Received a Civil Investigative Demand (CID) for My EIDL Loan: Now What??

A Civil Investigative Demand (CID) is a document served by the U.S. Attorney’s Office or other investigative agency of the federal government. It is an investigative tool, and not a criminal charge, so receiving a CID for your EIDL does not establish that you committed fraud or any other illegal act. As we discuss in greater detail below, CIDs are served on individuals and entities beyond just the suspects of an investigation, and receiving one does not imply guilt.

Among the most important things for those who have received an EIDL CID to know is that the process of dealing with the CID is not a “one size fits all” approach. Depending on the specifics of the investigation, it may be in your best interest to respond quickly. In many cases, however, taking more time to allow for a disciplined preservation process, a detailed legal review of the documents and records you have in your possession, and then determining what information is necessary to fulfill your legal obligations (or what information is extraneous or inappropriate to include) can give you the best chance of protecting your rights before any civil or criminal decision is made by the U.S. Attorney’s Office or another agency.

Another important point is that CIDs often will not identify you as a subject, target, or witness. In other words, the CID does not necessarily call you a “suspect.” This leaves some uncertainty, and if you are not comfortable serving as a source of information for the government, it may still be in your best interest to seek outside counsel to assist you. Many individuals choose not to provide any information in response to their CID until they have been advised of their legal rights and obligations. We strongly encourage you to take the same approach, so that you do not inadvertently provide unnecessary or detrimental information to federal investigators.

How and Why Are CIDs Issued?

Under 31 U.S.C. § 3733, the Attorney General, or the Attorney General’s designee, can issue a CID in a civil investigative demand if, upon a written determination, the Attorney General determines that the CID or the demand is necessary to obtain information that is reasonably likely to contain evidence that is relevant to a False Claims Act investigation. If you have received a CID related to an EIDL, then it is critical that you speak with an experienced defense lawyer at Spodek Law Group, and we encourage you to call us now to discuss your next steps.

Which EIDL records and deadlines require immediate attention?

A CID can request any records the U.S. Attorney’s Office thinks are pertinent to your potential False Claims Act violation. In EIDL loan cases, these requests frequently encompass a wide range of financial documentation from the time of application through the present. This can include your application, tax records, bank statements, payroll records, accounts payable, fixed debt statements, and evidence of other business expenditures. If you have recently spent your loan proceeds, you need to produce documentation demonstrating that you did so in compliance with SBA requirements. The SBA mandated that EIDL proceeds be spent in specific categories: payroll and other employee compensation, fixed debts, accounts payable, and other operating expenses.

Along with the loan proceeds themselves, the government will also closely examine any records that may call your EIDL eligibility into question. This is because receiving an EIDL required that you attest to meeting all of the program’s eligibility requirements. Therefore, any documents that show you did not meet the eligibility requirements for the EIDL may lead to additional scrutiny as well. As discussed below, this also includes records that the government may already possess, and you should never assume that just because the government likely has access to certain records means you do not need to produce these records in response to a CID.

What should I do if I need time to gather these records?

If you need additional time to gather the records, preserve your EIDL loan records, or conduct an internal investigation, your attorney can try to obtain an extension on your behalf. An investigator might accept a request to provide the records on a more relaxed timeline. Your lawyer can work with the investigator to ensure you have enough time to find the information you need while still demonstrating a good-faith effort to comply. This is critical, because refusing to respond to a CID (or appearing to intentionally impede an investigation) can lead to spoliation of evidence or obstruction of justice issues. While your lawyer can also negotiate with investigators to narrow the scope of a request or suggest a phased production, you must be careful not to intentionally withhold information that could create further legal problems for you.

Spodek Law Group states its position plainly on its own front page: we owe loyalty to only you.

How can an FCA CID differ from subpoenas and other protected disclosures?

Like subpoenas, CIDs may demand documents, production of records, written answers to questions, oral testimony, or combinations of these requests. Like subpoenas, CIDs operate as statutory investigative demands, meaning they impose a duty to comply. However, there are some key differences between CIDs and subpoenas. For example, unlike ordinary litigation subpoenas, FCA CIDs can be issued before any lawsuit is filed.

What constitutes a “protected disclosure”?

Attorney-client privilege is a primary example of a protected disclosure, although there are exceptions. In general, attorney-client privilege applies to confidential communications between a client and their attorney, whether they are written or oral. This privilege is often very broad in scope, and any communication between you and your lawyer made in their professional capacity should be protected. In some cases, however, privilege is either not applicable or can be avoided. These are the exceptions to attorney-client privilege, and they are more likely to apply in the context of an EIDL CID response if you have conducted an internal investigation with outside counsel.

A protected disclosure is an intentional and purposeful sharing of information under the umbrella of the attorney-client privilege. When communications fall under the definition of a “protected disclosure,” those communications do not have to be disclosed to federal agents, and you have the legal right to insist that they remain confidential. To maintain privilege, you must ensure that you are not including anyone who does not qualify to be part of the conversation. While you may need to include your business partners and some other executives in certain discussions with your defense team, including outside staff could put your attorney-client privilege in jeopardy. When it comes to responding to an EIDL CID, it is essential to have a plan for both protected and unprotected disclosures, and an experienced defense lawyer at Spodek Law Group can help ensure you provide the information you need while effectively protecting your rights.

Could an EIDL CID response produce civil or criminal exposure?

Even if you are not worried about an EIDL fraud charge, making false statements to federal agents is a separate and serious offense under 18 U.S.C. § 1001. This statute applies broadly to any statement, representation, or omission that is intended to deceive, mislead, or improperly influence a federal official. In the context of a CID response, even the omission of key financial information can be characterized as an attempt to mislead the government, which creates the risk of additional criminal liability. Therefore, ensuring that your response is accurate, complete, and disciplined is paramount for protecting yourself from unnecessary exposure.

If an EIDL CID does lead to an FCA investigation, there could be significant civil exposure as well. The FCA allows for treble damages, or three times the amount the government claims to have overpaid, and it allows for civil penalties on a per-claim basis. This means that if the government establishes FCA liability, the financial implications can be catastrophic for an individual or a business, although FCA liability generally requires the statutory knowledge element. It is essential to have a clear strategy to avoid exposing yourself to maximum penalties.

It is also worth noting that the EIDL statute of limitations is quite broad. While Public Law 117-165, the COVID-19 EIDL Fraud Statute of Limitations Act of 2022, generally provides a 10-year filing period for criminal charges or civil enforcement actions alleging borrower fraud involving certain COVID-19 EIDL loans, EIDL advances, and targeted EIDL advances, the applicable limitations period depends on the specific claim. For example, if a statement related to your loan is considered the basis for liability, the clock may not start ticking until after that statement was made. This allows the government to prolong their investigations and target individuals years after their EIDL applications were processed, meaning you may not be “safe” yet even if your EIDL application was several years ago.

While the CID is only one stage of an investigation, the response you provide can be used as evidence if the investigation leads to a civil suit or a criminal referral. Of course, responding to a CID will not automatically lead to additional charges or civil liability. It is entirely possible that the investigation will close without any further action, but you need to prepare for all possibilities. Our defense attorneys work with federal investigators to protect our clients’ interests to the maximum extent possible while mitigating risks throughout the investigative process.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 888 348 8028.