VC firms can be liable if startups wrongly claim stimulus funds | Hacker News Reader

VC firms can be liable if startups wrongly claim stimulus funds

venturebeat.com

46 pointsdsavant7 comments

(1) this is reaching, a lot of gates have to trip before that becomes even a remote possibility and (2) that liability as a director was there anyway.

In short, if you're a VC and you know about the company you are investing in applying in bad faith for stimulus money and you don't do anything about it then you are possibly liable.

Directors and officers of the company can be liable under certain circumstances anyway, whether the fund or the VC (management) firm is liable is another matter entirely and the article does not address this, at a guess this is only the case if the firm is mentioned as such a director.

In short: don't commit fraud, and if you are in an oversight role: act the part.

And there appears to be some sort of safe harbor provision where if you were granted funds you can return them by a certain date. One group I advise projected things crashing, applied, the projected crash didn't occur, got money (low 6 figures), and returned it within a few days.

They didn't do it in bad faith, they just had a bad model.. not like they'd worked this one out before.

Regardless, it did force them to work out some information and answer some questions they hadn't considered so it was a learning experience, just a time consuming/stressful one.

IIRC holding the board accountable for director non-compliance is more of a thing after one or more settlements with regulatory bodies.

Cool, but the whistleblower claiming 30% seems like a strange incentive.

More often than not that's a meager payout for what tends to be a career destroying move.

Very rarely do whistleblowers pick up real money, it has happened a couple of times though.

It’s been a few years since I’ve done anything related to qui tam suits but IIRC the whistleblower only gets 30% when the government declines to take up the case and the whistleblower (now plaintiff) decides to continue the suit anyway. These are the “long shot” whistleblower cases where the recovery is nominal (to the government at least) or the evidence immediately available before discovery is weak. Medicare and health insurance fraud is a common area where you’ll see this happen because it’s not infrequent but the fraudulent billing of one chiropractor isn’t enough to get it to the top of the prosecutor’s pile.

When the whistleblower provides compelling evidence and/or the amount at issue is significant the government will prosecute the case and the whistleblower will receive (I think) 10% of the recovery.

The major difference between the two situations is the time, effort, and legal fees required to be covered by the whistleblower vs the government. When the government declines the case the whistleblower’s attorney does all of the work and the government just gets the check. When the government takes the case the prosecutor does all of the work and the whistleblower just gets the check.

Managing the stimulus money (in the US and everywhere else) is likely to follow the same path everywhere - give it out as widely as possible, find that one high profile dodgy case and prosecute loudly, and have an amnesty period for companies to return money if they find they did not mean it.

This will work fine(ish) for the larger employers, but the majority of smaller businesses are going to be hurting in ways that paying 80% of employees wages won't help. Imagine a city bar / restaurant- in a few months they can reopen, their landlord will now demand back rent, all their customers will only be seated at tables 2 metres apart and they still won't cover costs.

The post covid landscape is going to look weird till we reach herd immunity / vaccine. And a lot of businesses that will be viable post-immunity are simply going to need to hibernate for much longer than a few months.

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