The COVID-19 pandemic has created unprecedented demand for medical equipment and basic household necessities, which some businesses and individuals are exploiting for financial gain. On March 24, Attorney General William Barr announced that the Department of Justice (DOJ) has launched a national task force to address COVID-19-related market manipulation, hoarding, and price gouging. The COVID-19 Hoarding and Price Gouging Task Force (the Task Force) is a combined effort involving attorneys from Main Justice and participants from U.S. Attorney's Offices in every federal District. Many state Attorneys General have also formed COVID-19 task forces to address financial crimes relating to procurement in their states. These U.S. enforcement agencies are joined by counterparts across the globe, including the UK Competition and Markets Authority, in creating COVID-19-focused enforcement initiatives to combat financial crime relating to the pandemic.
Attorney General Barr's announcement came just eight days after the Attorney General announced that DOJ had already received allegations of a wide array of fraudulent and otherwise illegal schemes in exploiting the COVID-19 national emergency. DOJ issued a directive for all U.S. Attorney's Offices to designate a coronavirus coordinator to serve as legal counsel for the district on matters relating to COVID-19, to prosecute COVID-19-related fraud cases, and to conduct public outreach and awareness activities relating to COVID-19. In many districts, the COVID-19 Hoarding and Price Gouging Task Force has combined with COVID-19 anti-fraud efforts to focus federal, state, and local law enforcement efforts on any and all potential criminal activity associated with the COVID-19 pandemic – whether allegations relating to potential fraud with regard to receiving funding under the CARES Act or related federal bail-out funds, excess pricing, hoarding, or outright fraudulent conduct.
To combat hoarding and price gouging for critical supplies, President Trump issued an executive order that prohibits hoarding of designated items, and which criminalizes the accumulation of designated items in excess of reasonable personal need, or for the purpose of selling the items for exorbitant prices. The list of designated items, as identified by Health and Human Services, includes masks, ventilators, medical gowns, gloves, and other PPE. In addition to the typical federal statutory tools available to DOJ, the executive order makes violations punishable by fines of up to $10,000 and imprisonment for up to one year. The majority of states have also enacted price gouging statutes, and a number of state governors (including in some states that do not have explicit price-gouging statutes) have issued executive orders specifically prohibiting price gouging in response to the COVID-19 pandemic. These state laws vary in scope and cover a gamut of products, conduct, and penalties.
Investigations of alleged COVID-19-related fraud, hoarding, and price-gouging have the potential to be politically-charged and high-profile during this national crisis. Even businesses with no intention to raise prices excessively or to exploit the pandemic could be at risk of an investigation and reputation-damaging media coverage based on an allegation by a competitor or a disgruntled furloughed employee.
Venable's Investigations and White Collar Defense team can advise you about conducting your business in compliance with state and federal fraud and price-gouging/hoarding laws during this unprecedented time – now is the time to prepare by reviewing practices and procedures in light of applicable laws and the extraordinary circumstances. And if a civil or criminal investigation arises, we have years of experience representing business and individuals at every stage of government investigations, including responding to civil investigative demands, grand jury subpoenas, search warrants, and other government tools, as well as representing individuals and companies through the full panoply of enforcement actions.