Enforcement of COVID-19 Related Fraud Increasing

As the Coronavirus has continued to evolve, individuals and companies have spared no time nor creativity in taking advantage of the dire needs produced by the pandemic. Several different fraud schemes have come to light including fake COVID-19 treatments, price gouging and hoarding of personal protective equipment (PPE) or scarce and necessary supplies, and financial fraud relating to improper use of Coronavirus Aid, Relief, and Economic Security Act (CARES Act) stimulus funds. With each new scheme, government officials and enforcement agencies have had to navigate how to handle and prevent such fraudulent activities.

The passing of the CARES Act created an expansive network of incentives and programs for businesses that have been most impacted by the Coronavirus pandemic to receive funding to offset any substantial financial losses incurred. As the number of individuals and businesses affected financially by the pandemic has increased, so too has the amount of COVID-19 related fraud and the number of individuals taking advantage of the resulting emergency economic stimulus funding. Hundreds of both civil and criminal federal actions have been filed relating to the pandemic.

Built into the CARES Act itself are several enforcement bodies. Among them include: the Inspector General for Pandemic Recovery (coordinates audits and investigations related to loans and the like), the Congressional Oversight Commission (oversees various agencies’ implementation of the CARES Act, and Pandemic Response Accountability Committee (safeguards CARES Act funds to detect and prevent fraud, waste, abuse, and mismanagement). Further, the U.S. Attorney General has directed all U.S. Attorneys to prioritize investigating fraud schemes relating to COVID-19 and to appoint coordinators to specifically oversee coronavirus matters.

As fraud schemes relating to COVID-19 have continued to, seemingly, multiply in numbers, law enforcement officials have dedicated ample time and resources to stay vigilant in attacking such operations. Government officials have expressed their dedication to counter such threats and shut down those just emerging. As said in a statement from the FBI, “collaborative efforts [working alongside federal law enforcement and private sector partners] are the key to quickly reducing the threat from COVID-19 related criminal activity, so the American public can focus on protecting themselves and their families during these trying times.”

 

Enforcement or legal actions have been brought or taken based on the following allegations:

  1. A reality TV personality, Maurice Fayne, took advantage of the Paycheck Protection Program (PPP), obtaining a loan under the name of Flame Trucking and spending the funds on jewelry and other unnecessary personal items. PPP is a program designed to assist employees and small businesses hard-hit by the Coronavirus, allowing qualifying businesses and organizations to receive loans in an effort to help keep them afloat. Fayne applied and received a loan under the name of his trucking company, Flame Trucking, and within days spent the money on various luxury jewelry pieces and other personal debts. None of the payments were authorized uses of the PPP funds. Fayne has since been arrested on federal bank fraud charges. Law enforcement has expressed their continued vigilance in ensuring the proper use of such emergency funding during this Coronavirus pandemic.
  2. A Buffalo-area broker of personal protective equipment (PPE) and other medical supplies has taken advantage of the Coronavirus pandemic and the desperate need for PPE by fraudulently charging governments and health officials for fake products, including respirator masks, which would never be delivered at excessively high prices. While promising extremely quick delivery and access to large quantities of respirator masks, defendants were attempting to exploit New Yorkers’ dire needs in exchange for their own financial gain. Such actions gave rise to the present lawsuit charging defendants with fraudulently soliciting the State of New York, including hospitals and health care systems nationwide, with fake offers of PPE desperately needed in the wake of a pandemic. This lawsuit serves as part of a larger investigation regarding fraudulent solicitation of PPE by companies seeking to take advantage of the supply-chain disruptions and increased demand caused by the COVID-19 Pandemic.
  3. An online travel agency, BookIt.com (BookIt), and its CEO have been sued for continuing to charge customers for travel reservations despite knowing that the reservations would ultimately be cancelled as a result of the Coronavirus pandemic. Further, once the foreseen cancellations had come to fruition, BookIt refused to refund the money. Allegedly, BookIt had suspended business due to the pandemic but continued to collect payments from customers, keeping the money for its own benefits and not forwarding the payments to the booked hotels and resorts. BookIt even went so far as to close all of its call centers so consumers had no way to contact the company seeking a refund. The pending lawsuit seeks restitution from BookIt to repay its consumers and to hold BookIt liable for its unfair and deceptive conduct.
  4. Mailers sent by Traffic Jam Events, LLC and its owner led consumers to believe they could obtain stimulus relief temporarily in person, directing them to “relief headquarters” to claim the incentives. The mailers included multiple details to purposefully mislead consumers including references to an economic stimulus program similar to the CARES Act, a mock of the Great Seal of the United States, and a falsified check labeled “Stimulus Relief Program.” Upon arrival to the “headquarters,” however, consumers found they were entering a used car sale. The Federal Trade Commission notes this is not defendants’ first illegal scheme and brings suit seeking a halt to defendants’ actions as well as redress to their misled consumers.

 

In any time, it is important to be vigilant for scams and other potential unscrupulous activity.  In times of increasing disruption, it is particularly important to stay vigilant, as the confluence of uncertainty, multiple new relief programs, and remote work have provided new opportunities.  If a program, deal or investment seems too good to be true, be sure to check with legal counsel to confirm its validity to avoid falling victim to one of the many scams currently circulating.

XML Sitemap