Volume 5 | May 2020
It is hard to believe that this is the THIRD COVID "Special Edition" of our newsletter. Once again, we are bringing you legal news and updates regarding the ongoing pandemic, along with some firm news as well.

Through the power of Zoom, phone calls, and emails, we are continuing to work tirelessly on behalf of our clients throughout this crisis. As always, we wish you and your families a safe and healthy May, and hope that we can see you all sometime this summer!

Two Recent Federal Prosecutions For PPP Loan Fraud Star An Undercover FBI Agent Posing As Bank Officer and a Reality TV Star

On May 5, the Department of Justice ("DOJ") announced its first prosecution for PPP loan fraud, turning these potential risks into a reality. To be fair, based on the allegations contained in the DOJ's press release, the prosecution does not seem to be based on a determination that the defendants violated some vague and ambiguous certification, but instead the DOJ alleges that these defendants committed blatant and unambiguous fraud.

According to the DOJ, the defendants, from Massachusetts and Rhode Island, allegedly claimed to have dozens of employees earning wages at four different businesses when, in fact, there were no employees working for any of the businesses. 

Specifically, one of the defendants is alleged to have submitted PPP loan applications requesting over $400,000, and claiming that he had dozens of employees at three restaurants he owned. However, the government alleges that, after an investigation, it was determined that two of the restaurants had closed down prior to the COVID pandemic for unrelated reasons, and that the defendant did not have any ownership in the third. The other defendant allegedly submitted a PPP loan application for over $100,000 for an unincorporated entity that never had any employees.   

The press release details some of the investigative steps taken by the FBI, including an undercover FBI agent posing as a bank compliance officer during a phone call with one of the defendants, during which conversation the defendant allegedly provided false information to support his loan application.

The defendants were charged by way of criminal complaint, including charges of conspiracy to make false statements, conspiracy to commit bank fraud, and aggravated identity theft. These charges are very serious felonies that could lead to a multi-year prison sentence. 

Just over a week later, the DOJ announced  another federal prosecution for alleged PPP loan fraud. This time the defendant is Maurice Fayne, who is also known as “Arkansas Mo” and stars in the reality show Love & Hip Hop: Atlanta.  

According to the DOJ, Fayne submitted an application to a local community bank for a PPP loan for his company, Flame Trucking. The application allegedly stated that the business had over 100 employees and an average monthly payroll of nearly $1.5 million. As part of the loan application process, the government alleges that Fayne, like all PPP loan applicants, certified that the loan proceeds would be used to “retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments.” 

According to the government, however, after obtaining the funds, Fayne used over $1.5 million of the PPP loan proceeds to purchase $85,000 in jewelry, including a Rolex watch, diamond bracelet, and 5.73 carat diamond ring, lease a Rolls Royce, and pay $40,000 in child support. Fayne then allegedly lied to federal agents during an interview about how he used the loan proceeds. According to the government’s press release, when federal agents executed a search warrant on his house, Fayne had over $9,000 in cash in his pockets.

Fayne has been charged with bank fraud. All of the defendants are innocent until proven guilty beyond a reasonable doubt.  
SBA Issues Updated PPP Guidance and Safe Harbor for Loans Less Than $2 Million

On May 13, 2020, the Small Business Administration (SBA) issued  updated guidance , in the form of updated Frequently Asked Questions (FAQs), on how it intends to enforce non-compliance with PPP loan certifications. 
The guidance was issued in light of widespread confusion and concern over how the federal government would interpret the “necessity certification” that all PPP applicants must make when submitting their applications. That certification requires borrowers to certify in good faith that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Post-hoc guidance previously issued by the SBA caused  serious confusion  over how that certification would be interpreted. 
To alleviate the concern and uncertainty as to how the necessity certification will be interpreted in future audits or investigations, the SBA, in consultation with the Treasury Department, created a safe harbor that applies to the SBA’s review of PPP loans under $2 million. Specifically, according to the SBA’s guidance, “[a]ny borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” The SBA notes that this safe harbor is designed, in part, to “promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees” and to “enable SBA to conserve its finite audit resources and focus its review on larger loans, where the compliance effort may yield higher returns.”

The SBA states that while borrowers with loans greater than $2 million will not be able to avail themselves of this safe harbor, they can still satisfy the required good faith certification based on their “individual circumstances in light of the language of the certification and SBA guidance.” The SBA goes on to state that  all  PPP loans in excess of $2 million will be subject to review for compliance with program requirements, and that if the SBA determines in the course of that review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, it will “seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.” The SBA also makes clear that “[i]f the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”

While the SBA’s updated guidance and safe harbor provides comfort to those who make the required necessity certification in good faith, it by no means eliminates the risk of criminal, civil, and administrative enforcement actions down the line. In fact, the DOJ has already  announced  several PPP loan fraud prosecutions, and all indications point to an increase in such actions as time goes on.
Chilivis Grubman News
Chilivis Grubman Partner Scott Grubman Selected For Another Term of AHLA Leadership

Chilivis Grubman partner Scott Grubman has been selected for another one-year term as Vice Chair - Educational Programming for the Healthcare Liability and Litigation Practice Group of the American Health Law Association (AHLA). 

This is Scott's fifth straight year in a leadership role with AHLA, which is the nation’s largest, nonpartisan, 501(c)(3) educational organization devoted to legal issues in the health care field, and has over 13,000 members.   

Webinar Recording Available for Download

As reported last month, on April 27, Chilivis Grubman attorneys Scott Grubman and Christian Dennis, along with Raj Shah, Senior Regulatory Attorney for MAGMutual Insurance Company, presented a webinar for HCCA (Health Care Compliance Association) covering various COVID-related healthcare topics, including AKS and Stark waivers, new telehealth rules, the relaxing of HIPAA enforcement, and DOJ enforcement activity related to COVID fraud schemes.

If you missed the webinar, entitled Navigating the Minefield: Updated Guidance Regarding Healthcare Regulations in Response to COVID-19 , you can order a recording here .
HHS- OCR Issues Guidance on Covered Health Care Providers and Restrictions on Media Access to Protected Health Information about Individuals in Their Facilities
On May 5, HHS' Office of Civil Rights ("OCR") issued guidance on covered healthcare providers and restrictions on media access to Protected Health Information ("PHI") about individuals in their facilities.

In its guidance, OCR reminded healthcare providers that, under the HIPAA Privacy Rule, they are not permitted to give the media or film crews access to facilities where patients' PHI will be accessible without the patients' prior authorization.

OCR made it clear that this restriction remains intact even during the COVID-19 pandemic and that providers are required "to obtain a valid HIPAA authorization from each patient whose PHI will be accessible to the media before the media is given access to that PHI" (emphasis in original). The guidance also clarifies that "masking or obscuring patients' faces or identifying information before broadcasting a recording of a patient is not sufficient."

According to OCR Director Roger Severino, "[t]he last thing hospital patients need to worry about during the COVID-19 crisis is a film crew walking around their bed shooting ‘B-roll. Hospitals and health care providers must get authorization from patients before giving the media access to their medical information; obscuring faces after the fact just doesn’t cut it."

The full version of OCR's guidance can be found here .

Feds CMS Issues Interim Final Rule on Notification Requirements of Confirmed and Suspected COVID-19 Cases Among Nursing Home Residents and Staff

Earlier this month, the Centers for Medicare and Medicaid Services ("CMS") issued its "interim final rule" updating requirements for notification of confirmed and suspected COVID-19 cases among residents and staff in nursing homes.

Among other requirements, the interim final rule provides that facilities must electronically report information about COVID-19 in a "standardized format" specified by HHS which must include, among other information, suspsected and confirmed COVID-19 infections among residents and staff, total deaths and COVID-19 deaths among residents and staff, personal protective equirement and hand hygiene supplies in the facility, ventilator capacity and supplies in the facility, resident beds and census, access to COVID-19 testing while the resident is in the facility, and staffing shortages.

This information must be provided at least on a weekly basis to the CDC's National Healthcare Safety Network, and will be posted publicly by CMS "to support protecting the health and safety of residents, personnel, and the general public."

The interim final rule also requires facilities to inform residents, their representatives, and families by 5:00 p.m. the next calendar day following the occurrence of either a single confirmed infection of COVID-19, or three or more residents or staff with new-onset of respiratory symptoms occurring within 72 hours of each other.

The actual text of the interim final rule, which is effective immediately, can be found here .


Life is like riding a bicycle. To keep your balance, you must keep moving.

- Albert Einstein

FINRA Arbitration Award Challenged Because Panel “Inattentive” During Zoom Hearing Session

As “social distancing” was just beginning to permeate the national discourse, two FINRA member firms were in the throes of a high stakes arbitration involving allegations of fraud, breach of contract and violation of the standards of commercial honor and principles of trade (FINRA Rule 2010), among other things. By March 10, eight of the nine scheduled hearing sessions had already been held in-person. But on March 11, the day before the final hearing session, the W.H.O. declared the COVID-19 outbreak would be classified pandemic. Out of “concern with the coronavirus crisis,” all participants in the arbitration agreed to hold the final hearing session via Zoom.

On April 6th, the panel issued an Award in favor of the Claimants and held Respondents liable for $11.4 million in compensatory damages, interest and attorneys’ fees. A month later, the Respondents filed a petition in to vacate the award in federal court. 

Respondents argue that the Award should be vacated on three grounds. First, they claim that Award is fatally defective because it did not include a ruling on each cause of action, instead holding Respondents “liable” without any additional elaboration. As Respondents concede, however, a FINRA Arbitration Award need not include a rationale for the panel’s decision. Nor does it require a ruling on each cause of action. 

Second, Respondents argue that they were denied a fair hearing due to the panel’s conduct. They claim that the panel’s rulings regarding cross-examination that went beyond the scope of direct testimony was inconsistent in favor of Claimants and they cite several other instances of allegedly biased conduct. And in a possible sign of what is to come in the age of social distancing, Respondents claim that the panel was inattentive during their Zoom hearing. One panel member was allegedly “looking at other screens, typing, and eating during the course of the presentation.” Another allegedly “blocked her screen during the hearing, preventing the parties from confirming that she was even participating.” Respondents also claim that closing arguments had to be paused when the Chairman just “walked away from his screen.” It’s not clear if the judge reviewing Respondents’ petition will consider such actions to be sufficient grounds for vacating an arbitration award, but this case should serve as a reminder that the integrity of the process can be undermined if participants sitting in the privacy of their home or office fail to maintain the same level of professionalism and decorum that would be expected at a live hearing.

Finally, Respondents argue that the panel exceeded its authority because one of the Respondents was not a signatory to the agreement in dispute. 

The case is Wunderlich Securities Inc. et al. v. Dominick & Dickerman LLC et al., Case No. 1:20-cv-03507, in the U.S. District Court for the Southern District of New York. 

A couple of months ago, we wrote about guidance from the U.S. Equal Employment Opportunity Commission (EEOC) related to COVID-19’s effect on Titles I and V of the American with Disabilities Act (“ADA”), and Section 501 of the Rehabilitation Act. The EEOC’s guidance was provided while state and local governments were issuing shelter-in-place directives, prompting changes to employment relationships, such as furloughs, layoffs, schedule changes, and work-from-home policies. With many government entities modifying shelter-in-place orders, the EEOC recently issued return to work guidance for employers. The EEOC discussed five topics related to employees returning to work. 

ADA Compliant Screening of Employees For COVID-19

The ADA prohibits employers from requiring a medical examination or inquiring about whether an employee has a disability or the nature of a disability unless the examination or inquiry is job-related or meets a business necessity. A reasonable belief based on objective evidence that an employee will pose a direct threat due to a medical condition is an exception to the general prohibition of medical examinations and inquiries. In our previous blog post, we noted that guidance from the CDC or another public health authority may satisfy the objective evidence requirement. 

According to the EEOC, employers are considered to be in compliance with the ADA “as long as any screening implemented is consistent with advice from the CDC and public health authorities for that type of workplace at that time.” However, employers must avoid unlawful disparate treatment in decisions related to screening and exclusion.

Personal Protective Gear (PPE) And Infection Control Practices

Employers may require employees to wear PPE and observe infection control practices. However, an employer may have to provide reasonable accommodations related to the employer’s PPE and infection control requirements. The reasonable accommodation may be required under various EEO laws, such as the ADA (if the employee has a disability) or under Title VII (religious accommodations). 

Requesting Reasonable Accommodations Due to a Medical Condition That May Place the Employee at Higher Risk for Severe Illness From COVID-19

The CDC published a list of medical conditions that may put a person at a higher risk of suffering severe illness from COVID-19. These medical conditions include chronic lung disease, moderate to severe asthma, serious heart conditions, diabetes, liver disease, chronic kidney disease (undergoing dialysis), and people who are immunocompromised. If an employee has one of the underlying conditions published by the CDC, the employee may be entitled to a reasonable accommodation. The employee or a third party (such as the employee’s doctor) must inform the employer of the need for a reasonable accommodation due to the underlying condition. The request may be verbal or written and does not have to include magic phrases like “reasonable accommodation” or “ADA.” In response, an employer may seek medical documentation or ask questions to help determine whether the employee has a disability or whether a reasonable accommodation can be provided.

Employees with A Higher Risk for Severe Illness From Covid-19 That Have Not Requested Accommodation

The EEOC has made clear that the ADA does not require employer action if the employee does not request a reasonable accommodation – even if the employer knows the employee's medical condition puts the employee at a higher risk of a severe illness form COVID-19.  The ADA prohibits the employer from excluding the employee or taking adverse action unless the employee poses a “direct threat” to the health of that employee or others. Notably, the ADA’s direct threat defense is a high standard. An employer must show that an employee has a disability presenting a “significant risk of substantial harm” to the health of that employee or other employees. And the fact an employee’s underlying condition is on the CDC’s list – by itself – does not meet the direct threat requirements.

In assessing whether a direct threat exists, employers must consider the duration of the risk, nature of risk, the likelihood of potential harm occurring, and other factors. The EEOC warns that “[e]ven if an employer determines that an employee’s disability poses a direct threat to his own health, the employer still cannot exclude the employee from the workplace – or take any other adverse action – unless there is no way to provide a reasonable accommodation (absent undue hardship).” 

Examples of Accommodations

The EEOC provided examples of accommodation that, absent undue hardship, may eliminate a direct threat or reduce a direct threat to an acceptable level. Protective gowns, masks, gloves, barriers to ensure proper distances between employees and customers, temporary work schedule changes, changing the location where work is performed, and designing one-way aisle are all examples of accommodations. The EEOC also encouraged employers and employees to be creative and flexible.

The guidance from the EEOC and public health authorities will likely continue to change as the COVID-19 pandemic evolves and government entities modify restrictions. Employers should continue to monitor the most current information from public health authorities and the EEOC.  
Virtual Dispute Resolution: The Future or Just Temporary?

The Covid-19 crisis has caused everyone to rethink what it means to conduct “business as normal.” Everything is now virtual – social visits, happy hours, work meetings, court hearings, and even appellate arguments. All of this is temporary, but is some of it here to stay?

Georgia Courts Consider Virtual Trials

Because social distancing does not allow for in-person evidentiary hearings or trials., and because there are no provisions for how to handle such matters remotely, trials in Georgia courts have been temporarily put on pause. Given that no one knows when the pandemic will end, permitting the return of in-person trials, the Georgia Council of Superior Court Judges is envisioning a new normal that permits trials by video conference.

Prior to Covid-19, Uniform Superior Court Rule 9.1 granted trial courts discretion to conduct video conference for certain pre-trial or post-trial proceedings in civil actions. The use of video conferencing was even more restricted; limited only to certain proceedings enumerated in Rule 9.2. Nothing in the Uniform Rules permitted trials by telephone or video conference; the proceedings were required to be conducted in person.

On March 14, 2020, Chief Justice Melton of the Georgia Supreme Court declared a statewide judicial emergency suspending all but essential court functions, including trials. In connection with the statewide judicial emergency, the Georgia Supreme Court modified Uniform Rule 9.1 to allow video conferencing to the same extent telephone conference were permitted. Although that modification expanded the use of video conference in civil matters, it did not allow courts to conduct trials by video conference.

Recognizing that nearly two months without trials only compounded the court backlog and delayed the vindication of litigants’ rights, the Georgia Council of Superior Court Judges proposed an amendment t o Uniform Rule 9.1 that would allow certain trials to proceed via video conference. Under the proposed rule, courts could conduct civil, non-jury trials remotely (i.e. trials in cases where the constitutional right to a jury does not apply or where the parties waived their right to a jury trial) for the duration of the statewide judicial emergency and for 180 days after it expired.

The rule is meant to stymie the inevitable surge in demand for courtroom space once the pandemic abates enough for courts to reopen. Superior Court Judge and president-elect of Georgia’s Council of Superior Court Judges, Wade Padgett, explained that the proposed rule provides shuttered courts with a tool “to get more done effectively than [they] could otherwise.”

The proposed rule was submitted for comments from the bench, bar, and general public. Comments were due May 6 and we expect a final decision on the proposed rule any day. Until then, litigants will continue waiting to have their day in court, whether that be the physical courthouse or a virtual version of it. 

Virtual ADR

Courts are not the only institutions looking to operate during this "new normal." Alternative Dispute Resolution ("ADR") services are also looking for new ways to keep matters moving. While the option to conduct mediations and arbitrations using videoconferencing is not new, it has not been widely used. Indeed, litigators have been slow to embrace virtual ADR, save for rare occasions where a party or counsel are unable to travel. 

How does virtual ADR work? There are several available videoconferencing platforms, including Zoom, Microsoft Teams, Skype, GoTo Meeting, WebEx, and other specific solutions offered by services like Court Call for an additional fee. The neutral controls the platform and sets up virtual conference rooms – one for each party and counsel that is private and secure, and one for all parties to confer with the neutral. The parties can present arguments, share documents, display demonstratives, and examine witnesses. Some platforms offer the necessary security features to satisfy the requirements of the Health Insurance Portability and Accountability Act (HIPAA) and many ADR service providers offer technical support and test runs to troubleshoot connectivity issues before and during the virtual proceeding.

Virtual ADR appears to be an efficient, convenient, and cost-effective option for both clients and counsel. The only question is whether it is here to stay.  
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