By Sharon LaFraniere and
…Federal, state and local law enforcement authorities are reporting an explosion of such scams as fraudsters move to capitalize on public panic over the fast-moving pandemic and the flood of federal money making its way to most Americans to help address the economic fallout.
“We are seeing fraud across the board, everything from low-tech to very sophisticated schemes,” said G. Zachary Terwilliger, the U.S. attorney for the Eastern District of Virginia. The pandemic has affected so many people in so many different ways, he said, that “it just allows the fraudsters to have their buffet, as it were, to prey upon vulnerable people.”
Seeking to stay ahead of the curve, the Justice Department has set up a task force to investigate price-gouging and prosecutors have been instructed to prioritize fraud cases. With more than $2 trillion in federal assistance pouring into the economy, the authorities are girding for both lone wolf operations and more complicated schemes akin to those that arose during the 2008 federal program to bail out financial institutions.
Other agencies have followed suit. The Food and Drug Administration has issued warning letters to more than 15 companies peddling unproven treatments or diagnostic tests. State attorneys general are fighting the same practices by issuing cease-and-desist orders.
The Environmental Protection Agency has threatened legal action against retailers that sell unregistered disinfectants and sanitizers that falsely claim to protect against the virus. And the Federal Trade Commission reported Tuesday that the number of coronavirus-related complaints it had received from consumers this year had doubled during the previous week, reaching more than 7,800.
“Scams follow the headlines, and that’s certainly the case with this,” said Monica Vaca, a consumer protection lawyer for the agency.
Last month, Dr. Alexander G. Salerno, an internist in East Orange, N.J., was desperately searching for personal protective equipment for his fellow medical workers. “It is like trying to find spare change in your couch,” he said.
His regular suppliers were out, but through similarly hard-pressed medical providers commiserating in a WhatsApp group chat, he was able to contact several sellers. A man who never revealed his name to Dr. Salerno — and who the authorities later said was operating out of an auto body shop — agreed to sell him 3,000 surgical masks and 2,800 sterile gowns for $12,000, a markup of about 700 percent. Dr. Salerno wired the money to a bank account.
When he went to pick up some of the supplies on March 18, he said, the man led him to a warehouse packed with enough medical equipment to outfit an entire hospital.
Inside, he saw pallet upon pallet of N95 protective masks, surgical gowns, Clorox wipes and hand sanitizers. “He had everything, right from the factory, certified real stuff,” Dr. Salerno said.
The doctor said he tried and failed to alert the state attorney general’s office. But the morning after a local television station aired a story about his experience, F.B.I. agents appeared at his office.
“We jumped all over it,” said Craig Carpenito, the U.S. attorney for the District of New Jersey who leads the task force from Newark. “It’s outrageous. If I was married to, or if I was a health care professional, I would be horrified right now that I can’t get the simple equipment I need for protection.”
The seller, Baruch Feldheim of Brooklyn, ran a company called “Solo Supplies” that had compiled a vast stockpile on the open market, including from a source in Canada, of 192,000 N95 masks, 598,000 pairs of surgical gloves and 130,000 other items like surgical masks, the authorities said.
Mr. Feldheim was arrested on Monday and charged with false statements and — because agents said he deliberately coughed in their direction and said he was sick with the virus — assaulting a federal officer. Asked why he was not charged with the crime of hoarding essential materials, authorities said that the investigation was continuing.
Using its authority under the Defense Production Act, the federal government bought Mr. Feldheim’s entire inventory — at standard prices — and shipped it to hard-pressed medical workers in New York and New Jersey.
“It’s just about the most un-American thing that I have encountered in my life,” Mr. Carpenito said. “People are out there looking to profit, despicably, from the greatest national crisis we have seen since World War II.”
The Newark case is one of a handful that federal prosecutors have brought over the past few weeks. In Austin, Texas, the F.B.I. shut down a website that promised consumers access to World Health Organization “vaccine kits” in exchange for a shipping charge of $4.95, payable by credit card. No vaccine for the virus exists.
In Georgia, F.B.I. agents arrested a 49-year-old man on charges of collecting kickbacks for Covid-19 tests and screenings for other respiratory illnesses in a scheme that aimed to submit $1.1 million in fraudulent Medicare claims. According to court documents, the man was upfront about his motives.
“Everybody has been chasing the Covid dollar bird,” he said in a telephone conversation, according to court papers. “While there are people going through what they are going through, you can either go bankrupt or you can prosper.”
That was apparently the view of another operator who promised a California union of nearly 100,000 health care workers that he could provide them 39 million N95 masks. But when health care providers like Kaiser Permanente sought to verify and inspect the man’s supply chain, he proved more and more elusive.
Last week, a federal prosecutor contacted the union, the Service Employees International Union-United Healthcare Workers West, for details about the seller. “As far as we know, no money changed hands,” said Steve Trossman, a spokesman for the union, which was trying to serve as an intermediary to hospitals. “The really bad thing was, the masks were desperately needed.”
In Southern California, agents arrested a 53-year-old, small-time actor for seeking investments in a nonexistent company that he claimed was just days away from marketing pills that would ward off the virus and injections that would cure Covid-19. The authorities said his YouTube and Instagram videos, in which he displayed a syringe of clear liquid or nondescript white pills, had been viewed more than two million times.
A self-described genius entrepreneur, the man claimed in a text to a cooperating witness that a Los Angeles patient stricken by Covid-19 rose from a sickbed and “walked out 51 hours after my injection,” the authorities said. He claimed he knew a doctor with White House ties who was on his way to President Trump’s Mar-a-Lago resort in Florida for an emergency order authorizing his drugs and promised a $300,000 investment in his company would yield a $30 million return.
Law enforcement officials are warning consumers to be especially wary of cyberscams, including sophisticated emails claiming to be from the Centers for Disease Control and Prevention, the Red Cross or other health organizations. One study suggested 3 percent of coronavirus-related domain names registered since January were malicious, while another 5 percent were suspicious. State attorneys general, like Letitia James of New York, have been warning companies that register domain names to be more vigilant.
Such frauds are only expected to multiply as the federal government doles out financial aid to individuals and businesses as part of the $2.2 trillion stimulus package.
Twelve years later, federal investigators are still pursuing bad actors who misused the $475 billion federal program intended to bail out banks and financial institutions after the subprime mortgage crisis in 2008. More than 400 people have been prosecuted, including 76 bankers who went to prison.