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COVID Frauds of the Week: Misrepresented Mask Inventories and Medicare Fraud

Posted  May 1, 2020

Amid COVID-19-induced fear and hardship, fraud is on the rise. Already, the FTC has received over 18,000 reports of COVID-19 related fraud. In response, the SEC, CFTC, and other regulators announced they are on the lookout for pandemic-related fraud, and the DOJ warned would-be wrongdoers that it will not tolerate profiting off of public panic.

This week, we focus on three enforcement actions brought by the government – including, notably, an action brought by the SEC.  In each case, the defendants allegedly lied about their inventory of N95 respiratory masks to defraud customers and investors.

  • Rodney L. Stevenson II was criminally charged for using his company, EM General, to sell N95 masks he didn’t actually have. EM General’s website falsely claimed it had N95 masks “in stock” and sold them to customers for up to $40 per mask. Stevenson also invented several fake employees to make his company appear legitimate and used stock photos on the company website to represent the “management staff.”
  • Donald Allen and Manuel Revolorio were also charged for attempting to sell customers N95 masks they did not have. Allen and Revolorio falsely claimed that their company, International Commerce and Investment Group, had been supplying PPE to healthcare providers for over five years and had access to millions of face masks. They also used photos of someone else’s masks and sealed empty boxes to misrepresent their mask inventory. As part of their scheme, Allen and Revolorio tried to pressure a potential customer to wire $4 million for masks.
  • The SEC announced charges against Praxsyn Corp. and its CEO Frank J. Brady, for allegedly issuing false press releases about Praxsyn’s ability to procure and sell millions of N95 masks. In one press release, Praxsyn claimed it was negotiating the sale of millions of N95 masks and was working to deliver millions more masks. Other press releases claimed Praxsyn had created a direct pipeline of masks from suppliers and manufacturers, and was accepting minimum orders of 100,000 masks. After regulatory inquiries, Praxsyn came clean that it never had any masks to sell. The SEC’s complaint charges Praxsyn and Brady with violating antifraud provisions of the federal securities laws.

The Praxsyn action illustrates the broad potential impact of COVID-19 fraud.  Misrepresentations about mask inventories can effect not just potential customers, but also the financial markets, as fraudulent PPE marketers seek investors who believe there is money to be made in this rapidly expanding sector.  Individuals with knowledge of securities fraud can report to the SEC Whistleblower Program, and may be eligible to receive a share of any recovery by the government.

Meanwhile, a Detroit-area doctor, Charles Mok, was charged with criminal Medicare fraud for causing the submission of claims to Medicare for services that were never rendered or were medically unnecessary.  Mok claimed that injections of high doses of vitamin C would help prevent COVID-19 in healthy patients and reduce the severity of the disease in sick patients. Not only is there no FDA-approved vaccine or treatment for COVID-19, but Mok’s clinic did not follow proper COVID-19 isolation protocols, meaning that healthy patients were exposed to patients with COVID-19 on numerous occasions.  U.S. Attorney Matthew Schneider emphasized the government’s commitment to prosecuting these and other COVID-19 related frauds, emphasizing that the government was “committed to prosecuting any medical professional who attempts to use the Covid-19 crisis to defraud patients or insurers.”  False claims to Medicare for unapproved treatments or medically unnecessary services can also give rise to civil liability under the False Claims Act.

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Tagged in: Catch of the Week, COVID-19, Healthcare Fraud, Medicare, SEC Whistleblower Reward Program, Securities Fraud,