Justice Department’s First Enforcement Act Against COVID-19 Fraud

In a memo from Attorney General William Barr dated March 16, 2020 …

In addition to ensuring that the justice system can continue functioning during the current national crisis, it is essential that the Department of Justice remain vigilant in detecting, investigating, and prosecuting wrongdoing related to the crisis. In particular, there have been reports of individuals and businesses selling fake cures for COVID-19 online and engaging in other forms of fraud, reports of phishing emails from entities posing as the World Health Organization or the Centers for Disease Control and Prevention, and reports of malware being inserted onto mobile apps designed to track the spread of the virus. The pandemic is dangerous enough without wrongdoers seeking to profit from public panic and this sort of conduct cannot be tolerated. Every U.S. Attorney’s Office is thus hereby directed to prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.

Following the release of this memo, DOJ attorneys moved in federal court in Austin, Texas for a temporary restraining order against operators of a website, coronavirustestingkit.com, alleged to have engaged in a wire fraud scheme by offering consumers access to “free” World Health Organization (WHO) vaccine kits in exchange for a shipping charge, which required consumers to enter credit card information on the website. United States v. John Doe, a/k/a “coronavirusmedicalkit.com”, Civ. No. 1:20-CIV-306, (W.D. Tx.)

Another DOJ memo was released on March 24, 2020 further detailing enforcement actions.

Consistent with the Attorney General’s March 16 Memorandum, I am directing your Offices to focus your attention on the following categories of offenses that may be relevant to the kinds of pandemic-related crimes we have seen reported.

First, we know that there are individuals and businesses taking advantage of the COVID-19 crisis to engage in fraudulent or otherwise illegal schemes. Depending on the specific facts, these acts may violate any number of provisions in Title 18. See, e.g., 18 U.S.C. § 1341 (mail fraud); id. § 1343 (wire fraud); id. § 1030 (computer fraud); id. § 1347 (healthcare fraud); id. § 1349 (conspiracy to commit fraud); id. §§ 1028-1028A (identification fraud and aggravated identity theft); id. § 1040 (fraud in connection with major disasters and emergencies); id. § 2320 (trafficking in counterfeit goods). Moreover, the sale of fake drugs and cures may be prohibited under Title 15, see 15 U.S.C. § 1263(a) (introduction of misbranded or banned hazardous substances into interstate commerce), constitute a violation of the Food, Drug, and Cosmetic Act, see 21 U.S.C. § 333 (introduction of misbranded or adulterated drug or device into interstate commerce), or constitute a violation of the Consumer Product Safety Act, see 15 U.S.C. § 2068 (sale, manufacture, distribution, or import of a consumer product or other product that is not in conformity with consumer-product-safety regulations).

Second, you may encounter criminal activity ranging from malicious hoaxes, to threats targeting specific individuals or the general public, to the purposeful exposure and infection of others with COVID-19. Because coronavirus appears to meet the statutory definition of a “biological agent” under 18 U.S.C. § 178(1), such acts potentially could implicate the Nation’s terrorism-related statutes. See, e.g., id. § 175 (development/possession of a biological agent for use as a weapon); id. § 875 (threats by wire); id. § 876 (threats by mail); id. § 1038 (false information and hoaxes regarding biological weapons); id. § 2332a (use of a weapon involving a biological agent). Threats or attempts to use COVID-19 as a weapon against Americans will not be tolerated.

Third, individuals or businesses may be accumulating medical supplies or devices beyond what they reasonably need on a daily basis, or for the purpose of selling them in excess of prevailing market prices. As discussed in a memorandum issued by the Attorney General today, it is illegal to acquire medical supplies and devices designated by the Secretary of Health and Human Services (HHS) as scarce in order to hoard them or sell them for excessive prices. Such conduct may be prosecuted under the Defense Production Act. See 50 U.S.C. §§ 4512, 4513.

Although no items have yet been designated, the Department will work closely with the HHS Secretary in connection with that process in the days ahead. Your Offices should coordinate with the newly constituted task force led by Craig Carpenito, the United States Attorney in the District of New Jersey, when investigating and prosecuting this conduct.

Finally, conspiracies between individuals or businesses to fix prices, rig bids, or allocate markets with respect to COVID-19 materials are prosecuted criminally under the federal antitrust laws. See 15 U.S.C. § I. Monopolization or anticompetitive agreements related to critical materials needed to respond to COVID-19 can be pursued civilly under the Sherman and the Clayton Antitrust Acts. See, e.g., 15 U.S.C. § I (anticompetitive agreements); id. § 2 (monopolization); id.§ 14 (exclusive dealings). And when the United States is injured as a result of those practices, the government may bring suit to recover its damages. See id. § 15a ( damages actions when the government is the victim).

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