Principal Associate Deputy Attorney General Marshall Miller Delivers Remarks at the Global Investigations Review Annual Meeting
Remarks As Prepared For Delivery
Thank you Jim Boyle for that kind introduction. I am very pleased to join you virtually and would like to thank BBB National Programs for inviting me to speak at the NAD 2020 program. Programs like this facilitate productive dialogue that is good for the business community and ultimately for consumers.
Even in normal times, deceptive advertising has generally received close attention, but a global pandemic is not normal. So high standards of truth and accuracy in advertising are even more vital, as we collectively endure a public health situation the likes of which we have not experienced since 1918, when more than 675,000 lives were lost in the United States.
We have seen the current pandemic dramatically impact consumers across the country. Stay-at-home orders have pushed people online for more of their shopping needs. Travel restrictions and social distancing measures have upended consumer demand for many services. Demand for certain essentials has risen steeply, sometimes creating shortages, rationing, rising prices, and distribution chain challenges. The pandemic has added considerable financial and psychological stress to the lives of many consumers, including elderly consumers who often are the targets of unlawful schemes.
Picture this: with the pandemic spreading, you see an ad for a “Miracle Mineral Solution”. It is being offered by the “Genesis II Church of Health and Healing”. It promises to prevent, treat, and even cure COVID19. Even better, the Church has said that it can also help treat other serious diseases and disorders, including cancer, Alzheimer’s, autism, multiple sclerosis, and HIV/AIDS. Amazing. And fraudulent.
A father and three sons in Florida actually promoted this, and the so-called miracle solution was a chlorine dioxide bleach that is commonly used for industrial applications like waste water treatment and whitening textiles. The FDA had specifically warned against people drinking this type of product, saying that doing so can cause nausea, vomiting, severe dehydration, life-threatening low blood pressure, and acute liver failure. But these individuals apparently thought that claiming to be a church would legalize their operation and protect them from FDA regulation and the justice system. It didn’t. The Justice Department in April obtained civil orders to stop the distribution of this fake cure, and in July the Department also brought criminal charges against the four individuals.
The Department of Justice and our enforcement colleagues across government have seen a disconcerting increase in reports of false, misleading, or unfair commercial practices like this as bad actors use the pandemic to exploit American consumers. In particular, scammers have deployed an array of schemes, some sophisticated and others less so, touting products and services that purportedly prevent, cure, or treat COVID-19, but which don’t actually do so. So what I’d like to do today is explain how DOJ approached this set of problems, the different tools we have applied—criminal, civil, and other means—and what the results have been, as well as some thoughts about enforcement more generally.
I’ll start at the onset of the pandemic emergency, around March of this year. From the beginning, DOJ has had its sights focused on fraudsters who might intend to use the current emergency for their own illicit gain. We knew from past experiences with other disasters that fraud and predatory behavior by unscrupulous individuals would spike. The Attorney General directed the Department to mobilize quickly to safeguard the American public and businesses from coronavirus-related fraud and other illegal activity.
Following the Attorney General’s lead, I then issued a memorandum on March 18 to U.S. Attorney’s Offices across the country to emphasize the importance of continuing to protect the public, notwithstanding the operational challenges that the virus posed. I stressed that our personnel and agents should protect their own health but that we would not lose sight of our primary responsibility to protect others, including by arresting criminals who may otherwise have thought that the pandemic offered them safe harbor to commit crimes.
The next day I further instructed Department personnel to guide the public to direct coronavirus-related complaints to the National Center for Disaster Fraud, which as its name suggests is tasked with facilitating the detection, prevention, investigation, and prosecution of criminal conduct related to disasters. I also directed that DOJ utilize the FTC’s Sentinel database to share complaint information with other enforcement agencies. This database aggregates complaints from more than 35 nationwide databases, and this sharing of information assists investigators to map criminal patterns, deconflict complaints, and broadcast alerts. In addition, I directed U.S. Attorneys to appoint a Coronavirus Fraud Coordinator in each judicial district.
You can find all of these memos at www.usdoj.gov/coronavirus/DOJresponse.
Our U.S. Attorneys and their teams in all 94 districts across the country snapped into action immediately. Many established state-wide and regional task forces to ensure federal, state, and local law enforcement were coordinating closely. They proactively engaged their communities to warn about the heightened threat of consumer fraud and to encourage the public to report any schemes to law enforcement.
Some criminal typologies became apparent right away. In a March 24 memorandum to all DOJ lawyers, I listed many problems that the public had already started to report. Most prominently, we were seeing bad actors selling fake testing kits, cures, so-called “immunity” pills, and fake promises of personal protective equipment. We also saw that exploiters were using robocalls, social media, and other mechanisms to offer fake services like free coronavirus testing in order to obtain credit card numbers and personally identifiable information that they would then unlawfully use for their own gain.
In my memorandum, I also shared various legal authorities that our prosecutors had identified for potential consideration in cases that might involve these bad actors. They included the mail, wire, computer, and healthcare fraud statutes that are widely known, and also included perhaps less widely known but equally important statutes like the Food, Drug and Cosmetic Act, which prohibits, among other things, the marketing of misbranded or adulterated drugs.
Encouraging the public to report coronavirus-related criminal conduct has yielded real dividends. Since we initially directed consumer concerns to the National Center for Disaster Fraud, the Center has received more than 74,000 calls and emails. Those have been directed to the most appropriate law enforcement agency for further analysis. The FBI’s Internet Crime Complaint Center has also received more than 20,000 tips regarding suspicious coronavirus-related websites or social media postings. Hundreds of cases that federal law enforcement has been investigating over the past several months derived from these complaints, and many turned into the cases that we have charged.
Our objective has been to disrupt and take down these criminal schemes and to hold accountable those who bear responsibility. In pursuit of that goal, we use a variety of legal tools.
First and foremost, we have been promptly filing criminal charges against truly bad actors as soon as the evidence supports such action. To date, we have filed charges in approximately 110 COVID-19-related cases nationwide, with hundreds more under active investigation. We commenced our first criminal case on March 25, just 9 days after the Attorney General first instructed the Department to prioritize these matters. The FBI arrested a Southern California man who posted videos to his Instagram account claiming that he had created both an injection that would cure coronavirus infections and a pill that would prevent infection. The posts received well over a million views after only a few days. This individual is also alleged to have attempted to defraud victims by recruiting them to invest in the scheme. In June, he was indicted on 11 counts of wire fraud.
The Department of Justice has also brought cases under other legal grounds for criminal liability. For instance, in late May, we secured a guilty plea from a woman who was selling an unregistered pesticide, which she marketed as providing protection against coronavirus. The product itself was a device worn around the user’s neck and which purportedly contained chlorine dioxide. It had not been registered under the Federal Insecticide, Fungicide, and Rodenticide Act, which criminalizes the sale of substances intended for preventing, destroying, or mitigating any pests—viruses included--that are not registered with the EPA. This prosecution not only stopped this scheme in its tracks but also sent a clear message that all available laws whose language clearly applied would be deployed to stop fake schemes during the pandemic.
Another notable tool has been the anti-hoarding provision of the Defense Production Act. Back in March, the President declared it the policy of the United States to prevent the hoarding of health and medical resources essential to combatting the spread of COVID-19. Pursuant to a delegation of statutory authority, HHS Secretary Alex Azar designated 15 categories of health care medical resources as scarce. With that designation, hoarding or price-gouging in the sale of the designated scarce medical supplies like respirators, face masks, sanitizer, and other essential medical supplies became a federal misdemeanor. The Attorney General promptly created a task force at the Justice Department to identify, investigate, and prosecute violations of this anti-hoarding statute.
To date, that task force has filed 13 criminal complaints and has hundreds of open investigations about hoarding or price-gouging. The Hoarding & Price Gouging Task Force’s investigations also had the additional benefit of revealing serious frauds that the Department was then able to charge. For instance, in April, we investigated a Georgia man who attempted to secure an order from the Department of Veterans Affairs for 125 million respirator masks and other personal protective equipment at prices that would have resulted in a total sale of over $750 million. The individual represented that he could obtain millions of hard-to-find 3M respirator masks, which retailed for less than a dollar, and that he would sell them to the VA at nearly a 500% profit, contingent on the VA paying the purchase price upfront. The price-gouging investigation determined that the suspect’s statements were fraudulent, and he was arrested and charged with wire fraud. Similarly, just last week, the task force secured an indictment of a Thailand national for defrauding a New Jersey-based company that was seeking to purchase PPE. This individual is alleged to have intentionally misrepresented his ability to sell 3M N95 respirators, including by providing fake 3M documents to the buyer. After receiving nearly $1.5 million in advance payment for these masks, the defendant did not ship a single mask and ceased communicating with the victim. The grand jury’s indictment included nine counts of wire fraud.
The task force has also led the charge on combatting fraudulent sales of PPE that are counterfeit or defective. Over the summer, the task force received a growing number of tips of PPE sellers falsely representing that their mask inventory is “FDA approved,” when neither the masks nor their manufacturer was approved. In certain investigations, the task force has seen fabricated documents and packaging bearing an FDA logo to indicate the FDA’s approval, or fabricated labels purporting to establish a mask is manufactured by a reputable mask manufacturer like 3M.
We have been particularly concerned with counterfeit PPE that simply fails the tests that PPE need to pass to be used safely. The task force has been coordinating closely with FDA to address these cases. In May, the task force was working with the FDA to examine a shipment of respirator masks that a domestic PPE reseller had sold to a hospital system for a substantial profit. The PPE was being shipped directly from a manufacturer in China to its end buyer when we had FDA examine the masks. Testing showed that these KN-95 masks did not block 95% of particulate matter, but only 82%, making them ineffective for medical-grade protection against the spread of coronavirus. It was fortunate that this shipment did not get to the buyer for hospital uses for which it was not adequate.
There are a number of other examples of criminal prosecutions in the package of press releases we provided. But the 110 criminal prosecutions to date are not the only approach the Department has taken to curb coronavirus fraud, so let me turn now to the civil side of things.
Section 1345 of Title 18 of the United States Code permits the Justice Department to commence civil actions to enjoin certain frauds, and this statute has proven to be an efficient tool to disrupt some types of schemes and protect consumers while federal agents conduct criminal investigations.
To date, during the pandemic DOJ has filed 10 injunctive actions against coronavirus fraud schemes.
The first of these civil actions was filed in late March, when we sought to enjoin the operators of the fraudulent website “coronavirusmedicalkit.com”. The website claimed to offer consumers access to World Health Organization vaccine kits in exchange for a credit card payment of $4.95. As I am sure I do not need to tell you, there were no coronavirus vaccines in March 2020. The court issued a temporary restraining order requiring the registrar of the fraudulent website to immediately block public access to it, safeguarding consumers who may have been tempted to input their credit card information on that site.
In other cases, the Department secured injunctions against a Dallas health center that used Instagram to market ozone gas as a preventative and curative treatment for coronavirus, and against an individual purporting to be a Utah-based doctor who was selling a silver-ion solution, otherwise called “colloidal silver,” claiming it provided protection against coronavirus. It does not, and to the contrary it could be dangerous. After a court enjoined this scheme in April, DOJ prosecutors and federal law enforcement continued a criminal investigation into the matter. Eventually, the Justice Department indicted the individual behind it, alleging that he fraudulently presented himself as a medical doctor and made false claims about the efficacy of ingesting sliver-based products.
In another case we brought just last month, the Department secured a temporary restraining order against three residents of Vietnam who are alleged to have engaged in a wire fraud scheme involving the operation of more than 300 websites that marketed sanitizer and PPE to consumers across the country. Thousands of Americans hailing from nearly every state purchased items from these websites, but the goods never arrived. These individuals facilitated their scheme by setting up hundreds of email and bank accounts using fabricated identities to hide from their victims and law enforcement. They also listed customer service contact information from unaffiliated businesses on their websites, which resulted in these unaffiliated businesses being inundated by customer complaints. The civil restraining order required that these fraudulent websites be immediately taken down while law enforcement continues to investigate.
In addition to these types of criminal and civil actions, another method that has proven efficient at disrupting unlawful online schemes has been to engage with the private sector directly, including internet domain providers and registrars. As I mentioned earlier, the FBI’s Internet Crime Complaint Center has received and reviewed thousands of complaints about coronavirus-related scam websites marketing fake vaccines and cures, fraudulent charities, and other bogus goods and services. We have referred thousands of these fraudulent websites to the private-sector companies that manage and host those websites, so they may review whether these websites violate their terms of service. Based on these reviews to date, we estimate that hundreds of malicious or fraudulent websites have been taken down, and much more quickly and with fewer law enforcement resources than would be required if we instead relied solely on criminal or civil actions to disrupt these schemes.
Our engagement with domain registrars and hosting services has encouraged other positive developments. Many have established teams to review their domains for coronavirus-related fraud and other malicious activity, putting them in the position to take appropriate action against fraudulent websites on their own.
Our engagement efforts in this regard also include working with cybersecurity researchers who are making important contributions by creating sophisticated tools to spot fraudulent or malicious websites out there on the web. We have also worked to provide training and technical assistance in other countries that face similar challenges.
As all these examples demonstrate, the Justice Department’s response to coronavirus-related fraud has been multifaceted. We have worked to apply every proper authority and resource at our disposal to tackle this problem. We have done that successfully so far, and we plan to continue to do so.
And let me add that it is good to see BBB National Programs playing a role as well. I understand that the National Advertising Division and the Direct Selling Self-Regulatory Council have, as of October 1, addressed the marketing of 97 coronavirus-related products or services challenged as false or misleading. 82 of those matters were resolved after the advertiser agreed to discontinue the challenged advertising, and 3 were referred to the FTC or FDA for investigation. This is valuable work, as it fosters trust, innovation, and competition in the marketplace, which may be more critical now than ever. It also creates a better experience for consumers, many of whom could use all the help they can get. And it bolsters wider law enforcement and regulatory efforts.
What about reputable companies who have products that might be helpful during the pandemic, though they are not preventions or cures? To state the obvious, they should take care to say accurate things. That is where good legal counsel can play a very constructive role.
Now, having talked about the different tools to address dishonest efforts during the pandemic, let me take a step back and offer some additional perspectives about how we think about this particular set of problems. The Justice Department’s perspective has been, and will continue to be, that charging decisions must take into account the larger context of the public health crisis. The regulatory landscape has evolved over the past seven months, especially with respect to medical treatments and supplies, as regulators and the private sector strive to find solutions in the safest and swiftest way possible. That will undoubtedly remain the case as we move forward. The Administration has approached regulatory matters with an appropriate degree of flexibility to bolster our collective public health efforts, and similarly, the Justice Department has approached its duties in a way that supports the broader goals of the public health response.
Said simply, the decisions we make to open investigations or to bring charges are intended to help the pandemic response, not hinder it. DOJ has been implementing this policy by focusing on rooting out true scams and frauds to protect the public rather than prosecuting good-faith minor missteps.
We also aim to help consumers to remain vigilant and be on the lookout themselves for fraudulent goods. If something seems too good to be true, it usually is, and it is always worth a little extra checking.
Finally, I’d like to touch on one other aspect of the pandemic, which is the relief funds and loans that became available under the CARES Act. Once that legislation passed at the end of last March, the Justice Department expanded its coronavirus-related fraud efforts to help protect the integrity of those federal relief funds. One major program was the Paycheck Protection Program, which provides forgivable loans to small businesses to ensure that they can meet payroll and pay other business-related expenses. As of the August 8 PPP loan application deadline, over 5.2 million loan applications had been approved, lending over $525 billion. Unfortunately, we received numerous reports that fraudsters have been diverting paycheck protection funds by submitting false applications.
Here again, the Department has taken swift action to uncover fraud and thwart such schemes, having already charged 65 people with defrauding this relief program. These individuals collectively have stolen or attempted to steal nearly $227 million in PPP loans in amounts as small as $30,000 and as large as $24 million.
And some of these frauds were truly brazen. In a case charged just last week, a North Carolina man is alleged to have applied for $6 million in loans using sham companies named after characters from the show “Game of Thrones.” In other cases, alleged cheaters have used these relief funds to buy exotic cars and diamond jewelry. In late July in Miami, for example, we arrested and charged a man who used over $300,000 of a PPP loan to buy a Lamborghini. In August, we arrested a Texas man who spent PPP loan proceeds not only on a Lamborghini but also a Ford F-350 pickup truck, a Rolex watch, real estate, and several trips to nightclubs and other clubs. These are sad reminders that even during a pandemic there are people who are not looking out for the common good.
Hopefully this overview gives you a fairly broad sense of how the Department of Justice has answered the challenge that coronavirus-related fraud has presented. Today, we have hundreds of active investigations ongoing and are closely coordinating with investigative agencies across the federal government. Coronavirus-related wrongdoing will continue to be a DOJ priority for the foreseeable future.
Let me wrap up with the English writer Samuel Johnson’s observation that “[w]hoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that confidence which constitutes not only the ease but the existence of society.” Each fraud victimizes all of us, not just the particular target of the fraudster’s scheme. That is why this work is fundamental to the Justice Department’s mission of protecting Americans and promoting the rule of law. So I appreciate the role that everyone participating today can play in helping ensure that Americans are not exploited during the pandemic. Combatting fraud ensures that our marketplaces remain viable and accessible to reputable businesses that benefit and engender the trust of the American consumer.
Thank you for this opportunity to share these observations today.