Yesterday, federal prosecutors in the District of New Jersey charged a Georgia man for his alleged role in a conspiracy to defraud federally funded and private health care benefit programs by submitting fraudulent testing claims for COVID-19 and genetic cancer screenings. It follows a criminal complaint announced last week by the U.S. Attorney’s Office for the Central District of California against a Southern California man on a federal fraud charge alleging he solicited investments in a company he claimed would be used to market pills that would prevent coronavirus infections and an injectable cure for those already suffering from COVID-19. These cases are among the first criminal actions in the ongoing public health crisis and come on the heels of the first civil enforcement action by the Department of Justice against a COVID-19 related fraud.
Federal prosecutors in New Jersey allege that an individual was already engaged in a kickback scheme when the COVID-19 pandemic reached the United States. But as the COVID-19 crisis escalated, prosecutors allege the defendant agreed with others to be paid kickbacks on a per-test basis for COVID-19 tests, provided that those tests were bundled with a much more expensive respiratory pathogen panel (RPP) test, which does not identify or treat COVID-19.
In California, federal prosecutors charged an individual with one count of attempted wire fraud. The defendant claimed to have personally developed a “patent-pending cure” and a treatment that prevents coronavirus infection, even though public health officials and medical experts have warned that there is no specific antiviral treatment for COVID-19 and that we are months away from any potential vaccine capable of preventing the infection. Prosecutors say the defendant took to social media to advertise the treatments, including Facebook, YouTube, and his Instagram account where he had 2.4 million followers.
The criminal actions unveiled by federal prosecutors in the last few days show that the Department of Justice is monitoring the public health crisis very closely and moving swiftly to expose and prosecute fraud and misconduct. These criminal complaints are the first of their kind in the wake of a memo from U.S. Attorney General William Barr to the nation’s federal prosecutors on March 16, 2020 urging them to “remain vigilant in detecting, investigating and prosecuting wrongdoing related to the crisis.”
The global pandemic has prompted law enforcement and regulatory agencies in every industry to double down on their policing efforts. Last week the co-heads of the Securities and Exchange Commission’s Enforcement Division issued a stern warning against trading on nonpublic information related to the COVID-19 pandemic. In coordination with that response, FINRA released a notice to members reminding them to bolster their business continuity plans and seek extensions of time, if needed, for their regulatory filings or responses to FINRA inquiries and investigations.
The extraordinary events of the last few weeks have resulted in unprecedented market turmoil. The public health crisis will continue to present enforcement and regulatory challenges, but law enforcement agencies and regulatory bodies have already shown us that they are keeping pace with this crisis.