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OFFICE OF THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
Quarterly Report to the United States Congress
July through September 2023
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SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
MESSAGE FROM THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
I am pleased to present our fourteenth Quarterly Report to Congress. During this reporting period, the
Special Inspector General for Pandemic Recovery (SIGPR) has issued our third interim report based on
Main Street Lending Program loan information received as part of subpoena requests to the lender
banks. These banks reported over $1 billion 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 September 14, 2023, interim report notes that principal payments on Main
Street Lending Program loans just started to become due in July 2023, and already the Federal Reserve
Board has reported there are $210 million in actual loan losses as of August 31, 2023.
During this reporting period, SIGPR also issued an audit report on a direct loan program borrower. The
report found that the borrower did not comply with the terms of its loan agreement with Treasury
regarding its use of loan proceeds and its collateral coverage ratio.
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 Fraud Task Force. 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-nine percent of matters currently under investigation at SIGPR came from self-
generated leads, and those investigations involve potential fraud arising from more than $380 million in
CARES Act loans.
This quarter SIGPR’s investigations resulted in two individuals being sentenced for illegally obtaining
over $7.6 million of Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) funds
for unauthorized purposes and for their own personal enrichment.
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, for this work to
continue, we are asking for a five-year extension beyond our March 2025 sunset date. 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
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
ii
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 44 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
1 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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 three engagements related to the Direct Loan
Program and one audit of Treasury’s Investment in 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. As of September 1, 2023, 8 of these 35 loans were in default.2 These defaults include 2
borrowers who have filed for bankruptcy. The total outstanding loan amount for these loans in default is
over $772 million.3
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
1 See CARES Act § 4018(c)(1)
2 Borrowers whose direct loans are currently in default are Aero Hydraulics, Inc.; Caribbean Sun Airlines, Inc.; Elite
Airways, LLC; Legacy Airways, LLC; Meridian Rapid Defense Group, LLC; Timco Engine Center, Inc.; Visual Semantics,
Inc.; and Yellow Corporation.
3 A single borrower, Yellow Corporation, owes approximately $737 million of this total.
SIGPR OVERSIGHT
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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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.
Limited Scope Review of Yellow Corporation’s Executive Compensation
On August 16, 2023, SIGPR issued a subpoena to Yellow Corporation (Yellow) as part of a limited scope
review of Yellow’s compliance with Section 12.05 – Limitations on Certain Compensations, as found
within its $700 million loan agreement with Treasury.
On July 30, 2023, Treasury received information from Yellow’s financial advisor that Yellow paid over $8
million in compensation to certain corporate officers and employees, including a $3.35 million retention
payment to Yellow’s Chief Executive Officer (CEO). On August 4, 2023, Treasury issued a Notice of
Noncompliance to Yellow to address the situation. Yellow responded to Treasury on August 10, 2023,
that the CEO voluntarily returned the $3.35 million. While Yellow did not make any other self-
disclosures regarding any other violations of their loan agreement, SIGPR has the obligation to further
investigate the self-disclosure they did provide.
We have held meetings with Yellow’s outside counsel and received a partial response relating to the
subpoena. We have requested the remainder of documents requested through the subpoena that we
have not received.
Audit of Direct Loan Program Borrower – Mesa Airlines, Inc.
Mesa Airlines, Inc. (Mesa) 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 agreement between
Mesa Airlines and Treasury are being met.
Our audit found instances where Mesa used proceeds from the loan to make payments on other existing
loans, which is in violation of the terms of the loan agreement. We also found that Mesa fell below the
Collateral Coverage Ratio requirement of 1.6 to 1. Rather than requiring Mesa to make loan payments or
pledge additional collateral to get in compliance as the agreement dictates, Treasury granted Mesa a
waiver to this requirement and reduced the ratio to 1.55 to 1. Finally, although the loan agreement
requires Mesa to use all proceeds from the sale of collateral to repay the loan, Treasury entered into an
agreement to allow Mesa to use only a portion of its proceeds from the sale of collateral to be applied
towards the loan repayment.
We recommended that Treasury determine if corrective action is needed regarding the improper use of
loan proceeds, and that Treasury closely monitor Mesa’s collateral to ensure it is remaining in
compliance with the terms of the loan agreement.
Audit of Direct Loan Program Borrower – MapLarge, Inc.
MapLarge, Inc. (MapLarge) 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.
During the course of the audit, the audit team reviewed MapLarge’s responses to Salesforce review card
questions that are designed to monitor compliance with the loan agreement and conducted a site visit
to MapLarge’s headquarters to review supporting documentation and interview MapLarge officials. The
SIGPR OVERSIGHT
3 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
audit team has also corresponded with Treasury officials to gain a better understanding of the nature
and extent of guidance provided to borrowers.
Audit of the Effects the Main Street Lending Program’s Loan Losses Have on Treasury’s Investment in
the Program
On September 14, 2023, SIGPR issued its third interim report based on MSLP loan information received
as part of subpoena requests to the MSLP lender banks. The report is based on responses received from
47 lender banks. Statistics on the banks’ responses are as follows:
Summary of Responses Received Compared to All MSLP Loans
Summary of 39 Subpoena Responses
Count
$ Loan Value
Defaults
74
$878.5 million
Delinquent Interest Payments
25
$121.2 million
Delinquent Financial Reporting
215
$1.1 billion
Impaired Loans
34
$228.9 million
Material Misrepresentation
5
$66.9 million
Paid Off
283
$2.9 billion
Our interim report also notes that principal payments on Main Street Lending Program loans just started
to become due in July 2023, yet the Federal Reserve Board has reported there are $210 million in actual
loan losses as of August 31, 2023.
Finally, our interim report discussed obtaining detailed loan loss information from the Federal Reserve
Board and the Federal Reserve Bank of Boston. On September 5, 2023, the SIGPR Office of Audits issued
an IG subpoena to the Federal Reserve Bank of Boston (FRBB) to obtain the documents that identify the
Main Street Lending Program loans comprising the approximately $164 million in actual loan losses as of
July 31, 2023. Production of the subpoenaed materials is due from the FRBB on October 5, 2023.
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.
Subpoena
Responses
MSLP
Universe
% of
MSLP Universe
Number of Banks
47
319
15%
Number of Loans Issued
1,094
1,830
59.8%
$ Value of Loans Issued
$10,224,112,602
$17,459,024,461
58.6%
SIGPR OVERSIGHT
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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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, Pandemic Response Accountability
Committee (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 Inspector General.
SIGPR OVERSIGHT
5 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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 table highlights SIGPR’s investigative activities as they relate to the various CARES Act
programs.
SIGPR OVERSIGHT
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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SIGPR Investigative Activity – July 1, 2023, through September 30, 2023
Hotline Complaints
Hotline Complaints Received
211
Referrals to Other Agencies*
31
Preliminary Inquiries
Opened
6
Closed
1
Converted to Full Investigation
3
Ongoing
6
Investigations**
Opened
5
Closed
1
Ongoing
37
Criminal Actions †
Referrals to the Department of Justice
3
Referrals to State/Local Prosecuting Authorities
0
Indictments/Informations****
2
Arrests/Summons
1
Convictions/Pleas
0
Sentencings
2
Civil Actions
Referrals to the Department of Justice
0
Civil Judgments/Settlements
1
Other Enforcement Actions
IG Subpoenas Issued
14
Suspension/Debarment Recommendations****
14
Administrative Suspension
7
Administrative Debarment
0
Investigative Monetary Results
Funds Seized/Forfeitures
$6,240,113
Restitution Ordered
$9,075,969
Fines and Penalties
0
Civil Judgments/Settlements
350,000
Recoveries***
0
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.
**** Includes statical information not captured in the last reporting period.
† Actions reported include those resulting from PRAC Fraud Task Force investigations and joint
investigations with other agencies.
SIGPR OVERSIGHT
7 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
CASEWORK HIGHLIGHTS
Throughout the fourth 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 SENTENCED IN $7.6 MILLION COVID-19 FRAUD SCHEME
In September 2023, a Manassas man and a Bealeton man were sentenced in federal court to a
combined 6 years in prison for engaging in a joint scheme to defraud banks and the Small Business
Administration (SBA) of over $7.6 million in COVID relief funds.
In May 2023, a Manassas business owner, and a Bealeton man pled
guilty in federal court to conspiring to defraud banks and the SBA of more
than $7.6 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 SBA’s 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. This was a joint investigation conducted by the SIGPR and the Federal Bureau of
Investigation. See Press Release from the Office U.S. Attorney for the Eastern District of Virginia.
https://www.justice.gov/usao-edva/pr/two-men-sentenced-76-million-covid-fraud-scheme
VIRGINIA BUSINESS OWNER SETTLES PPP FRAUD ALLEGATIONS
In September 2023, a Gainesville business owner agreed to pay
$350,000 to settle a civil fraud case that alleged he falsified payroll and
income documents to obtain loans through SBA’s PPP for four
businesses where he was the owner and President.
The settlement arose in connection with a lawsuit filed under the
whistleblower provision of the FCA, United States ex rel. Salman v. Bull
Run Capital Investments, Inc., et al. This was a joint investigation
conducted by SIGPR and the Federal Bureau of Investigation. See Press
Release from the Office of U.S. Attorney for the Eastern District of
Virginia. https://www.justice.gov/usao-edva/pr/gainesville-business-
owner-settles-ppp-fraud-allegations
SIGPR OVERSIGHT
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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RECOGNITION OF SIGPR’S CASEWORK
DOJ Nationwide COVID-19 Fraud Enforcement Action
On August 23, 2023, the Justice Department announced the results of a
coordinated, nationwide enforcement action to combat COVID-19 fraud,
which included 718 enforcement actions – including federal criminal
charges against 371 defendants – for offenses related to over $836 million
in alleged COVID-19 fraud. The announcement was made by Deputy
Attorney General Lisa O. Monaco at a roundtable meeting of senior Justice
Department officials, law enforcement partners, and Office of Inspector
General (OIG) executives. Inspector General Brian Miller was present at
the roundtable meeting. SIGPR investigative accomplishments were
included as part of the announcement. See Press Release from the U.S.
Department of Justice. https://www.justice.gov/opa/pr/justice-
department-announces-results-nationwide-covid-19-fraud-enforcement-
action
Pandemic Response Accountability Committee (PRAC)
The PRAC recognized SIGPR’s Senior Special Agent
Christopher Cave (right) with an award in recognition of
his outstanding work on the PRAC Fraud Task Force. On
September 13, 2023, SIGPR’s Inspector General Brian
Miller (left) presented SSA Cave with the award
recognizing him for work that resulted in 15 individuals
being indicted and arrested for engaging in a $53 million
scheme to defraud commercial banks and the SBA. The
case involved millions of dollars related to the COVID
relief funds. SSA Cave is responsible for the PRAC Fraud
Task Force’s largest financial case to date.
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
SIGPR OVERSIGHT
9 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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.
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, SIGPR had no
reportable activity relating to complaints of human trafficking or any related investigations.
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 211 hotline complaints, of which the vast majority
pertained to matters outside SIGPR’s jurisdiction, as indicated in the table and chart below. All hotline
complaints outside of SIGPR’s jurisdiction were referred to those federal agencies that have jurisdiction
over these programs.
Complaints by Category
Received July 2023 through September 2023
Category
Total
Title I – Paycheck Protection Program
5
Title IV, Subtitle A — Loans and Investments
2
Title IV, Subtitle B — Payroll Support Program
1
Title V – Coronavirus Relief Fund
10
Multiple CARES Act Programs
4
Economic Impact Payments
2
Unemployment Insurance Programs
3
Rental and Housing Assistance Programs
10
Emergency Income Disaster Loans
1
Income Tax Related
2
Social Security Benefits
87
Financial Institution Related
7
Non-Program Related
77
Grand Total
211
SIGPR OVERSIGHT
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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11 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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).”4
Accordingly, below are the categories of loans and other investments made by Treasury under CARES
Act section 4003,5 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),
4 CARES Act § 4018(f)(1)(B)
5 Treasury did not establish a program for “loan guarantees” under CARES Act section 4003.
FINDINGS AND DEVELOPMENTS
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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and businesses critical to maintaining national security ($17 billion).6 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.7 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, 2020.8
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).9 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.10
6 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. Department of the Treasury, Other Programs,
https://home.treasury.gov/data/other-programs
7 See Consolidated Appropriations Act, 2021, Pub. L. 116-260, div. N §§ 1003, 1005
8 Id. § 1005.
9 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.,
10 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 (Oct. 1, 2023) 4026b1CLoanReport10012023.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).
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15 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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
FINDINGS AND DEVELOPMENTS
REPORT TO CONGRESS | JULY – SEPTEMBER 2023
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issuer or through secondary markets, and “making loans, including loans or other advances secured by
collateral.”11
The Federal Reserve established several liquidity programs (facilities) pursuant to section 13(3) of the
Federal Reserve Act.12 That provision, used extensively during the 2008 financial crisis and amended by
the Dodd-Frank Wall Street Reform and Consumer Protection Act,13 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.”14 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.15 The Federal Reserve may not establish any emergency
lending program under section 13(3) without prior approval of the Secretary of the Treasury.16
Of note, as of September 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
$257 million in actual loan losses, net of subsequent recoveries.17 This number has more than
quintupled from $45 million since SIGPR’s last quarterly report for 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.18 The allowance for loan losses is estimated based upon MS Facilities, LLC’s
holdings as of June 30, 2023.19
These facilities have stopped extending loans or purchasing obligations. Additional details for the facilities
are available on the Federal Reserve’s website.20 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.
11 CARES Act § 4003(b)(4)(A)–(C)
12 See 12 U.S.C. § 343(3)
13 Pub. L. 111-203, 124 Stat. 1375
14 12 U.S.C. § 343(3)(A); see also 12 C.F.R. § 201.4(d)
15 12 U.S.C. § 343(3)(B)(i)
16 12 U.S.C. § 343(3)(B)(iv)
17 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.
https://www.federalreserve.gov/publications/files/13-3-report-20231011.pdf (Oct. 10, 2023)
18 See id.
19 See id.
20 See id.
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17 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
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 Sept. 30,
2023.21
Recipient
Treasury Investment Remaining as of
Sept. 30, 2023
MS Facilities, LLC
$10,148,760,892.69
TALF II, LLC
$890,952,976.00
Corporate Credit Facilities, LLC
$0.00
Municipal Liquidity Facility, LLC
$2,946,650,305.31
The SPVs have returned the following amounts to Treasury as of Sept. 30, 2023.
Recipient
Investment Returned to Treasury as of
Sept. 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
21 Letter from Michelle Dickerman, Deputy Assistant General Counsel, Office of General Counsel, Treasury, to
Vincent Mulloy, Special Counsel, Office of General Counsel, SIGPR, Treasury (Oct. 24, 2023) (on file with SIGPR).
HELP FIGHT
FRAUD, WASTE, AND ABUSE.
BY EMAIL: hotline@sigpr.gov
BY PHONE: 202-927-7899
www.sigpr.gov