Defense Counsel for Companies Accused of Consumer Fraud During the COVID-19 Crisis

State Attorney General offices across the country are aggressively pursuing allegations of consumer fraud during the novel coronavirus (COVID-19) pandemic. If your company has received a civil investigative demand (CID) in relation to allegations of consumer fraud, it is imperative that you engage experienced defense counsel promptly.

While many aspects of life in America have been put on hold in response to the novel coronavirus (COVID-19) outbreak, the nation’s Attorney General offices are busy at work protecting individuals from predatory businesses. As residents of almost all 50 states are sheltering in place and limiting their activity outside of the home to commuting to work and obtaining essential goods and services, many are finding their purchasing options limited—both in retail stores and online.

This is due to a number of different factors. Among them, panic buying spurred by the media’s coverage of the COVID-19 crisis has led to shortages of essentials such as toilet paper and hand sanitizer, and many companies are struggling to meet consumer demand due to supply chain disruptions caused by the novel coronavirus outbreak. But, the Attorney Generals in all 50 states are targeting other causes as well, including consumer fraud perpetrated by both legitimate and illegitimate operations seeking to reap windfalls from the pandemic.

Is Your Company Being Accused of Consumer Fraud? If So, Are You at Risk?

Of course, not every company that is marketing its products and services to cash-strapped consumers during the COVID-19 crisis is engaged in nefarious business practices. Many are doing everything they can to meet consumer demand as efficiently as possible, and many are being forced to increase their prices due to wholesale price increases further up the supply chain.

But, there are bad actors out there, and this fact has forced state Attorney General offices to take an all-encompassing approach. As a result, all types of companies are finding themselves under scrutiny, and most are discovering that they are being targeted through the service of civil investigative demands (CIDs).

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Gamal Abdel-Hafiz
Gamal Abdel-Hafiz

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

What Constitutes Consumer Fraud During the COVID-19 Crisis?

If you have received a CID pertaining to allegations of consumer fraud, including allegations of price gouging, what do you need to know? First and foremost, you need to know what constitutes consumer fraud so that you can determine whether and to what extent your company’s business practices could be putting it (and potentially you) at risk for civil or criminal penalties.

Since these are state-level investigations, the specifics of each individual case will be determined by the laws of the state in which the investigations are conducted. That said, there are various practices that are broadly considered to constitute consumer fraud in jurisdictions across the country, and there are a number of practices in particular that state Attorney General offices appear to be targeting during the novel coronavirus pandemic. For example, state Attorney General offices across the country are issuing CIDs targeting allegations of:

  • Price gouging. This is perhaps the most pervasive issue that state Attorney General offices are targeting during the COVID-19 crisis, and U.S. Attorney General William Barr has indicated that the Department of Justice (DOJ) will be prosecuting price gouging cases at the federal level as well. While the federal government is targeting price gouging in relation to necessary medical supplies in particular, the state Attorney General offices are pursuing price gouging claims involving all types of consumer products.
  • False and misleading product claims. Companies that rely on false and misleading claims to sell products during the COVID-19 crisis can expect to face aggressive enforcement action as well. This includes, for example, publishing advertisements that make unsubstantiated claims about the effectiveness of sanitizing agents or face masks. Even if a company’s goal is to get needed products into the hands of consumers as quickly as possible during the pandemic, it cannot ignore the legal requirements that apply under ordinary circumstances.
  • Vaccines, medications, and home test kits. As the U.S. Food and Drug Administration (FDA) is yet to approve any vaccines, medications, or home test kits for COVID-19, any offers purporting to offer these types of products to consumers are going to face heavy scrutiny from both state and federal authorities.
  • Insurance, warranty, and refund schemes. State Attorney General offices are also targeting entities that are offering fraudulent insurance coverage and claims assistance, fraudulent warranties, and fraudulent refund and rebate schemes. This includes both sales by legitimate companies that rely on false and misleading information as well as outright scams that “spoof” offers from legitimate companies.
  • Credit, loan, and payment plan offers. Similarly, companies that make fraudulent credit, loan, and payment plan offers are likely to face scrutiny from their states’ Attorney General offices through the issuance of CIDs. This includes not only companies that offer predatory interest rates and other terms, but also companies that attempt to extend grace periods to their customers without complying with the various consumer protection laws that apply.
  • Mortgage fraud. The federal government and various state authorities are offering mortgage relief to homeowners during the novel coronavirus pandemic. Lenders and loan servicers that fail to comply with the Coronavirus Aid, Relief, and Economic Security (CARES) Act in good faith and that unfairly impose additional financial burdens on homeowners may face allegations of consumer fraud. Entities that attempt to take advantage of distressed homeowners by offering fraudulent financial assistance or services could be at risk for substantial penalties as well.
  • Investment fraud. State and federal regulators are particularly sensitive to the heightened risk of investment fraud schemes during crises and other large-scale events that impact the market and investors’ emotions. Similar to physical goods, companies and brokers offering investment opportunities during the COVID-19 crisis must continue to comply with all applicable laws and regulations.
  • Debt elimination fraud. State Attorney General offices are also targeting companies offering what appear to be fraudulent debt elimination services. In addition to mortgage debt, this includes service offerings for the elimination of outstanding credit card, student loan, and income tax payment obligations.

This list is not exhaustive, but rather is representative of some of the main types of consumer fraud cases that state Attorney General offices are pursuing through the issuance of CIDs to both legitimate and illegitimate businesses across the country. In addition to focusing on these (and other) specific types of fraudulent consumer offerings, state Attorney General offices are also likely to be particularly concerned with consumer marketing campaigns that involve:

  • Robocalls and telemarketing efforts that rely on spoofing local telephone numbers
  • Text messages that appear to be from friends, neighbors, or state authorities
  • Emails that aggressively market products or services with “limited time” offers
  • Marketing materials that utilize government seals or insignias
  • Any offers that make claims related to COVID-19 prevention or treatment

What Should You Do if You Have Received an Attorney General CID?

If you have received a civil investigative demand (CID) from a state Attorney General’s office in relation to the sale of consumer goods or services during the novel coronavirus (COVID-19) pandemic, what should you do?

First, and most importantly, you should not ignore the CID. If a state Attorney General has determined that the issuance of a CID is warranted, this means that it is going to press forward with its investigation. Ignoring the CID will only serve to put your company further behind and potentially increase the risks of the Attorney General office’s investigation.

In order respond effectively and avoid unnecessary penalties, your company will need to respond to the CID with the assistance of experienced defense counsel. This will involve:

  • Reviewing the CID to determine what response is required by what date;
  • Determining if your company has any grounds to challenge the CID (although successful challenges to CIDs are relatively rare);
  • Preparing a compliant response that also preserves the attorney-client privilege;
  • Interfacing with the Attorney General’s office with regard to the subject matter of its investigation; and,
  • Working to achieve a favorable result that avoids formal charges and the costs and risks of administrative, civil, or criminal prosecution.

At Oberheiden P.C., we represent companies and individuals nationwide in Attorney General office investigations initiated through the issuance of CIDs, and we are actively representing several clients specifically in relation to novel coronavirus-related matters. If you have received an Attorney General CID, we can help you avoid steep penalties, and we encourage you to contact us promptly for a free and confidential case assessment.

In addition to attorneys who have devoted their careers to compliance and defense representation, our team also includes several former prosecutors and law enforcement agents with experience at the state and federal levels. This background provides us with unique insight into the CID investigation process, and it allows us to efficiently and effectively advise clients facing a broad range of consumer fraud-related allegations. Contact us to learn more.

Speak with a CID Defense Lawyer at Oberheiden P.C.

Have you received a civil investigative demand (CID) from a state Attorney General’s office targeting allegations of consumer fraud? To discuss your case with a CID defense attorney at Oberheiden P.C. in confidence, call 888-680-1745 or request a free phone consultation online now.

Alert – The Consumer Protection Division/Unit is sending CID’s in high volumes. Please contact us today if you have received a CID.

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