A California man was arraigned in federal court on July 9, 2021, on an indictment charging him with defrauding victims who paid for COVID-related medical protective equipment that was never delivered, causing nearly $3 million in losses to victims. The man is charged with four counts of wire fraud and two counts of money laundering.
The indictment, that was returned by a federal grand jury, states that the man falsely represented that he had access to millions of boxes of medical-grade nitrile gloves through his California based company. During the pandemic this type of personal protective equipment (PPE) was in high demand and in short supply.
The man entered into contractual agreements with victims, whom he required to provide a money deposit to inspect the gloves before delivery. After he received the deposits, he allegedly instructed victims to travel to the Los Angeles area where he claimed the gloves were stored in a warehouse. The man and some of the employees from his privately owned company allegedly provided excuses as to why the gloves could neither be inspected nor delivered to the victims.
The nitrile gloves were never provided to the victims, and the man is alleged to have absconded with the deposit money totaling nearly $3 million. After the man and others obtained the victims’ wire deposits, they are believed to have used the funds to make lavish purchases for personal benefit.
If convicted of all the charges in the six-count indictment, the California man would face a statutory maximum sentence of 100 years in federal prison. The Federal Bureau of Investigation (FBI) investigated this case.
The Department of Justice (DOJ) is monitoring and investigating reports of COVID-19 fraud. Report counterfeit medical supplies and other types of COVID-19 fraud to the DOJ National Center for Disaster Fraud. The complaint form can be accessed here.
3M key strategies to lower your risk of accidentally purchasing counterfeit N95 products can be accessed here.
Compliance Perspective
Issue
It is critical that healthcare staff working on the frontline battling COVID-19 are provided with personal protective equipment (PPE) that gives them effective protection. The purchasing department must ensure that all PPE is purchased from a reputable company. Facilities must have an emergency plan in place should supplies of PPE become low or be depleted.
Discussion Points
- Review policies and procedures that guide the purchasing of PPE to ensure they stipulate that PPE will only be purchased from reputable companies. Update the policy as needed.
- Train purchasing department personnel so that they are able to identify and purchase from reputable suppliers of PPE. Train healthcare workers on steps that they should take if they suspect that PPE may be counterfeit or ineffective in anyway.
- Periodically audit the inventory of PPE to ensure that it fits properly and provides effective protection. Determine that all PPE and other essential supplies are only purchased from reputable companies and are of medical quality. Review the emergency plan for managing PPE inventory should the regular supply be interrupted.
