Introduction 

Fraudsters and criminals have wasted no time capitalizing on the public fear and sentiment of the novel coronavirus pandemic (“COVID-19”). Common fraudulent schemes include fake cures, free testing materials in exchange for personal information, billing frauds, coding frauds, loan frauds, and other testing frauds. 

This has caused a direct increase in federal scrutiny as well as multiple legislative actions such as paid-leave guarantees and the establishment of the Paycheck Protection Program (“PPP”). Thus, the COVID-19 pandemic has put all companies in every industry sector at risk of a federal investigation. 

In addition to understanding COVID-19-related frauds and their warning signs, it is also important to be aware of the latest federal responses. As explained by fraud defense attorneys, this article expands upon some of these considerations.

COVID-19 Testing Frauds 

COVID-19 testing frauds are fraudulent scams or schemes involving testing supplies, testing services, test results, etc. These types of frauds can be civil or criminal at the federal level. Civil frauds or civil offenses do not involve the intent to defraud someone. 

Despite this, there are still offenses that individuals and companies can be subject to for unintentionally defrauding someone. Criminal frauds or criminal offenses require the intent to defraud. This “intent” requirement can be explicit, inferred, or imputed with actual or constructive evidence. 

Because continuous testing for COVID-19 for many individuals is very important, federal authorities have found it necessary to scrutinize this process as well as the suppliers of COVID-19 equipment and the labs that offer testing services. 

Laboratories have faced a particularly high level of scrutiny from federal agencies due to their intricate involvement in COVID-19 diagnostic, testing, and processing services. Certain mistakes can be deemed fraud and lead to intense federal investigations and multiple fines and penalties for those labs and individuals involved.

Examples of COVID-19 Testing Frauds

Some examples of testing frauds relating to COVID-19 include the following:

• Collecting payments from the government for tests and not providing the results;

• Fraudulently billing federal government benefit programs for COVID-19 testing;

• Making false statements about the results of COVID-19 tests;

• Making false statements about the authorization of COVID-19 tests;

• Making false statements in order to win contracts for COVID-19 testing kits;

• Collecting payments for COVID-19 testing kits that are never delivered;

• Using COVID-19 tests from abroad that are not authorized to be used as tests within the United States; and

• Selling fraudulent testing kits.

“The COVID-19 pandemic has created many legal risks and obligations for companies that are already struggling to stay afloat. In addition to new laws and compliance obligations, the risk of an impending federal investigation for COVID-19 testing fraud is a real possibility. All companies—especially healthcare entities and laboratories—face this risk and need to therefore ensure that their interests, rights, and reputation are properly safeguarded. Retaining an attorney experienced COVID-19 testing fraud and the federal process is your first and best defense.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

Federal Agency Warnings and Guidelines Regarding COVID-19 Frauds 

Many U.S. federal agencies have released warnings, guidelines, and other alerts that aim to inform the public about what to expect and how to prepare for various COVID-19-related consequences. Below are a few examples:

• The Food and Drug Administration (“FDA”): The FDA’s focus remains on increasing the availability of tests to the public, vaccines, and devices to help fight the pandemic such as ventilators and personal protective equipment. In addition, the FDA is also monitoring the human and animal food supply as well as taking prompt action in response to fraudulent COVID-19 products.

• The Federal Trade Commission (“FTC”): The FTC’s consumer advice focuses on informing consumers of what to watch out for and how to spot potential frauds. For instance, if anyone charges you for help signing up for the vaccine, it is a fraud; COVID-19 vaccines are free. Also, if someone offers you a COVID-19 vaccine for a fee, it is a fraud; only state and federal approved locations offer the COVID-19 vaccine.

• The Securities and Exchange Commission (“SEC”): The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert warning investors about investment frauds such as claims that a certain product or service will stop the virus. The SEC is focused on examining social media content and Internet promotions that claim that a certain product of a company will prevent, detect, or cure the virus and that the stock of these companies will surge in price. These frauds are displayed as “research reports” but are nevertheless fraudulent schemes.

• The Department of Justice (“DOJ”): The DOJ has informed the public that it is committed to investigating, detecting, and prosecuting conduct relating to COVID-19. It warns that criminals and fraudsters will likely use new tools and methods to perpetrate their crimes around the world. The DOJ has a special “National Center for Disaster Fraud Hotline” where individuals can report the nature of a suspected fraud/scam as well as a complaint form for individuals to fill out.

Recent DOJ Investigation and Charges for COVID-19 Fraud

The Department of Justice is one of the leading federal agencies that has been the leader in investigating and prosecuting COVID-19-related testing frauds. The DOJ recently brought charges against fourteen people for an alleged COVID-19-related healthcare fraud scheme that led to over $143 million in false billings. 

The charges are against a telemedicine company executive, marketers of the business, medical business owners, and a physician. Specifically, on May 26, 2021, the DOJ brought criminal charges against these individuals in a total of seven federal districts across the nation. 

The defendants in this case exploited the pandemic by offering COVID-19 tests to Medicare beneficiaries, drive-through testing sites, and medical offices in order to induce the recipients to provide their personal identifying information (and saliva and a blood sample). The defendants misused the information they received from the recipients and submitted unrelated, medically unnecessary claims to Medicare for very expensive tests.

Some cases involved COVID-19 tests that were not provided to the beneficiaries or that were not reliable. The proceeds from this fraudulent scheme were laundered through shell corporations and the defendants used these proceeds to purchase luxury real estate and exotic automobiles. 

In other cases, the defendants allegedly exploited CMS policies that provided increased access to care by submitting false and fraudulent claims to Medicare for telemedicine visits that never occurred. Medical professionals allegedly offered and paid bribes in exchange for their referral of medically unnecessary testing. The DOJ’s Fraud Section is committed to prosecuting this and other cases that capitalize on the pandemic in order to fraudulently gain a financial benefit.

Conclusion 

COVID-19 has created a host of new legal and regulatory requirements as well as compliance obligations for companies and individuals. Failure to follow these regulations or conform to these compliance obligations could lead to fraud allegations.

Several federal agencies including the SEC and DOJ have been both eager and successful at investigating and prosecuting COVID-19 testing frauds.

Companies that need to be especially attentive to federal laws and compliance obligations in the midst of the virus include laboratories and other testing service companies. These entities run a high risk of a federal investigation because of the nature of their business, which entails individual testing, diagnostic, and processing services.