Reed Smith Client Alerts

The COVID-19 pandemic has had a tremendous impact on the global community and has resulted in a desperate demand for medical-related commodities, particularly personal protective equipment (PPE)1. PPE is needed by healthcare providers and others to protect themselves and the people around them from the spread of the COVID-19 virus. Unfortunately, the demand for PPE has created a perfect environment for criminals seeking to take advantage of would-be consumers through elaborate fraud schemes. These deceptive practices frequently involve the non-delivery of PPE after a buyer has remitted payment to the fraudsters. Such cases often involve criminals promising to deliver large quantities of PPE that they do not actually possess. This alert aims to provide useful tips for businesses and individuals seeking to protect against PPE fraud schemes.

Authors: Leigh T. Hansson Yves Melin Rizwan A. Qureshi Eric H. Sussman Liza V. Craig Nicholas M. Gibson Philippe Heeren Aryeh M. Younger

Disposable mask against Coronavirus 2019-nCoV droplet infection and an antibiotic syringe

Background

PPE shortages are leaving healthcare providers and frontline workers woefully ill-equipped to care for COVID-19 patients and to provide critical services to impacted populations. In an effort to boost stockpiles, governments and corporate industries worldwide are scrambling to locate and procure these critical items. As manufacturers and suppliers struggle to keep pace with the frenzied demand, buyers and end-users are finding that PPE prices have surged dramatically, delivery can take months or longer, and bad actors are taking advantage of the crisis, often selling commodities to the highest bidder at dramatically inflated prices.

According to the World Health Organization (WHO), roughly 89 million medical masks are needed each month because of the COVID-19 pandemic, while the number of examination gloves required internationally has increased by 76 million per month.2 The WHO estimated that the manufacturing of PPE must be increased by a minimum of 40% to keep up with current demand; it has also called for an increase in production incentives and the easing of export restrictions associated with PPE restrictions. It is clear that frontline workers across the globe have struggled – and likely will continue to struggle – with obtaining PPE during the COVID-19 pandemic.

Meanwhile, as the crisis continues to unfold, criminals are seeking to take advantage of the situation by targeting PPE buyers and sellers through elaborate fraud schemes that have been, unfortunately, very effective. The Federal Bureau of Investigation (FBI) has disclosed a number of recent incidents where state government agencies have fallen victim to PPE fraud schemes in which agencies have provided funds to fraudulent brokers and sellers prior to receiving the merchandise. The FBI claims that the perpetrators include both domestic and foreign entities.3 In many of the cases, by the time the purchasers became suspicious, much of their funds had already been transferred beyond the reach of U.S. law enforcement and were therefore unrecoverable.