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First COVID-19 Fraud Action Filed by the DOJ, as Broader Federal and State Enforcement Heats Up

Alert
03.25.2020
By Habib Ilahi

The U.S. Department of Justice (DOJ) announced it has taken its first action in federal court to combat fraud related to the coronavirus (COVID-19) pandemic. The heightened fraud enforcement establishes a new precedent for taking extra steps to ensure robust compliance measures are in place, to review supply chain agreements, and communicate the importance of fraud prevention to front line personnel.

DOJ's enforcement action, filed in federal court in Austin, Texas, against operators of a fraudulent website tracks Attorney General William Barr’s recent directive to DOJ prosecutors to prioritize the detection, investigation and prosecution of illegal conduct related to the pandemic.

DOJ alleged the operators of the website “coronavirusmedicalkit.com” were engaging in "a wire fraud scheme seeking to profit from the confusion and widespread fear surrounding COVID-19." Information published on the website claimed to offer consumers access to "free" World Health Organization (WHO) vaccine kits for a shipping charge of $4.95. According to the DOJ and other health experts, there are currently no legitimate COVID-19 vaccines, and the WHO is not distributing any such vaccine. The DOJ asked the court to immediately shut down the website while it continued to investigate. In response, the court issued a temporary restraining order requiring that the registrar of the fraudulent website immediately block public access to it.

This action highlights that businesses selling products or providing services in the COVID-19-related medical provider, laboratory testing, or pharmaceutical sectors as well as medical supplement and medical foundations will have increased scrutiny by DOJ and other federal and state law enforcement agencies as they are within the prioritized coronavirus-related enforcement.

Consider the following actions:

  • Review ethics policies, procedures and processes to make sure that they are effective and being followed. Document communications that all claims should be truthful and not withhold critical information.
  • Review supply chain policies/contracts to make sure your suppliers are not making improper claims about their products and that they indemnify you if they do.
  • Review your whistleblower/employee complaint policies and be sure they reflect your position on when employees should report suspicious behavior and to whom.

The fallout from the COVID-19 pandemic is fluid and ongoing, and the government’s response, at the federal, state and even local levels will continue to touch on all aspects of businesses and lives. The DOJ, state Attorneys General, the Federal Trade Commission and Food and Drug Administration are currently watching schemes which include:

  • Phishing emails from entities posing as the 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 this information to fraudulently bill for other tests and procedures

Attorney General Barr has further directed each U.S. attorneys’ office to coordinate with the DOJ Civil Division’s Consumer Protection Branch, the DOJ Criminal Division’s Fraud Section, and the DOJ Antitrust Division’s Criminal Enforcement Program for additional guidance on how to detect, investigate and prosecute individuals and entities engaged in pandemic-related fraud schemes.

Stinson’s Coronavirus Task Force and White Collar Criminal Defense & Special Investigations team will continue to monitor COVID-19-related fraud enforcement and provide periodic updates. This team includes leaders who are alumni of many of the sections of the DOJ including the Consumer Protection Branch, the Civil Division's Fraud Section, the Antitrust Division, and U.S. Attorneys’ Offices.

Due to the dynamic nature and rapidly changing circumstances, we will continue to provide legal updates on fraud, and we welcome your questions.

For more information on the DOJ's heightened fraud enforcement in relation to the coronavirus, please contact John Aisenbrey, Sean Colligan, William Greene, Habib Ilahi, Elsa Manzanares, Adine Momoh, John Munich, Jeremy Root, Joel Schwartz, Pete Schwingler or the Stinson LLP contact with whom you regularly work.

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