FBI Targets Virus Scams From ‘Prevention Pill’ to Hoarding
A cottage industry has emerged of criminals and hackers seeking to scam and profit off the coronavirus crisis.
(Bloomberg) -- A Los Angeles man posted videos online of a “Coronavirus Prevention Pill” and syringe while asking people to invest in his startup. His pitch was viewed almost two million times.
A man in Brooklyn hoarded scarce medical supplies needed to treat coronavirus patients and then sold them to doctors and nurses at hugely inflated prices. When confronted by FBI agents, he allegedly claimed he had the virus and coughed toward them.
These are among alleged cases of criminal activity and fraud that the Justice Department and FBI have been investigating and prosecuting in recent weeks. As states, local governments and hospitals struggle to find and obtain critical medical equipment, a cottage industry has emerged of criminals and hackers seeking to scam and profit off the burgeoning crisis.
The criminal actions come as hospitals in New York and elsewhere are running so short on medical equipment that doctors and nurses are being forced to reuse disposable masks for days at a time. And across the U.S., states are bidding against one another as middleman companies raise the price of medical supplies and equipment.
A 700% Markup
The Brooklyn man, Baruch Feldheim, allegedly agreed to sell about 1,000 medical-grade N-95 respirator masks and other materials to one doctor for $12,000 -- about a 700% markup from the normal price, according to a criminal complaint announced on March 30 by New Jersey U.S. Attorney Craig Carpenito.
Carpenito was appointed by Attorney General William Barr to lead a Justice Department task force on combating price gouging and hoarding related to coronavirus.
“We are in the middle of a war, and the weapon that we have to combat that war are scientists, doctors, nurses and first responders,” Carpenito said in an interview Thursday. “Those weapons that this country needs to fight this virus need protection themselves. And the protection is being held back by wrongdoers.”
The arrest of Feldheim, who is being charged with assaulting a federal officer and making false statements to law enforcement, was the first public case being handled by the task force. A lawyer for Feldheim didn’t respond to a request for comment.
More than 500,000 items of personal protective equipment were seized by the FBI as a result of the operation, including 192,000 N-95 masks and 598,000 medical-grade gloves. The Justice Department and Health and Human Services Department announced on Thursday that the items would be delivered to health departments for New York state, New York City and New Jersey.
Governors Bidding
Carpenito said the task force will pursue cases wherever they lead, including against companies that are improperly raising prices on governors and hospitals, essentially forcing them to bid against each other. He said the task force has received referrals from state attorney general offices, including two on Thursday. He declined to discuss any details of ongoing cases.
“This is one of these fights where there’s just no room for ego,” he said. “We’re going to find the best vehicle to bring people to justice and to get these materials to the front line as quickly as possible.”
House Speaker Nancy Pelosi said a commission she’s creating also will scrutinize whether there’s fraud and abuse in spending under the $2 trillion virus relief bill that Congress passed. “The panel will root out waste, fraud and abuse,” Pelosi told reporters on Thursday. “It will protect against price-gouging, profiteering and political favoritism.”
President Donald Trump issued an executive order on March 23 prohibiting the hoarding of specific items, including N-95 face masks, ventilators, surgical masks, medical gowns and drug products with active ingredients chloroquine phosphate or hydroxychloroquine.
A day later, Barr created the “COVID-19 Hoarding and Price Gouging Task Force.”
Barr said the task force isn’t interested in prosecuting people who are stocking up on necessities for their own use or businesses obtaining materials they reasonably need.
“We are beginning to receive reports of individuals using the crisis to hoard vital medical items and then make inappropriate, windfall profits at the expense of public safety and the health and welfare of our fellow citizens,” Barr wrote in a department-wide memo. “We will aggressively pursue bad actors who amass critical supplies either far beyond what they could use or for the purpose of profiteering.”
While the task force is focused on hoarding and price-gouging, other elements of the Justice Department and FBI are pursuing cases of fraud and other criminal activity tied to the coronavirus outbreak.
In one case, a man in Georgia operating a marketing firm referred people who feared they might have coronavirus to companies for medically unnecessary tests in exchange for financial kickbacks.
“My task force is part of the DoJ army in addressing this stuff,” Carpenito said. “Facts and circumstances are going to dictate whether or not it’s a federal crime, whether or not it could be a state crime, or whether or not there’s conduct that should be investigated at all. If someone is seeking to profit illicitly off this crisis, the Department of Justice is going to try to bring them to justice.”
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