In disorder there is opportunity—for the bold, inventive, cunning, and ruthless alike—to advance their interests while others’ guards are down and emotions up.
The global COVID-19 pandemic is perhaps (we must hope) a once-in-a-lifetime chaos event, wreaking widespread and acute social, business, economic, and governmental disorder. It is, therefore, a perhaps once-in-a-lifetime opportunity for various persons to profit, whether by predation or other, less nefarious, even benevolent, means.
Of course, profit in and of itself is neither wrong nor illegal, nor is it made such merely by its coincidence with others’ misfortunes and suffering. It is human nature to seek to better one’s station no matter the attending circumstances. Our moral judgments, as well as the legal judgments of law enforcement and, ultimately, the courts, depend on how such profits are made.
Already, there have been myriad stories of scams and classic frauds relating to the ongoing pandemic, from the peddling of snake oil COVID-19 “cures” and “treatments,” to the distribution of supposed COVID-19 related apps containing malicious malware, and the “sales” of masks and other such demanded supplies where payments are processed with no intention of delivering the purchased good. However, there have also been myriad stories of attempts to profit for which the motive is less patently immoral and illegal, such as a congressperson’s selling of stock after receiving the confidential but security-aspecific pandemic briefing, to the hoarding and/or increasing of price of demanded supplies like hand sanitizer and N95 masks.
In response to such stories and anticipation of their inevitable multiplication, New Jersey federal and state law enforcement offices have announced the formation of a joint COVID-19 Fraud Task Force (“COVID-19 Task Force”) to protect the public from various forms of nefarious profiteering. According to a Department of Justice press release, the COVID-19 Task Force will “marshal the collective investigative power of federal and state law enforcement agencies” to “investigate and prosecute a wide range of misconduct arising from the COVID-19 pandemic.”
The press release notes that the COVID-19 Task Force—which will be co-headed by the U.S. Attorney for the District of New Jersey, the New Jersey Attorney General, and the Acting State Comptroller, and include a multitude of federal and state agencies and offices—will combat the following sorts of frauds and “misconduct”:
- Unlawful hoarding: The Department of Health and Human Services (HHS) issued a Notice pursuant to President Trump’s Executive Order 13910 and the Defense Production Act, which designated health and medical resources necessary to respond to the spread of COVID-19 that are scarce or the supply of which would be threatened by excessive accumulation. These designated materials are subject to the hoarding prevention measures authorized under the Executive Order and the Act. Individuals or businesses that violate the Act will be subject to prosecution.
- Price-gouging: Individuals and businesses may sell essential goods, like hand sanitizer, for significantly higher prices than in a non-emergency setting. New Jersey's price gouging law bans excessive price increases during a declared state of emergency and for 30 days after it ends. A price increase is considered excessive if the new price is more than 10 percent higher than the price charged during the normal course of business prior to the emergency. Price gouging violations are punishable by fines of up to $10,000 for the first violation and $20,000 for each subsequent violation.
- Treatment scams: Scammers are offering to sell fake cures, vaccines, and advice on unproven treatments for COVID-19.
- Supply scams: Scammers are creating fake shops, websites, social media accounts, and email addresses claiming to sell medical supplies currently in high demand, such as surgical masks. When consumers attempt to purchase supplies through these channels, fraudsters pocket the money and never provide the promised supplies.
- Provider scams: Scammers are also contacting people by phone and email, pretending to be doctors and hospitals that have treated a friend or relative for COVID-19, and demanding payment for that treatment.
- Charity scams: Scammers are soliciting donations for individuals, groups, and areas affected by COVID-19.
- Phishing scams: Scammers posing as national and global health authorities, including the World Health Organization (WHO) and the Centers for Disease Control and Prevention (CDC), are sending phishing emails designed to trick recipients into downloading malware or providing personal identifying and financial information.
- App scams: Scammers are also creating and manipulating mobile apps designed to track the spread of COVID-19 to insert malware that will compromise users’ devices and personal information.
- Investment scams: Scammers are offering online promotions on various platforms, including social media, claiming that the products or services of publicly traded companies can prevent, detect, or cure COVID-19, and that the stock of these companies will dramatically increase in value as a result. These promotions are often styled as “research reports,” make predictions of a specific “target price,” and relate to microcap stocks, or low-priced stocks issued by the smallest of companies with limited publicly available information.
No doubt, the above list is non-exhaustive and the COVID-19 Task Force will likewise pursue suspect COVID-19 related insurance claims, falsified applications for economic relief under the newly passed CARE Act, and overstatements of various losses and expenses on federal and state tax filings, to name only a few.
Individuals and business owners and operators must be wary that, even if they are not engaging or intending to engage in any of these sorts of schemes, that the mere appearance of profiteering from this time of chaos and, for some, personal crisis, however straightforward or honest its means, may invite citizen complaints and, with it, the scrutiny of both federal and state law enforcement. And when they do, the scopes of such investigations may not necessarily be limited to the various COVID-19 frauds and misconducts identified by Task Force, such that if other frauds or improprieties are discovered they may be referred to other law enforcement agencies and prosecutors who stand ready to prosecute. It is always better to be proactive than cross your fingers and live in fear of governmental intrusion and possible prosecution.
If you or someone you know may have reason to fear such investigations, regardless of whether such fears arise from or may be amplified by the ongoing COVID-19 pandemic, the attorneys at Arseneault & Fassett stand ready to help no matter the circumstances.