Federal Agencies Are Aggressively Investigating Suspected Fraud Related to COVID-19

“Our FBI agents and other law enforcement agencies are tracking down every tip and lead they get, and are devoting massive federal resources to this effort.” 

– Peter Navarro, Defense Production Act Coordinator and Assistant to President Trump

The federal government has put in place unprecedent measures to curb the spread of COVID-19 and mitigate the pandemic’s impact on the American economy. 

Many of these measures are aimed at putting money in the pockets of the American people, but some of these measures are also designed to prevent unscrupulous businesses from profiting from the pandemic through price gouging, hoarding, and illegal trade practices.  

Although these new rules are intended to protect the American population, federal agents are casting a very wide net in their rush to enforce the new restrictions on importation and distribution of medical supplies and personal protective equipment. 

Therefore, many well-meaning individuals and businesses are now finding themselves to be the targets of aggressive, multi-agency enforcement efforts aimed at weeding out suspected violations of the new regulations.

Newly Enacted Regulations Governing Distribution of Personal Protective Equipment (PPE) and Medical Supplies

“The Department of Justice will not tolerate the criminal exploitation of this national emergency for personal gain.”

– Assistant Attorney General Jody Hunt

On March 27, 2020, President Trump issued an Executive Order that expanded the authority of the Defense Production Act of 1950 (DPA) to help preserve essential health and medical resources with respect to the COVID-19 pandemic. 

Pursuant to this Executive Order, the Department of Justice established a COVID-19 Hoarding and Price Gauging Task Force dedicated to ensuring the availability and fair distribution of medical supplies, such as ventilators, and personal protective equipment, such as face masks, hand sanitizers, and disinfectants.

Given the newness of the regulations, there is not a lot of existing guidance for businesses to refer to if they want to engage in the distribution of covered items. 

Some larger companies have taken advantage of the business review process outlined in the Joint Antitrust Statement Regarding COVID-19 issued by the Department of Justice and the Federal Trade Commission, which allows medical supply companies to seek an expedited review of business plans for distributing essential medical and protective supplies.

What Is COVID-19 Fraud?

COVID-19 fraud refers to a variety of conduct that involves illegally profiting from the current coronavirus pandemic.  There are several main categories of COVID-19 fraud, including (1) marketing and computer fraud; (2) trade violations; and (3) hoarding and price gauging. 

Marketing and Computer Fraud

“Those marketing suspected illegal products should beware they may end up on the radar of federal investigators, and be vigorously prosecuted.”

Assistant Attorney General Jeffrey Bossert Clark

Federal investigators are actively seeking out individuals and businesses suspected of selling defective or non-existence medication and medical supplies, soliciting donations for illegitimate charities, or operating phishing schemes through corrupt apps or websites.

In a March 20, 2020 press release, Attorney General William Barr issued a warning against schemes designed to :

  • Individuals and businesses selling fake cures for COVID-19 online
  • Phishing emails from entities posing as the World Health Organization (WHO) or the Centers for Disease Control and Prevention (CDC)
  • Malicious websites and apps that appear to share Coronavirus-related information to gain and lock access to personal devices pending payment
  • Seeking donations fraudulently for illegitimate or non-existent charitable organizations
  • Medical providers obtaining patient information for COVID-19 testing and then using that information to fraudulently bill for other tests and procedures

On March 22, 2020, the Department of Justice announced its first COVID-19 fraud arrest involving an individual accused of selling fake COVID-19 vaccines through a website claiming to have access to non-existent World Health Organization (WHO) vaccine kits. 

In another arrest announced on April 10, 2020, a man was arrested for allegedly attempting to sell millions of dollars’ worth of non-existent protective equipment to the Department of Veterans Affairs in exchange for large upfront payments.

The Department of Justice has issued a public call for citizens to report COVID-19 related online scams.  Thousands of tips have already been reported to the FBI’s complaint center, and federal authorities have disrupted hundreds of internet domains suspected of being used to exploit the global pandemic to commit COVID-19 fraud.  

In some cases, government attorneys have sought and received legal injunctions from federal courts barring companies from disseminating misleading information about treatments for COVID-19.

Oarding or Price Gauging Medical Supplies and Protective Gear

“The Department of Justice’s COVID-19 Hoarding and Price Gauging Task Force is working tirelessly around the clock with all our law enforcement partners to ensure that bad actors cannot illicitly profit from the COVID-19 pandemic facing our nation.”

Attorney General William P. Barr

The federal government is prioritizing the fair distribution of medical and protective equipment.  

Businesses suspected of hoarding supplies are having their inventories seized and redistributed by federal agents.  Within its first few weeks of operations, the COVID-19 Hoarding and Price Gauging Task Force had already redistributed hundreds of thousands of medical supplies seized from offending entities.  

Companies attempting to take advantage of supply shortages by raising prices on essential equipment may likewise encounter enforcement actions from the Task Force, including confiscation of products.

Trade Violations

Federal investigators are paying close attention to import and export activities to monitor compliance with trade restrictions put in place to promote the availability of medical supplies and protective equipment to essential workers and first responders.  

With heightened scrutiny on international trade activity, individuals attempting to import illegal products are more likely to be caught and prosecuted. 

For example, the Department of Justice announced on April 9, 2020, that an individual was arrested for illegally importing an unregistered pesticide and marketing it as a sterilizing agent for COVID-19.

Although the focus is on discovering COVID-19 fraud, the increased review of trade activities is also causing an increase in the detection and prosecution of routine violations, such as discrepancies in the documentation.  Therefore, even companies not in the business of distributing medical supplies may experience an uptick in enforcement efforts.

What Agencies Are Investigating COVID-19 Fraud?

The federal government is engaging in a multi-agency effort to detect and prevent COVID-19 fraud.  It is truly all-hands-on-deck for federal agents:

  • Department of Justice (DOJ):  The DOJ is channeling its investigative resources, including the Federal Bureau of Investigation (FBI), to lead the charge in detecting and prosecuting COVID-19 fraud.
  • Department of Health and Human Services (HHS):  HHS is working with the FBI to investigate hoarding and price gauging fraud involving essential medical supplies and protective equipment, as well as improper billing and other traditional forms of health care fraud.
  • Department of Homeland Security (DHS):  Customs and Border Protection (CBP) and other agencies within DHS are vigilantly intercepting unsafe and illegal goods being imported into the United States, as well as helping track imported supplies for compliance with tariff restrictions and regulations regarding hoarding and price gouging.
  • United States Postal Inspection Service (USPIS):  USPIS is monitoring the national mail system for mail fraud related to COVID-19, such as delivering illegal products through the postal service.
  • Environmental Protection Agency (EPA):  The EPA’s Criminal Investigation Division is aiding COVID-19 fraud investigations involving the improper distribution of chemicals, such as pesticides, being marketed as sterilizing agents.
  • Food and Drug Administration (FDA):  FDA officials are working with the DOJ task forces to prevent the distribution of dangerous or unproven products being marketed as cures or vaccines for COVID-19.
  • Federal Trade Commission (FTC):  The FTC is working closing with the DOJ to combat anti-competitive practices involving essential medical supplies and protective equipment, including hoarding and price gouging.

What Businesses Are at Risk?

Federal investigators are closely scrutinizing all businesses distributing medical supplies and personal protective equipment. 

If your company is engaged in importing, exporting, or selling essential medications, medical equipment, or protective gear, you are at risk for being investigated for COVID-19 fraud.  

How Will You Know If Your Business Is Under Investigation for COVID-19 Fraud?

“If you are amassing critical medical equipment for the purpose of selling it at exorbitant prices, you can expect a knock on your door.”

Attorney General William P. Barr

Given the exigencies of the pandemic, federal investigators are heavily relying on in-person visits to obtain evidence of suspected fraudulent activity. 

Other common investigative tactics, such as written requests for information, are slower and may cause unacceptable delays for the fast-paced COVID-19 fraud investigations.

If federal agents have information that you or your business is distributing unsafe products, hoarding essential supplies, or engaging in illegal trade practices, you can expect them to come by your home or office with the intent of laying eyes on the type and amount of inventory you have in your possession.

What Should You Do If You Are Under Federal Investigation for COVID-19 Fraud?

Being investigated for alleged COVID-19 fraud can result in serious criminal charges and should not be taken lightly. 

If you believe that you or your business are under investigation for COVID-19 related charges, the following steps may help you protect yourself.

Do Not Volunteer for an Interview without Your Attorney Present

If you are under federal investigation for COVID-19 fraud, anything you say to federal agents is being documented and may be used against you by federal prosecutors. 

You are not required to speak with agents who come to your door, and doing so puts you are a risk for inadvertently incriminating yourself.  

However, if you are approached by federal agents, you should be polite and provide them with identification if requested. 

You should also request business cards from each of the agents present. 

That way, once you have retained legal counsel, your attorney can contact the investigators and notify them that you are represented by counsel.

If your attorney determines that it is in your best interest to provide an interview to federal investigators, your attorney can make those arrangements with the government on your behalf. 

Thereafter, your attorney can help prepare you for what to expect during the interview and accompany you to the meeting.

Do Not Delete or Destroy Evidence

Tampering with evidence is a good way to make things worse for yourself.  It is illegal and may expose you to additional charges for obstruction of justice, which is a federal felony. 

Additionally, it will likely invite increased scrutiny from investigators if they detect that you are not forthcoming.

Consult with Legal Counsel

The sooner you have a lawyer intervene on your behalf, the better position you will be in to fight allegations of COVID-19 fraud. 

An attorney will handle your communications with government officials so that you do not risk making incriminating admissions. 

Additionally, experienced defense counsel will be able to answer your questions and guide you through the investigation process.

Need Help? Contact The BFH Law Group

The BFH Law Group understands the unique pressures that medical suppliers are facing as a result of the COVID-19 epidemic, and we are here to help protect you and your business during this time of uncertainty and crisis.

We are open for business and our attorneys are standing by to answer your most pressing questions about COVID-19 fraud and your potential exposure to enforcement efforts.  

Contact us today to schedule a free consultation with one of our experienced, federally licensed attorneys.

Blair Brogan

Blair Brogan is an experienced federal criminal defense who represents clients facing investigation and prosecution by the federal government for white-collar offenses. 

With a specialization in healthcare law, Ms. Brogan advises doctors, medical service providers, suppliers and marketers of durable medical equipment (DME), and other health care industry professionals on regulatory compliance and enforcement. 

Ms. Brogan graduated magna cum laude from Tulane University Law School and holds an honors degree from American University.