117–348—JAN. 5, 2023 ‘‘Trafficking Victims Prevention and Protection Reauthorization
Act of 2022’’
In compliance with the reporting requirements to Congress as required by this law, the Special Inspector
General for Pandemic Recovery had no reportable activity relating to complaints of human trafficking or
any related investigations.
REPORT TO CONGRESS | APRIL – JUNE 2023 10
SECTION 2 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).” 2
Accordingly, below are the categories of loans and other investments made by Treasury under CARES
Act section 4003, 3 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 of the
Treasury “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),
2 CARES Act § 4018(f)(1)(B)
3 Treasury did not establish a program for “loan guarantees” under CARES Act section 4003.
REPORT TO CONGRESS | APRIL – JUNE 2023 11
FINDINGS AND DEVELOPMENTS
and businesses critical to maintaining national security ($17 billion). 4 The fourth category, described in
section 4003(b)(4), authorized the Secretary to invest in various liquidity programs established by the
Board of Governors of the Federal Reserve System 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. 5 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 MSLP, that were authorized to purchase loans until January 8, 2021,
for applications submitted by December 14, 2020.6
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).7 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
under 14 C.F.R. Part 145, and air-transportation ticket
agents, as well as $4 billion for cargo air carriers.
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 report excerpts on the following pages summarize the section 4003(b)(1) – (3) loans current through
this quarter. 8
4Treasury 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
5 See Consolidated Appropriations Act, 2021, Pub. L. 116-260, div. N §§ 1003, 1005
6 Id. § 1005.
7
U.S. Department of the 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.,
8 See U.S. Department of the Treasury, Report Under Section 4026(b)(1)(C) of the CARES Act on Loans to Air
Carriers, Eligible Businesses, and National Security Businesses (July 1, 2023) 4026b1CLoanReport07012023.pdf
(treasury.gov) ; see also U.S. Department of the Treasury, Loans to Air Carriers, Eligible Businesses, and National
Security Businesses, Loans to Air Carriers, Eligible Businesses, and National Security Businesses | U.S. Department
of the Treasury (last updated Jan. 21, 2021).
REPORT TO CONGRESS | APRIL – JUNE 2023 12
FINDINGS AND DEVELOPMENTS
13 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
REPORT TO CONGRESS | APRIL – JUNE 2023 14
FINDINGS AND DEVELOPMENTS
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.” 9
9 CARES Act § 4003(b)(4)(A)–(C)
15 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
The Federal Reserve established several liquidity programs (facilities) pursuant to section 13(3) of the
Federal Reserve Act. 10 That provision, used extensively during the 2008 financial crisis and amended by
the Dodd-Frank Wall Street Reform and Consumer Protection Act, 11 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.” 12 The Federal Reserve Board was required to consult with the Secretary of the Treasury
prior to the Federal Reserve Board’s 2015 issuance of its regulations governing emergency lending under
section 13(3) of the Federal Reserve Act. 13 The Federal Reserve may not establish any emergency
lending program under section 13(3) without prior approval of the Secretary of the Treasury. 14
Of note, as of June 30, 2023, MS Facilities, LLC—a special-purpose vehicle (SPV) jointly formed by
Treasury and the Federal Reserve Bank of Boston to operate the MSLP—has recognized approximately
$164 million in actual loan losses, net of subsequent recoveries. 15 This number has more than tripled
from $45 million since SIGPR’s last quarterly report of 2022. In addition, an evaluation of loan
participations purchased by the MS Facilities, LLC resulted in a reported loan loss allowance in the
amount of $1 billion. 16 The allowance for loan losses is estimated based upon MS Facilities, LLC’s
holdings as of March 31, 2023. 17
These facilities have stopped extending loans or purchasing obligations. Additional details for the facilities
are available on the Federal Reserve’s website. 18 The Federal Reserve has indicated that because the
MSLP ceased purchasing participations on January 8, 2021, it will not provide additional transaction-
specific disclosures about the MSLP on a periodic basis going forward.
10 See 12 U.S.C. § 343(3)
11 Pub. L. 111-203, 124 Stat. 1375
12 12 U.S.C. § 343(3)(A); see also 12 C.F.R. § 201.4(d)
13 12 U.S.C. § 343(3)(B)(i)
14 12 U.S.C. § 343(3)(B)(iv)
15See 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. 13-3-report-20230711.pdf
(federalreserve.gov) (July 10, 2023).
16 See id.
17 See id.
18 See id.
REPORT TO CONGRESS | APRIL – JUNE 2023 16
FINDINGS AND DEVELOPMENTS
The following table summarizes the total amount of remaining CARES Act funds that Treasury invested
in MS Facilities, LLC and other SPVs created in conjunction with other lending programs as of June 30,
2023. 19
Treasury Investment Remaining as of
Recipient
June 30, 2023
MS Facilities, LLC $10,059,500,816.92
TALF II, LLC $883,115,976.09
Corporate Credit Facilities, LLC $0.00
Municipal Liquidity Facility, LLC $2,920,731,446.70
The SPVs have returned the following amounts to Treasury as of March 31, 2023.
Investment Returned to Treasury as of
Recipient
June 30, 2023
MS Facilities, LLC $27,815,675,901.29
TALF II, LLC $9,152,091,265.55
Corporate Credit Facilities, LLC $37,980,215,713.55
Municipal Liquidity Facility, LLC $14,673,971,316.39
19 Letter from Michelle Dickerman, Dep. Ass’t Gen. Counsel, Off. of Gen. Counsel, Treasury, to Vincent Mulloy,
Special Counsel, Off. of Gen. Counsel, SIGPR, Treasury (July 24, 2023) (on file with SIGPR).
17 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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