White Collar Enforcers: “expect heightened scrutiny coming out of the COVID-19 crisis!”

One apparent certainty arising from COVID-19 is that prosecutors and regulators are preparing for a wave of enforcement matters when the pandemic slows down. White collar enforcers say they are pressing forward with investigations and enforcement actions during the COVID-19 crises while increasingly targeting pandemic-related actions. At a conference last month, Brian Rabbitt,  principal deputy assistant attorney general for the DOJ’s Criminal Division, and James McDonald,  enforcement director at the U.S. Commodity Futures Trading Commission, said that the companies and individuals should expect a groundswell of  investigations before the end of the year.

Thus, COVID-19-related cases are in the works, likely involving insider trading, market manipulation, accounting fraud, disclosure fraud, and valuation fraud or mismarking.

One area of expected heightened scrutiny during and resulting from the COVID-19 crisis is insider trading. Already, several U.S. senators have faced accusations of trading ahead of the  market declines caused by the pandemic, based on information gleaned from Senate hearings. Sen.  Richard Burr, R-N.C., last month stepped aside as chairman of the Intelligence Committee while an investigation into his stock trading played out.

Another issue for public companies is the disclosures they made during the
pandemic, given the widespread financial strains on businesses. There are suspicions that some corporate bankruptcy filings didn’t necessarily reflect the financial realities of the companies leading up to the pandemic. What appears certain however is that federal and state regulators are preparing for a wave of enforcement matters when the pandemic eases.

Companies and individuals are duly warned.  Using their legal and government affairs  advisors, potential targets of enforcement may be able to get ahead of the groundswell of cases and trials predicted toward the end of the year. Such mitigation efforts frequently involve taking remedial measures within a corporate compliance and ethics program, audits of the organization’s compliance with law, as well as proactively presenting audit findings to regulators to find safe harbors, thus avoiding costly and destructive enforcement actions and litigation.

 

NJ Beneficial Use Exemption to the Solid Waste Rules – “A Flexible Exemption”

The use of a little understood exemption to the Solid Waste Rules, known as the “beneficial use exemption”, has been on the rise in recent years as awareness of its existence and utility has increased. The beneficial use exemption provides an opportunity for waste generators to reduce economic burdens associated with waste disposal, while complying with the Solid Waste Rules and avoiding harm to the environment.

The New Jersey Department of Environmental Protection (“NJDEP” or the “Department”) promulgated the Solid Waste Rules pursuant to New Jersey’s Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq. (“SWMA”), to regulate the registration, operation, maintenance and closure of sanitary landfills and other solid and hazardous waste facilities, as well as the registration, operation and maintenance of solid waste transporting operations and facilities in New Jersey. The Solid Waste Rules are set forth at N.J.A.C. 7:26-1.1 et seq. While these rules impose extensive, strict requirements for all aspects of solid waste handling and disposal activities, they also provide a number of exemptions to regulation. One of the best-known exemptions is for recycled materials and recycling activities. See N.J.A.C. 7:26-1.1(a)8 and -1.6(a)2. Generally, waste materials that are separated at their point of generation into components which can be processed and reintroduced into the economic mainstream, either as products or raw materials, are considered recyclable materials. Recyclable materials are exempt from the definition of “solid waste” and are regulated instead under the Recycling Rules, N.J.A.C. 7:26A-1 et seq.

One of the lesser-known exemptions provided by the Solid Waste Rules is the beneficial use exemption, promulgated at N.J.A.C. 7:26-1.1(a)1ii and -1.6(a)3. Under the beneficial use exemption, waste materials of almost any sort, even if contaminated to a certain extent, may be approved for “beneficial use” instead of the normally-required disposal at a permitted Solid Waste Facility. “Beneficial use” is defined by the Solid Waste Rules as “the use or reuse of a material, which would otherwise become solid waste under this chapter, as landfill cover, aggregate substitute, fuel substitute or fill material or the use or reuse in a manufacturing process.” N.J.A.C. 7:26-1.4. By definition, the beneficial use of waste materials does not constitute recycling or disposal of that material – it is a special category of activities exempted from the Solid Waste Rules. See N.J.A.C. 7:26-1.4.

NJDEP currently receives approximately five to six applications for beneficial use determinations each month. These numbers represent a slow, but steady, increase in the number of such applications in the past five to ten years, as awareness of the program has increased within the regulated community. According to NJDEP, beneficial use determinations are made on a case-by-case basis, and a pre-application conference between an NJDEP representative and the beneficial use applicant is encouraged so that the applicability of the exemption to the particular project proposed can be thoroughly explored. As a result of the pre-application process, the vast majority of beneficial use exemption applications are approved.

To obtain NJDEP approval, a waste generator must show that (1) the proposed beneficial use project at which its waste materials will be used is designed and managed in a manner consistent with the environmental statutes, permits and approvals applicable to the project and (2) the proposed beneficial use project will not pose a threat to public health or the environment. See N.J.A.C. 7:26-1.7(c) and (g)1. If the beneficial use exemption is granted, the generator receives a “certificate of authority” to operate the beneficial use project. Since the materials and projects are reviewed on a case-by-case basis, the certificate of authority that is granted may be limited in time or by type of materials that are acceptable for the project, or both.

Although no category or type of waste materials is explicitly prohibited from consideration under the beneficial use exemption, NJDEP will not, as a matter of policy, consider for beneficial use materials that constitute hazardous waste under the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”). In fact, the beneficial use exemption provides a list of materials and specified uses that are categorically approved for beneficial use, such as tire chips used as aggregate for road base materials, coal combustion bottom ash used or reused as a component to manufacture roofing shingles or bituminous asphalt products, and non-hazardous solid waste approved in advance by the Department for use as cover material, landfill liner or cap material. See N.J.A.C. 7:26-1.7(g)4. Also, while there are no numeric or narrative criteria beyond those listed above, the Department applies the Soil Cleanup Criteria and evaluates the particular project proposed to determine whether there is a potential risk of harm to public health or the environment.

Last, it is interesting to note that there are no prohibitions on the types of uses or projects that can be considered under the beneficial use exemption. NJDEP will consider any type of project as a beneficial use project, including landfill closures, roadway construction, real estate development and manufacturing processes. Specific examples of materials and projects that have been granted a beneficial use exemption include the use of steel flag waste material as road sub-base in a roadway construction project, and the use of construction and demolition materials as structural fill for a redevelopment project. Thus, the beneficial use exemption is extremely flexible.

NJDEP reviews beneficial use exemption applications on a case-by-case basis and, according to an NJ, the Department seeks to work with applicants to try and find a way to make the beneficial use exemption work, while at the same time protecting the public health and the environment. Thus, each material and project proposed for beneficial use receives thorough and careful consideration by NJDEP with an eye toward making the project fit the exemption. The beneficial use exemption is extremely flexible, both as written under the Solid Waste Rules and as applied by NJDEP, and provides a worthwhile opportunity for waste generators to avoid the necessity of compliance with the Solid Waste Rules, while eliminating waste materials from New Jersey’s already over-burdened and onerous solid waste disposal system.

 

 

UPDATE: The Paycheck Protection Program Flexibility Act became law on June 5, 2020 making a number of changes to the Paycheck Protection Program (PPP)

via UPDATE: The Paycheck Protection Program Flexibility Act became law on June 5, 2020 making a number of changes to the Paycheck Protection Program (PPP)

UPDATE: The Paycheck Protection Program Flexibility Act became law on June 5, 2020 making a number of changes to the Paycheck Protection Program (PPP)

Martin Milita

On June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) into law.
The Flexibility Act makes a number of changes to the Paycheck Protection Program (PPP) that will impact borrowers, including the following (each of which is qualified in its entirety by the full text of the Flexibility Act):
1. Extends Deadline for Filling a PPP Loan Application
The deadline for filing a PPP loan application would be extended from June 30, 2020 to December 31, 2020.
2. Increases Amount of Time to Spend PPP Funds
The amount of time PPP loan recipients have to spend PPP loan proceeds would be extended from eight weeks to the earlier of (a) 24 weeks or (b) December 31, 2020. This addresses many critics’ concerns that the current eight-week forgiveness period is not enough time to help businesses remain open (specifically bars, restaurants and salons) and…

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UPDATE: The Paycheck Protection Program Flexibility Act became law on June 5, 2020 making a number of changes to the Paycheck Protection Program (PPP)

On June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) into law.
The Flexibility Act makes a number of changes to the Paycheck Protection Program (PPP) that will impact borrowers, including the following (each of which is qualified in its entirety by the full text of the Flexibility Act):
1. Extends Deadline for Filling a PPP Loan Application
The deadline for filing a PPP loan application would be extended from June 30, 2020 to December 31, 2020.
2. Increases Amount of Time to Spend PPP Funds
The amount of time PPP loan recipients have to spend PPP loan proceeds would be extended from eight weeks to the earlier of (a) 24 weeks or (b) December 31, 2020. This addresses many critics’ concerns that the current eight-week forgiveness period is not enough time to help businesses remain open (specifically bars, restaurants and salons) and to spend their received funding and recover financially, particularly in light of the other restrictions these businesses face because of COVID-19. PPP loan recipients that have already received their PPP loans would have the option to extend the covered
period or continue with the original eight-week period.
3. Increases to 40% the Amount of a Loan that Can Be Spent on Non-Payroll Costs Rule
The amount of the loan required to be spent on payroll costs would be lowered from 75% to 60%, and correspondingly, up to 40% of a PPP loan may be used for other approved costs, such as mortgage payments, rent and utilities. By lowering the minimum percentage of funds required to be spent on payroll, this change allows businesses will be able to spend a greater amount on other business operating expenses without sacrificing the amount of the loan that may be forgiven. The expansion of
time to use the loan and the amount of the loan that can be used for non-payroll costs will significantly increase the likelihood that PPP loan recipients will have the entire PPP loan forgiven. Of course, those loan recipients who used the loan to pay employees even though they were not open for business will likely require additional relief to restart and ramp up their businesses.
4. Extends Time to Re-hire Employees and Provides Additional Safe Harbor for FTE Reductions
The deadline for re-hiring employees and receiving loan forgiveness reductions under the PPP would be extended six months from June 30, 2020 to December 31, 2020. The additional six-month period should operate to eliminate most loan forgiveness reductions resulting from a work force reduction. In addition, the loan forgiveness amount would no longer be decreased due to a reduction in the number of full-time equivalent (FTE) employees from February 15, 2020, through December 31, 2020, if the loan recipient can document:
(a) its inability to rehire individuals employed on February 15, 2020, and hire qualified replacements by December 31, 2020, or
(b) the company’s inability to return to its activity level before February 15, 2020, due to COVID-19- related restrictions, guidance or requirements imposed by the government between March 1, 2020, and December 31, 2020. This, in conjunction with the reduced percentage of PPP loans required to be spent on payroll and the new deadline for re-hiring employees, significantly increases a small business’s ability to maximize the impact of its PPP funding and obtain complete loan forgiveness.
5. Maturity of Loan Extended to Five Years
PPP loans would mature in five years instead of two years. While this change will apply to all PPP loans made on or after the enactment of the law, loan recipients will be able to retroactively extend the maturity of PPP loans funded before the enactment of the law.
6. Payment Deferral Period Extended to 10 Months

A loan recipient would not be required to make any payments in respect of loan balance remaining outstanding after giving effect to the forgiveness feature until ten months after the loan was received by the recipient. The deferral period is currently only six months. In addition, loan recipients must apply for forgiveness within ten months after the last day of their covered PPP loan period, which is the earlier of 24 weeks from origination or December 31, 2020.
7. Permits Employer to Defer its Portion of the 6.2% Payroll Tax
Any loan recipient can now access the CARES Act deferral for its portion of Social Security payroll taxes up to 6.2% for payments required to be made between March 27, 2020, and December 31, 2020, regardless of whether any portion of its PPP loan is forgiven. Previously, a loan recipient could not continue to defer its portion of Social Security payments after any of its PPP loan was forgiven.
In addition, the Senate added a letter to the Congressional Record clarifying its intention that the extension of the covered period does not authorize the SBA to issue any new PPP loans after the June 30, 2020 deadline established by the CARES Act.
Nevertheless, with more time to use the funds, and more time to re-hire employees, and a decrease in the mandatory minimum funds to be spent on payroll costs, more borrowers will be able to meet the loan requirements and guarantee complete loan forgiveness for themselves.

As we all continue coping with the unprecedented situation arising from the COVID-19 virus, we want to take this opportunity to notify our clients and friends that Duane Morris Government Strategies (DMGS) is here to help if you need assistance of any kind, and to assure you that the Firm is operating and fully functional. Our professionals and staff are working remotely and securely, and we remain available to assist our clients without disruption.

COVID-19 -Governor Murphy Issues Extensions of NJDEP Timeframes and Deadlines.

On Saturday May 2, 2020, New Jersey Governor Phil Murphy issued Executive Order (EO) 136 providing for extensions of many statutory deadlines required under environmental laws and regulations administered by the New Jersey Department of Environmental Protection (NJDEP or Department) and suspending timeframes for certain NJDEP permit decisions and reporting.  The extensions and suspensions are retroactive to March 9, 2020. EO-136 does the following:

  • NJDEP’s “90-day” review period for Waterfront Development, CAFRA and Flood Hazard Area (stream encroachment) permit applications is tolled and extended.
  • Registration deadlines under the new “Dirty Dirt” law are extended.
  • “All timeframes governing the Department’s provision of public notice, review and decisions on permits and other approvals,” including those which would deem applications approved without conditions are paused.
  • The timeframe for NJDEP approval of certain asset sales of sanitary landfills is extended.
  • Reporting deadlines for municipalities regarding recycling tonnage are extended by 60 days; and
  • Extended the August 1 deadline for semi-annual reporting for entities that collect electronic “e-waste.”

Under the terms of EO 136, the NJDEP Commissioner is required to issue an Administrative Order by May 7, 2020 to implement the extensions.  NJDEP is also authorized to “establish earlier timeframes for review and decisions on specific permit applications, with appropriate public notice, if DEP determines that an earlier decision is in the public interest or … to maintain appropriate sequencing of federal timeframes.”

90-day Permit Review Stayed.  Under N.J.S.A. 13:1D-32, NJDEP is required to make a determinations on applications for permits under the Waterfront Development Act, N.J.S.A. 13:9A-1 et seq, the Wetlands Act of 1970 (the Coastal Wetlands Act), N.J.S.A. 13:9A-1 et seq., the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-1 et seq., and the Flood Hazard Area Control Act,  N.J.S.A. 58:16A-50 et seq.  EO-136 extends the timeframe for completeness reviews and permit decisions until 60 days after the end of COVID-19 Public Health Emergency declared under EO-103.  Hence, all pending application will essentially be held in abeyance absent a finding that the permit decision is needed “in the public interest.”  DEP is also required to continue reviews of permit applications “to the maximum extent practicable.”

NJDEP’s review of county or municipal projects to clear debris from streams under N.J.S.A. 58:16A-67 has also been extended.

Review of Treatment Works Approvals (TWA) for sewer connection permits and other “90-day permits” were not addressed, nor was any relaxation of those addressed down the regulatory food chain for local and county entities involved in approval processes.

“Dirty Dirt” registration deadline extended.  Among other actions, EO #136 extends the deadlines for the “dirty dirt law” registration and licensing requirements by the number of days of the Public Health Emergency declared in Executive Order No. 103 plus an additional 60 days.

Recycling Reporting deadlines extended.  Deadlines for annual reporting by municipalities of recycling tonnage under N.J.S.A. 13:1E-99.16.e. and the next semi-annual reporting for facilities accepting e-wastes required under N.J.S.A. 13:1E-99.105c, have been extended for sixty (60) days to July 1, 2020 and August 1, 2020 respectively.Approval of Sanitary Landfill Asset Transfers.  The timeframe for DEP to act on certain proposed asset transfers for Sanitary Landfills under N.J.S.A. 48:3-7 has been extended for a period of sixty days after the end of the COVID-19 emergency declaration.

Click here to read EO 136:  https://nj.gov/infobank/eo/056murphy/pdf/EO-136.pdf
Click here to read the Governor’s press statement on EO 136:  https://nj.gov/governor/news/news/562020/approved/20200502d.shtml

As we all try to cope with the unprecedented situation arising from the COVID-19 virus, we want to take this opportunity to notify our clients and friends that Duane Morris Government Strategies (DMGS) is here to help if you need assistance of any kind, and to assure you that the Firm is operating and fully functional.  Our, attorney’s, government affairs professionals and staff are working remotely and securely, and we remain available to assist our clients without disruption.