DOJ Investigating COVID-19 Fraud

March 26, 2020
Firm Publication

As the impact of the COVID-19 pandemic continues to spread, the federal government is preparing to take unprecedented action to curb its effects on the nation’s health and economy by freeing up federal dollars for private businesses, manufacturers, and healthcare entities of all types. But, those receiving these dollars, directly or indirectly, should continue to monitor updates to and maintain compliance with all applicable laws and regulations as this unprecedented economic response comes with heightened scrutiny.

In an internal memo on March 16, Attorney General William Barr stated that the U.S. Department of Justice (DOJ) would remain vigilant in its efforts to combat fraud related to the COVID-19 crisis and directed all U.S. Attorneys to prioritize the detection, investigation, and prosecution of illegal conduct related to the pandemic. On March 19, Deputy Attorney General Jeffrey Rosen directed the U.S. Attorney in each federal district to appoint a Coronavirus Fraud Coordinator to serve as legal counsel on coronavirus-related matters, direct the prosecution of coronavirus-related crimes, and to conduct outreach and awareness.

Suspected Fraudulent Schemes  

To that aim, the public is being urged to report suspected fraud schemes to the National Center for Disaster Fraud (NCDF), a national coordinating agency within the Criminal Division of the DOJ. The NCDF coordinates with 16 additional federal law enforcement agencies, as well as state Attorneys General and local authorities.

In a press release from March 20, DOJ warns that criminals will find new methods to exploit the current pandemic crisis and, on March 20, identified the following potential coronavirus-related schemes:

  • Individuals and businesses selling fake cures for COVID-19 online and engaging in other forms of fraud.
  • Phishing emails from entities posing as the World Health Organization (WHO) or the Centers for Disease Control and Prevention.
  • Malicious websites and apps that appear to share coronavirus-related information to gain and lock access to your devices until payment is received.
  • Seeking donations fraudulently for illegitimate or non-existent charitable organizations.
  • Medical providers obtaining patient information for COVID-19 testing and then using that information to fraudulently bill for other tests and procedures.

Moreover, during a press briefing on March 23, with members of the Coronavirus Task Force, Attorney General Barr stated that the DOJ had already initiated investigations of “activities that are disrupting the supply chain and suggestive of hoarding . . . for the purpose of manipulating the market and ultimately deriving windfall profits.”

DOJ Announces First Enforcement Action Against COVID-19 Fraud

It is clear that the DOJ is serious about its commitment to COVID-19-related enforcement and has already sought injunctive relief to curtail suspected fraud. Following its recent statements, on March 22, DOJ announced the filing of its first action in federal court against COVID-19 fraud. The defendant, John Doe, a/k/a “coronavirusmedicalkit.com,” is alleged in the complaint to be engaging in and facilitating a predatory wire fraud scheme exploiting the current COVID-19 pandemic.

The United States filed a complaint on March 21 against the defendant seeking a temporary restraining order (TRO), a preliminary injunction, and a permanent injunction restraining all future fraudulent conduct. The U.S. District Court for the Western District of Texas issued a TRO on March 22 against the website, requiring the registrar of the website to take action to block access to it, while the investigation of the website and its operators continues. If the case proceeds to trial, the government will need to prove the allegations in the complaint to receive a permanent injunction.

According to the complaint, on March 3, NameCheap, Inc. registered the website “coronavirusmedicalkit.com,” which purports to ship free WHO vaccine kits if consumers pay $4.95 for shipping. The complaint states that the website uses a photograph of the Director of the National Institute of Allergy and Infectious Diseases, Dr. Anthony Fauci, “to add the imprimatur of the United States government to its claims.” The government alleges that the defendant is aware that the WHO is not offering free vaccine kits for COVID-19 and that purpose of the website is to induce consumers to pay the shipping costs for non-existent vaccine kits and to engage in identity theft fraud. The government alleged that the defendant engaged in wire fraud and is seeking injunctive relief. Under the court’s order, the defendant is temporarily restrained from committing wire fraud and from doing business through “coronavirusmedicalkit.com.”

The case is being handled by the United States Attorney’s Office for the Western District of Texas, the DOJ Civil Division’s Consumer Protection Branch, and the FBI. This case illustrates a federal commitment to combat COVID-19-related fraud and the DOJ’s efforts to protect consumers from fraudulent schemes.

The case is United States v. John Doe, a/k/a “coronavirusmedicalkit.com,” Case Number A-20-CV-306 (No. 1:20-cv-00306), in the United States District Court for the Western District of Texas.

Conclusion

The government is taking steps to root out any potential fraud, waste, or abuse of resources related to the COVID-19 response. These anti-fraud efforts are likely to continue after the country moves past the immediate crisis. This will involve criminal and civil enforcement activity, including the use of the False Claims Act where companies or individuals submit or cause the submission of false claims for federal dollars. During this time, it is critically important to maintain a vigorous compliance program. It is also essential to remind personnel at all levels of an organization that compliance and ethics are as important now as ever. If you have any questions about DOJ enforcement and COVID-19 fraud, please contact the authors of this alert.