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DOJ Briefs Senate Committee on Its Efforts to Fight COVID-19 Scams

June 12, 2020

This week, Department of Justice officials appeared before the Senate Judiciary Committee. They described steps DOJ is taking to detect, investigate, and prosecute COVID-19 scams. The two officials were Associate Deputy Attorney General William Hughes and U.S. Attorney for the District of New Jersey Craig Carpenito. DOJ has given Mr. Hughes responsibility for coordinating DOJ’s response to criminal misconduct relating to COVID-19. Mr. Carpenito leads DOJ’s Hoarding and Price Gouging Task Force.

In their joint statement, the officials emphasized DOJ’s efforts “to detect and prosecute those who seek to exploit the COVID-19 pandemic and the economic dislocation it has caused for personal financial gain.”  They reported that DOJ already is conducting investigations and prosecutions in a number of areas concerning COVID-19. Key priorities include hoarding and price gouging, fraud and abuse, internet scams, and antitrust violations.

Hoarding and Price Gouging

Hoarding and price gouging make it difficult for essential healthcare workers to have the equipment and supplies needed to protect them from the virus. Personal protective equipment (PPE) and sanitizing products protect healthcare workers and inhibit the virus’s spread. In late March, President Trump invoked his authority under the Defense Production Act (DPA) to combat hoarding and price gouging.

Thereafter, the Department of Health and Human Services (HHS) designated fifteen categories of health and medical resources as scarce. These include respirator face masks, ventilators, sterilization services, medical gowns, face shields, and surgical masks and gloves. DOJ formed a task force, headed by Mr. Carpenito, to combat hoarding and price gouging of these critical supplies. Each U.S. Attorney’s Office in the country has one or more attorneys working with the task force.

The task force already has seized hoarded PPE, including N95 masks. Then, HHS was able to transfer the PPE to state and local governments to distribute to frontline healthcare workers. In addition, DOJ has brought two criminal prosecutions for hoarding and price gouging. One case was against a New Jersey man who tried to defraud New York City into paying him $45 million for PPE masks that he didn’t even possess. The other was against a New York pharmacist who sold N95 respirators for excessive prices.

COVID-19 Fraud and Abuse

The Attorney General has directed every U.S. Attorney’s Office “to prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.” DOJ officials’ joint statement to the Judiciary Committee emphasized that:

Assistant United States Attorneys across the nation are committed to the mission of combatting fraud relating to COVID-19, and they work with lawyers throughout the department to bring to bear all the criminal and civil tools necessary to investigate, prevent, and prosecute sales of fraudulent PPE and COVID-19 treatments, cures, and tests; the use of stolen identities to obtain health care, Economic Impact Payment, unemployment, or other government benefits; and loan fraud, bank fraud, money laundering, and aggravated identity theft relating to CARES Act funds.

The U.S Attorneys’ Offices work with every major law enforcement agency to investigate and prosecute the fraud arising out of the pandemic; they often pair with the Criminal Division and the Civil Division to ensure that they are using every tool available to prevent and prosecute the fraud. They also have leveraged and have further strengthened relationships with State and local law enforcement counterparts in their districts, leading to more effective enforcement and more successful prosecutions.

Enforcement Actions

As of June 3rd, DOJ prosecutors had brought six cases charging fraud in connection with PPP applications. We previously wrote about the first such case, which involved two New England men who sought over $500 million in forgivable PPP loans. The defendants falsely claimed to have dozens of employees working at four businesses.

DOJ’s Criminal Division also is targeting health care fraud schemes emerging during the crisis. It chairs a working group with FBI, HHS Office of Inspector General, and others. In addition, DOJ officials reported that the Criminal Division’s Fraud Section “has assigned 25 prosecutors to prosecute COVID-19 cases across the country, directed its Data Analytics Group to prioritize analysis of COVID-19-related billing schemes, and retained forensic accounting and other experts that will assist in investigations and prosecutions.” DOJ already has brought some prosecutions for COVID-19 heath care fraud. Recently, we wrote about one of those cases, in the Middle District of Florida. The defendant conspired to receive kickbacks on a per-test basis first for genetic cancer screening tests. Then, after the pandemic hit, she tried to use a similar scam for COVID-19 tests.

DOJ Warns of Other COVID-19 Scams

The joint statement described other fraudulent schemes. DOJ already is investigating and, in some cases, prosecuting such scams. These include:

  • Medicare beneficiaries receiving fraudulent calls, texts, and emails seeking to have the recipients disclose their personally identifiable information (PII) (e.g., social security numbers, dates of birth, and bank account routing and account numbers) under the auspices of confirming eligibility for COVID-19 tests, and then using that PII to bill health insurance programs for medically unnecessary, or not provided, services or equipment.
  • Medical professionals offering free COVID-19 testing to obtain Medicare beneficiary information that can then be used to submit medical claims for unrelated and medically unnecessary – and far more expensive – tests or services, as well as the payment of kickbacks for referrals for such testing.
  • Social media scams fraudulently seeking donations or claiming to provide COVID-19 relief funds if the recipient enters his or her bank account information.
  • Scammers representing that they are acting on behalf of government agencies, including the SBA, U.S. Treasury, and other entities, in order to obtain money from individuals.
  • Robocalls making fraudulent offers to sell respiratory masks with no intent of delivery.
  • Sales of counterfeit or fake testing kits, cures, “immunity” pills, and protective equipment.
  • Seeking donations fraudulently for illegitimate or non-existent charitable organizations.

Consumer Protection

The Consumer Protection Branch of DOJ’s Civil Division also is acting to protect the public from COVID-19 scams. In one case, DOJ sued in the Western District of Texas to shut down a website that fraudulently claimed to sell COVID-19 vaccine kits.

Moreover, the Consumer Protection Branch is working closely with the FBI to identify and shut down websites or advertisements for fake COVID-19 vaccines and cures, as well as those promoting fraudulent charities or spreading malware.  Also, the Consumer Protection Branch and FDA are working together to protect consumers from illegal and possibly harmful products that scammers might promote to treat COVID-19. In several cases, DOJ has successfully sued to enjoin the unlawful sale of potentially dangerous products.

Antitrust Enforcement

DOJ is on the lookout for companies that “take advantage of the pandemic to engage in anticompetitive conduct such as price fixing and bid rigging.” In particular, DOJ is concerned about anticompetitive conduct in connection with manufacturing or selling of products such as face masks, respirators, and diagnostics, especially when companies sell such products to federal, state, and local agencies. More generally, DOJ’s Procurement Collusion Strike Force is targeting “antitrust crimes and related fraudulent schemes in government procurement, grant, and program funding at all levels of government.”

DOJ further stated that its Antitrust Division is working closely with the FTC to monitor employer collusion that harms workers. Specifically, the agencies are focused on protecting competition for workers on the frontlines of the COVID-19 response “by enforcing the antitrust laws against those who seek to exploit the pandemic to suppress or eliminate competition for compensation, benefits, hours worked, and other terms of employment.”

National Center for Disaster Fraud Hotline

COVID-19 fraud hotline

DOJ has set up a hotline and encouraged people to report COVID-19 scams. DOJ’s National Center for Disaster Fraud (NCDF) handles complaints about COVID-19 fraud. The NCDF is responsible for disseminating complaints to federal, state, or local agencies for further investigation. DOJ reported that the NCDF has fielded thousands of complaints about possible COVID-19 fraud.

Whistleblowers Needed to Shut
Down COVID-19 Scams

In sum, DOJ is working on multiple fronts to investigate and prosecute COVID-19 fraud. Many of the crimes associated with the pandemic also can form the basis for actions under the False Claims Act. Whistleblowers are critical to fighting COVID-19 fraud and can protect the public by bringing illegal practices to light. If you have knowledge of such scams, please contact us.