A New York man became the first person federally charged with hoarding and reselling tons of “COVID-19 essentials” at a huge markup, according to a U.S. Department of Justice press release.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS) and Craig Carpenito, head of the Department of Justice’s nationwide COVID-19 Hoarding and Price Gouging Task Force announced the criminal charges and filed the complaint against Amardeep Singh of Long Island, New York, on April 24, 2020.
“On April 14, 2020, Postal Inspectors executed a search warrant at Singh’s retail store and a consensual search of the warehouse and seized 23 pallets containing more than 100,000 face masks, 10,000 surgical gowns, nearly 2,500 full-body isolation suits and more than 500,000 pairs of disposable gloves,” the DOJ press release said.
Singh had allegedly been hoarding several tons of supplies including digital thermometers, hand sanitizer, face masks and surgical gowns between March 25 and April 8, 2020.
Then he began selling N-95 respirators, several types of personal protective equipment (PPE) and clinical-grade sanitizing and disinfecting products to the public through his retail store at inflated prices — including masks he bought for $0.07 cents and sold for $1.00 each, a markup of about 1,328 percent.
“The Coronavirus has created challenging times for all Americans, especially those living in the New York metropolitan area,” USPIS Inspector-in-Charge Bartlett said in a press release. “Unfortunately, Mr. Singh allegedly chose to use this opportunity to make money by hoarding and price gouging PPE. The conduct charged in the complaint is reprehensible and against our most fundamental American values.”
Signh’s attorney Bradley Gerstman told Time magazine that the charges were mostly fiction.
“If selling PPE goods is improper or criminal, then a lot of people need to go to jail,” Gerstman said.
If convicted, Signh will face up to one year in prison.
Singh was charged under Defense Production Act. The law makes it illegal to acquire essential medical supplies and devices designated by the Secretary of Health and Human Services (HHS) as scarce and hoard or sell them at inflated prices, the DOJ complaint said.
Price gouging in hard-hit states like New York can be severe.
For example, Law.com reported that masks bought by the state of New York were 15 times their normal price. The state also paid $20 for gloves that normally cost less than a nickel. Infusion pumps it bought were twice their normal rate, and the state paid $248,000 for X-ray machines normally priced at $30,000 to $80,000.
U.S. Attorney General William Barr has said the DOJ will be aggressively going after coronavirus profiteers.
“DOJ is prioritizing the detection, investigation, and prosecution of fraudulent activity and price gouging related to medical resources needed to respond to the coronavirus,” the White House said in a statement on March 23, 2020.
While the Defense Production Act applies to supplies HHS deems essential, price gouging of consumer goods through online retailers such as Amazon, eBay and Craigslist has also increased.
One report by United States Public Interest Research Group (U.S. PIRG) found price spikes of at least 50 percent compared to the average price on Amazon. Surgical masks saw prices with an average that was 166 percent higher.
Colorado congressman Joe Neguse cited an extreme example of price gouging in a March 18, 2020 letter urging the DOJ to stop price gouging on consumer goods.
“Denver’s Craigslist page listed single rolls of toilet paper for $15, small bottles of hand sanitizer for $20 and a pack of 20 face masks for $100,” the letter said.
A new bill called the COVID-19 Price Gouging Prevention Act proposed by Reps. Joe Neguse and Ted Lieu aims to crack down on price gouging of consumer goods or services.
The congressmen formally introduced their legislation on April 3, 2020. According to a section-by-section summary of the COVID-19 Price Gouging Prevention Act , a “consumer good or service” means “a good or service sold primarily for personal or household purposes and includes, but is not limited to, food, beverages, water, ice, chemicals, personal hygiene products, personal protective equipment, respirators, medical supplies, cleaning supplies, sanitizers, healthcare services, delivery services, or cleaning services.”
The Price Gouging Prevention Act gives the Federal Trade Commission the power to enforce a ban on price increases deemed gouging — defined as any price increase above 10 percent. It also gives states flexibility to enforce federal law as well as enforce state laws related to price gouging.
It’s not just government entities cracking down on COVID-19 price gouging.
On April 10, 2020, 3M — the nation’s largest producer of N95 masks — filed lawsuits against Performance Supply LLC and Rx2Live LLC for price gouging.
The claim against Performance Supply LLC alleges the company used “famous ‘3M’ trademarks to perpetrate a false and deceptive price-gouging scheme on unwitting consumers, including agencies of government, during the global COVID-19 pandemic.”
The lawsuit also alleges Performance Supply offered to sell 3M brand respirators to New York City’s Procurement Office at 500 to 600 percent above 3M’s listed price.
“3M does not – and will not – tolerate individuals or entities deceptively trading off the fame and goodwill of the 3M brand and marks for personal gain. This is particularly true against those who seek to exploit the surge in demand for 3M-brand products during the COVID-19 global pandemic,” the complaint said.
3M’s second lawsuit against Rx2Live LLC claims the company wanted to sell millions of 3M-branded N95 masks to Community Medical Centers Inc. in California. An Rx2Live employee purportedly told CMC that it had to buy 10 million masks for the price of $52 million. 3M’s price for the same number of masks is $12.7 million, Law 360 reported.
Both lawsuits accuse defendant companies of misusing the “3M” trademark and 3M’s reputation to price gouge.
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