The COVID-19 pandemic continues to have a significant impact on people, businesses, and society. Millions of people have been unable to work, companies have shut down, and fatalities continue to rise in the United States.
This situation has led to a dire need for Personal Protective Equipment (PPE) and related medical supplies and goods. With the higher demand for PPE, PPE fraud is on the rise.
The Department of Justice states that the Defense Production Act and 2020 Executive Orders set up a framework for PPE fraud cases. You may be charged with criminal fraud if you hoard or charge excessive prices for PPE, including surgical gowns, gloves, N95 masks, and various disinfectants.
Criminal fraud charges involving PPE require intentional violations of the DPA and the related orders and regulations established by the US government.
Hoarding of PPE needs to have occurred after March 25, 2020, when the president issued an Executive Order that that gave powers to the Department of Homeland Security to identify 15 categories of medical and health resources as scarce.
What Is PPE Fraud?
PPE fraud covers several types of illegal conduct. It usually involves the sale of phone testing kits, facial masks, cleaning products, gloves, or surgical gowns. It also consists of making false statements about the availability or effectiveness of these products. PPE fraud also may include making false claims to the US government to secure lucrative PPE contracts.
The FBI has stated there are generally two types of PPE fraud:
- Testing schemes
- Treatment schemes
Testing schemes happen when the criminal contacts a person by phone, email, or in-person and says they work for the US government, and they need you to take a coronavirus test. During this scam, the idea is to get the person’s health insurance information and then fraudulently bill health insurance programs and plans.
Treatment schemes occur when the fraudster preys on the public’s fears by selling phony cures and treatments for the virus. People who believe the fraud will pay or provide their financial information to the scammer.
PPE Fraud Examples
The Department of Justice warns consumers that criminals are trying to exploit the COVID-19 pandemic worldwide through various scams and frauds.
One of the most common is robocalls making phony offers to sell respiratory masks and other respiratory devices with no intent to deliver, phone calls to individuals and companies offering to sell large amounts of PPE and requiring advance payments with no intention of delivery.
DOJ also warns consumers to look out for the sale of tampered, counterfeit, or otherwise phony PPE, such as N95 masks, surgical gowns, and gloves.
Also, federal, state, and local governments have been defrauded in a rush to obtain PPE that is desperately needed by healthcare professionals.
Most public entities cannot compete with private companies to buy PPE from overseas manufacturers; most offshore companies require 50-100% upfront payments. Government entities usually cannot pay more than 10% upfront.
In this situation, a lot of PPE fraud and price gouging has occurred involving government organizations.
Other examples of PPE fraud include:
- A company making offers to sell masks or medical devices that they are not going to deliver. Consumers and businesses should verify that the company owns the equipment being offered.
- Increasing medical equipment prices well above average market prices.
- Delivering PPE that is of lesser quality than advertised.
- Providing masks and other medical products that do not offer protection promised in the advertising.
- Advertising that products in their possession with prevent, treat, diagnose, or cure the coronavirus.
PPE Fraud Red Flags
Some red flags that indicate PPE fraud include:
- Supplier changes prices at the last minute.
- Seller or supplier requires full payment upfront.
- Seller asks that the buyer wire money before shipment.
- The buyer cannot verify that the seller is a legal vendor.
- The seller fails to communicate with the buyer by phone or email.
- The buyer receives many excuses for shipping delays.
PPE Fraud Punishments
When pursuing PPE fraud cases, the Department of Justice has been mostly using preexisting federal statutes such as:
- Aggravated identity theft
- Bank fraud
- Making false statements to the SBA
- Making false statements to an FDIC-insured bank
- Making false statements to federal agents
- Wire fraud
- Tax evasion
Companies accused of PPE fraud also can have charges brought under the Defense Production Act.
How to Respond to PPE Fraud Charges
Companies and individuals who have been charged by the FBI, DOJ, and other federal agencies need to take quick action to protect themselves.
The first thing to do is to not communicate with federal agents on your own. The federal government has vast resources at its disposal and is aggressively prosecuting PPE crimes. Make sure that you have an experienced federal crimes defense attorney to safeguard your rights.
PPE Fraud In the News
Below are some of the recent PPE fraud cases in the news:
- Promotion Distributor Charged With PPE Fraud: John Taylor, the owner of Wasatch Promotional Products, has been charged with wire fraud over a scheme that attempted to take advantage of the need for N95 masks during the COVID-19 pandemic.
- New York Attorney General Sues PPE Broker for Fraud: NY Attorney General Letitia James filed a lawsuit against a Buffalo broker of PPE and other medical supplies for alleged fraud during the pandemic. The lawsuit accuses Frank Borgese and his firm of fraudulently soliciting the State of New York with phony offers of PPE.
- Man Faces 20 Years in Prison for PPE Scam: An Atlanta man was placed under arrest for trying to defraud the VA into paying $750 million in fake orders for 125 million facemasks and PPE.
- Hong Kong Man Arrested For Selling Non-Existent PPE to French Drug Company: A man from Hong Kong has been charged with PPE fraud for allegedly selling $10 million of non-existent PPE to a drug company in France.
- Georgia Man Charged With Trying to Fraudulently Sell 50 Million N95 Masks: Paul Penn, as well as several others, have been accused by the Department of Justice of trying to defraud a foreign government related to an attempted sale of 50 million N95 masks, which he and his business associates did not possess.
- PPE Fraud Rise During Coronavirus Pandemic. Accessed at https://www.natlawreview.com/article/ppe-fraud-rise-during-coronavirus-pandemic
- Combating COVID-19 Fraud. Accessed at https://www.justice.gov/coronavirus/combattingfraud