Personal Protective Equipment (PPE) and Laboratory Testing Fraud During the COVID-19 Crisis
The FBI and DOJ have begun targeting individuals and companies accused of hoarding PPE, selling fraudulent test kits, price gouging, and engaging in other fraudulent practices related to the COVID-19 crisis.
As the novel coronavirus (COVID-19) pandemic continues, some federal agencies are turning their focus to prosecuting individuals and companies that are attempting to profit from the pandemic illegally. In particular, we have recently seen multiple cases in which the Federal Bureau of Investigation (FBI), the U.S. Department of Justice (DOJ), and other agencies have launched investigations targeting fraudulent activities related to personal protective equipment (PPE) and laboratory tests (including in-home testing kits) for COVID-19 and its antibodies.
Engaging in these types of fraudulent activities has the potential to lead to severe penalties. In addition to prosecution for consumer fraud, mail fraud, wire fraud, False Claims Act violations (in cases involving sales to the government), and other fraud-specific crimes, offenses committed during the COVID-19 crisis also have the potential to lead to prosecution under the Defense Production Act (DPA). While there were previously some questions around whether and to what extent the Defense Production Act would be invoked during the crisis, prosecutors have now begun using the DPA to target individuals and companies accused of hoarding and other crimes.
Are You Facing Federal Fraud Charges During the COVID-19 Crisis?
If you or your company is under investigation for hoarding, price gouging, false advertising, or any other alleged fraudulent practice, you must engage experienced federal defense counsel immediately. The FBI and DOJ are actively targeting individuals and companies that are attempting to take advantage of the COVID-19 crisis for financial gain, and they have a mandate from the White House to ensure that people are safe and the supply chain is not disrupted. These investigations are moving quickly, and charges can carry severe penalties. You cannot afford to take chances—no matter how certain you may be that you have done nothing wrong.
Our firm is actively representing clients in federal fraud investigations during the novel coronavirus (COVID-19) pandemic. In addition to our senior attorneys, many of whom are former DOJ prosecutors, our firm also affiliates with former federal law enforcement agents with the FBI, DOJ, and other agencies. With centuries of combined experience on both sides of high-stakes federal fraud investigations, and with a practice focused heavily in the healthcare defense field, we are uniquely positioned to defend individuals and companies accused of fraud in relation to the nation’s efforts to fight COVID-19.
What Constitutes PPE Fraud or COVID-19 Testing Fraud?
There are various types of commercial activities that can be prosecuted as fraud under federal law. With regard to the COVID-19 crisis in particular, the DOJ is currently focusing its efforts on targeting individuals and companies that either provide dangerous PPE or lab tests, or that deprive consumers or healthcare providers of access to necessary PPE or testing. For example, the following are all forms of fraud that could lead to prosecution under various federal laws:
1. Selling Unsafe or Ineffective PPE or COVID-19 Testing Kits
All kinds of companies are scrambling to manufacture masks and other types of personal protective equipment. At the same time, multiple labs are working to be among the first to bring reliable COVID-19 and antibody tests to market. While it is essential that necessary supplies get into the right hands as quickly as possible, companies must avoid selling PPE that does not provide adequate protection or testing kits that do not provide reliable results.
2. Selling Unauthorized COVID-19 Test Kits
The U.S. Food and Drug Administration has issued warnings about unauthorized fraudulent COVID-19 test kits, and it has published a long list of frequently-asked questions (FAQs) regarding what manufacturers, distributors, and retailers can and cannot offer to healthcare providers and consumers. Selling unauthorized laboratory test kits in violation of FDA rules can be prosecuted as fraud under federal law, and companies and their owners can face substantial penalties.
3. Collecting Payment for PPE or COVID-19 Testing Kits Not Delivered
Another form of fraud that has already led to multiple investigations involves offering masks, face shields, sanitizers, testing kits, and other products for sale, collecting payment, and then not delivering the goods that were offered. While one highly-publicized case appears to have possibly been a misunderstanding fueled by speculation on social media, there are other ongoing cases in which individuals and companies are at very real risk for federal criminal prosecution.
4. Hoarding and Price Gouging PPE and Testing Kits
There have already been multiple cases of federal authorities targeting individuals and companies for hoarding and price gouging in relation to personal protective equipment, and we expect to see similar prosecutions for COVID-19 testing kits as well. President Trump has issued Executive Orders that prohibit these practices, and the DOJ has announced that it intends to aggressively target anyone suspected of hoarding or price gouging PPE.
5. Making False or Misleading Claims about the Effectiveness of PPE or COVID-19 Lab Tests
When selling PPE and COVID-19 lab tests, companies must maintain strict compliance with federal consumer protection laws and regulations. Making false or misleading claims about PPE’s effectiveness or the reliability of COVID-19 test results is a form of fraud that carries steep penalties under federal law. In particular, companies that make representations without adequate substantiation are going to be at high risk for prosecution.
6. Making False Representations in Order to Secure Contracts for the Supply of PPE and COVID-19 Tests
In addition to fraudulent advertising claims, companies that make fraudulent claims in order to secure private or government contracts for the supply of PPE or COVID-19 test kits will also be exposing themselves to the risk of prosecution by the DOJ. This includes claims regarding the volume of PPE or test kits that can be delivered, claims regarding the quality of PPE or test kits, claims regarding the timing of availability of PPE and test kits, and others.
7. Delivering Substandard PPE or Unauthorized COVID-19 Test Kits (“Bait and Switch”)
Another fraudulent practice that carries a high risk for federal prosecution involves delivering substandard PPE or unauthorized COVID-19 test kits when high-quality PPE or authorized tests were promised. This type of “bait and switch” can lead to prosecution by federal authorities in addition to private civil litigation involving claims for fraudulent inducement. Failing to perform as promised under a private commercial agreement or a contract with the government – whether intended at the time of contracting or not – has the potential to lead to substantial liability under federal and state law.
8. Identity Theft Schemes Involving COVID-19 Testing
The FBI is warning U.S. residents to be aware of the risk of identity theft schemes involving COVID-19 testing. When the FBI issues this type of warning, this typically means that the Bureau has already seen several instances of the illicit conduct involved. According to the FBI, “Bad actors are selling fake COVID-19 test kits and unapproved treatments through telemarketing calls, social media platforms, and door-to-door visits. Many scammers are promising free care to patients in order to gain access to their personal and health insurance information, including their dates of birth, Social Security numbers, and financial data.”
9. Advance Fee and Business Email Compromise (BEC) Schemes
The FBI is also warning healthcare providers and government entities to be cautious of advance fee and business email compromise (BEC) schemes related to PPE and COVID-19 testing and treatment. In two separate press releases issued on March 27 and April 13, the FBI said that it is actively monitoring the market for companies that are attempting to fraudulently obtain payment from healthcare providers and government entities that are in desperate need of PPE and other medical supplies.
10. Fraudulently Billing Medicare, Medicaid, or Other Programs for PPE or Laboratory Tests
PPE suppliers, labs, and health care providers must also be careful to avoid allegations of healthcare fraud during the COVID-19 crisis. Companies and providers that improperly bill Medicare, Medicaid, and other government healthcare benefit programs for PPE and COVID-19 test kits will be putting themselves at risk for prosecution under the False Claims Act and other statutes, and they could be putting their owners at risk for criminal indictments in some cases.
Regardless of the specific issues at hand, if you, your company, or your healthcare practice is under investigation for PPE or COVID-19 testing fraud, you do not have time to waste. You need to execute an effective defense strategy in order to avoid charges, and this starts with engaging experienced federal defense counsel. At Oberheiden P.C., we are prepared to represent you, and we encourage you to contact us 24/7 for a free and confidential case assessment.
Speak with a Federal Fraud Defense Lawyer at Oberheiden P.C.
Are you or your company facing allegations of personal protective equipment (PPE) or COVID-19 laboratory testing fraud? To discuss your situation with a senior federal fraud defense lawyer at Oberheiden P.C. in confidence, call 888-680-1745 or contact us online now.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.