Investigation Risk Proliferates for Inflation Reduction Act and Infrastructure Investment and Jobs Act Funding Recipients

The Inflation Reduction Act (“IRA”) and Infrastructure Investment and Jobs Act (“IIJA”) appropriated hundreds of billions of dollars in grants, loans, and other funding to facilitate clean energy and infrastructure deployment, advance Environmental Justice policy objectives, and address climate change concerns. While many companies, non-profits, and other recipients have reaped the benefits of those programs, they may also now be exposed to increased risks from Congressional investigations; enforcement actions; inspector general reviews; terminations for alleged waste, fraud, and abuse; and in extreme instances, potential exposure to criminal liability.

The breadth of potential risks to federal funding recipients are illustrated by the Environmental Protection Agency’s (“EPA”) multi-pronged effort to claw-back federal funding awarded under the Greenhouse Gas Reduction Fund (“GGRF”). Not only has the agency sought to freeze those already-distributed funds, but it has sought to justify its decision by alleging the program was rife with waste, fraud, and abuse. According to EPA, those allegations form the basis for ongoing investigations by DOJ, the Federal Bureau of Investigation, and the EPA Office of Inspector General (“OIG”).^[1] Even more recently, the EPA OIG provided notice to the EPA Office of Environmental Justice that it has launched an investigation into “whether the EPA implemented effective controls during the selection of Track I grant awardees through the Community Change Grants Program within the EPA Office of Environmental Justice and External Civil Rights.”^[2] By targeting EPA’s selection process, the eligibility of individual grant awardees to have received funds inescapably will be within the scope of the EPA OIG review.  

Not to be outdone, two congressional committees have also opened their own investigations into the EPA program’s funding recipients. Those requests, which for now were only issued to direct recipients of GGRF funding, also probe for information about “all contracts and agreements” between those funding recipients and sub-awardees. So while sub-awardees of federal funding may not currently be the subject of Congressional oversight, companies that have received GGRF funding should be prepared to respond to investigative requests and other federal inquiries.

Companies that have received U.S. Department of Energy (“DOE”) funding are likewise at risk. DOE is actively considering actions to terminate numerous grants and loans, and, as with the GGRF, may pursue allegations of waste, fraud, and abuse to justify those decisions. The DOE Office of the Inspector General has indicated that it is performing its own investigation into one or more recipients of funding from the Loan Programs Office.

In the event DOJ, EPA, DOE and Inspectors General pursue such investigations, the consequences can be significant for primary grantees and subgrantees alike. Based upon the actions taken to date, scrutiny should be expected around:

• Eligibility to have received funds;
• Conflicts of interests in obtaining the funds--including potential or perceived conflicts of interest with the Biden Administration; and
• Awardees’ use of funds, including:
  • Whether the ultimate use of the funds is consistent with the IRA or IIJA, respectively; and
  • Whether the awardee is maintaining compliance with and providing adequate oversight of the use of funds.

Scrutiny of such issues has the potential to create exposure under a range of federal regimes, such as:

• False Claims Act (g., misrepresenting eligibility to receive funds);
• Title 18 crimes (g., making false statements in the process to receive funds; misappropriation of government funds); and
• Federal Acquisition Regulations (g., conflicts of interests, etc.).

Notably, these provisions include both civil and criminal exposure, and in the case of the FCA, whistleblower awards. 

Accordingly, all recipients of funds under these programs must be prepared. The first signs of an investigation may come in the form of a letter or some other formal inquiry, or even direct contact from federal agents. Best practices to adopt in preparation include:

• Have and rehearse a plan for if/when agents show up or an investigatory demand is received;
• Retain and preserve all documents and other potential evidence; and
• Consider taking proactive action, including an audit or other internal investigation performed at the direction of counsel.

Additional guidance and practical first steps will be discussed as part of the upcoming webinar on May 22, 2025.