Congressional Investigations during the 117th Congress: What to Expect

Présentation


Although control and leadership of the US House of Representatives did not change hands as a result of the 2020 elections, President Joe Biden’s victory and the Democrats’ Senate runoff victories in Georgia are already having a significant impact on the trajectory of congressional investigations over the next two years. Historically, when Congress and the presidency are controlled by the same party, congressional investigations tend to focus more on the private sector than the Executive Branch. As a result, companies should be aware of issues and industries that are likely targets of investigation and the ways in which congressional inquiries differ from traditional criminal, civil and administrative legal processes and other governmental investigations.

In Depth


Industries and companies targeted by congressional investigations face unique challenges as law and politics converge, and the investigations often play out under intense media scrutiny. This presents legal, political, reputational and business risks. Successfully navigating these challenges requires familiarity not only with the rules, procedures and precedents of congressional investigations, but also the personalities and priorities of individual committee and subcommittee leaders and rank-and-file members. Failure to manage these risks can lead to significant adverse outcomes, such as the public release of sensitive commercial information, a decline in company value and collateral criminal or civil investigations.

While congressional Democrats will investigate a wide array of industries and issues, the following are some of those likely to be targeted for investigation: (1) Coronavirus Aid, Relief and Economic Security (CARES) Act programs, specifically the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL); (2) the federal government’s pandemic response in 2020; (3) « Big Tech » companies’ perceived monopolization and the spread of disinformation and extremism on social media platforms; and (4) the fossil fuel industry’s influence on the Trump administration and its impact on climate change.

The Effectiveness and Use of CARES Act Stimulus Funds

From March 2020 to March 2021, Congress appropriated more than $5 trillion to address the COVID-19 pandemic and support the US economy. More than $700 billion of those funds have been delivered to businesses and sole proprietors through the US Small Business Administration’s (SBA) PPP and more than $200 billion has been distributed through the agency’s EIDL program. A key aspect of each program in 2020, and now in 2021, is that Congress and the SBA allowed applicants to self-certify their eligibility for these business loans. As a result of the self-certification process, confusing regulatory guidance and rules from the SBA and Department of the Treasury—on top of unprecedented economic uncertainty—the SBA disbursed billions of dollars in loans to businesses that Congress—or at least some members—did not intend or want to receive such loans. The House Select Subcommittee on the Coronavirus Crisis has already sent letters to a number of PPP loan recipients demanding documents relating to their loan applications and certifications. Additionally, the Select Subcommittee continues to conduct oversight of the SBA’s administration of these programs, including the Trump administration’s communications with large banks and business groups. We expect that this oversight and scrutiny of loan recipients—especially those that are viewed as connected to private equity firms, hedge funds and public companies—to continue in 2021.

The Federal Government’s Pandemic Response

Personal Protective Equipment Contracts

When the pandemic hit the United States in early 2020, the country was not prepared to protect its people. At the forefront of this failure was the lack of personal protective equipment (PPE) available to healthcare workers. Images circulated on social media and news sources of nurses and physicians wearing trash bags in lieu of proper PPE. In a belated effort to respond to the crisis, the Trump administration doled out billions of dollars in contracts to businesses to provide the needed PPE to various hospitals, clinics and Veterans Affairs homes throughout the country. This drew the ire of the Select Subcommittee in July 2020, which wrote letters demanding documents to certain agency heads and contractors and stated the following in a press release:

Recent reports indicate that federal agencies awarded contracts to businesses that had political connections to the Trump Administration, lacked federal contracting experience and had been selected by the White House without competition or transparency. Some of these companies failed to provide the supplies promised. The Select Subcommittee is concerned that these contracting practices may have wasted taxpayer dollars and exacerbated shortages of critical supplies, contributing to the spread of the coronavirus and the death of Americans.

As Congress obtains documents and communications from the executive branch that may not have been turned over during the prior administration, expect more scrutiny of former officials and businesses with whom they interacted on large PPE procurements.

Nursing Homes

As the COVID-19 pandemic took hold in 2020, legislators on both sides of the aisle and across multiple congressional committees held hearings and launched investigations related to nursing home policies during the pandemic. For example, in June 2020, the Select Subcommittee on the Coronavirus Crisis, led by House Majority Whip Jim Clyburn (D-SC), launched an investigation that included letters to the Centers for Medicare & Medicaid Services (CMS) and the nation’s five largest for-profit nursing home companies. Also in June, the House Ways and Means Health Subcommittee held a similarly themed hearing. On the other side of the aisle and also in June, Senator Chuck Grassley (R-IA) and Congressman Greg Walden (R-OR), then the Chairman of the Senate Finance Committee and the Ranking Member on the House Energy and Commerce Committee, respectively, asked the Health and Human Services (HHS) Office of Inspector General (OIG) to initiate an investigation into whether five states (California, Michigan, New Jersey, New York and Pennsylvania) violated federal guidance in pressuring nursing home facilities to accept patients who tested positive for COVID-19. Ongoing investigations by the Select Subcommittee on Coronavirus, along with other standing committees with jurisdiction over nursing home issues, are possible in 2021.

Hospitals

Also on the front lines during the COVID-19 pandemic, US hospitals may face increased scrutiny with respect to various aspects of pandemic response. Hospitals’ receipt and use of federal funding provided through the CARES Act, such as the Provider Relief Fund, may also face heightened examination.

« Big Tech » Companies

Antitrust/Monopolization Investigations

Last October, after a 16-month investigation, the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law released a 450-page majority staff report alleging monopolistic practices of leading technology companies and recommending sweeping changes to antitrust laws. Democrats have already revived this inquiry and will look to translate their findings and recommendations into legislation. In February, the Subcommittee announced that it will be holding a series of hearings to consider legislative proposals « to address the rise and abuse of market power online and to modernize the antitrust laws. »

Social Media

The spread of disinformation on social media has been an area of intense interest among Democrats over the last several years and apparently will continue to be. Last month, the House Oversight and Reform Committee sent a letter to the social networking company Parler regarding the platform’s involvement in the lead-up to the Capitol insurrection on January 6 and concerns about the spread of Russian disinformation. In addition, the House Energy & Commerce Committee held a hearing on March 25, 2021, on « misinformation and disinformation plaguing online platforms » during which the chief operating officers of several leading technology companies testified. Look for Congress to continue its focus on the tech industry over the next two years on issues ranging from antitrust to privacy, cybersecurity and the spread of disinformation and extremism.

Fossil Fuel Companies and Climate Change

After four years of the Trump administration rolling back the Obama administration’s progressive climate change policies, Democrats in Congress are eager to shine a light on the perceived influence of fossil fuel industries on those rollbacks. For example, Senator Sheldon Whitehouse (D-RI) sent a letter on March 15, 2021, to the Department of Justice (DOJ) seeking information relating to a number of matters, including the DOJ’s Antitrust Division’s investigation into certain automakers’ agreement with the State of California in 2019 to adjust state fuel economy standards. According to Senator Whitehouse, the Antitrust Division’s investigation came after « President Trump sent tweets decrying the arrangement[,] » « as it foiled the fossil fuel industry’s plot to blow up the fuel efficiency standards regime. » Senator Whitehouse further alleged that the Antitrust Division’s investigation and letters to the automakers’ « true origin may have been the White House and that they were perhaps devised in concert with Marathon Petroleum and the oil industry in a joint political effort. »

Expect this inquiry to be among the first of many that Senator Whitehouse and Democrat-controlled committees launch into the fossil fuel industry during the 117th Congress. These inquiries are likely to focus on the fossil fuel industry’s impact on climate change and its political activities—both direct contributions to candidates as well as « dark » money used in lobbying efforts and advertisements.

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McDermott’s Congressional Investigations practice has the personnel and experience to help individuals and organizations navigate the various challenges presented by congressional oversight. Our professionals have served at all levels of congressional staff—and on both sides of the aisle—including as chief counsel to the House Energy & Commerce Committee and counsel to the Senate Judiciary Committee and as aides to high-ranking members of Congress. Additionally, our team has represented clients from many different industries before almost every committee of Congress. Whether you or your company receives a one-off oversight letter or becomes the target of a full-blown investigation, our team is prepared to help.