Wednesday, June 10, 2020

Attorney General James Sues Purported PPE Broker for Repeated Fraud During Coronavirus Pandemic


IMPACT Medical & Surgical Solutions Attempted to Defraud New York State,
Hospitals, and Health Care Systems Across the Country

AG James Seeks Permanent Ban on Deceptive Conduct,
Restitution for All Customers, and Return of Any Profits
  New York Attorney General Letitia James filed a lawsuit against a Buffalo-area broker of personal protective equipment (PPE) and other medical supplies for repeated and widespread fraud during the coronavirus disease 2019 (COVID-19) public health crisis. The lawsuit charges Frank Borgese and his company — IMPACT Medical & Surgical Solutions (IMPACT Medical) — with fraudulently soliciting the State of New York, as well as hospitals and health care systems across the country with fake offers of critically-needed PPE, including 3M N95 respirator masks. Borgese and IMPACT Medical took advantage of the desperate need for PPE by attempting to charge governments and health care systems exorbitant prices for fake items or products they could never deliver, potentially giving Borgese and his company the opportunity to make millions in sales. 
“We won’t allow anyone to take advantage of New York State during this unprecedented moment,” said Attorney General James. “As frontline health care workers desperately searched for the proper PPE during the coronavirus pandemic, Frank Borgese and IMPACT Medical tried to profit off New Yorkers’ dire needs by selling lies. Not only did he attempt to sell products at exorbitant rates, but he did so without the ability to deliver on these attempted sales. This lawsuit should serve as a warning that we will hold anyone who tries to unlawfully profit off the coronavirus accountable.”
“The COVID-19 pandemic forced New York State to mobilize unprecedented resources and innovative solutions to provide PPE and other supplies to essential workers in need, and it’s unacceptable that some companies have tried to exploit that situation for their own financial gain,” Governor Andrew Cuomo said. “I applaud the Attorney General for taking decisive action to protect New York’s essential workers from IMPACT Medical’s half-baked attempt to sell non-existent PPE.”
As detailed in Attorney General James’ lawsuit — filed in New York County State Supreme Court — between March 2020 and May 2020, Borgese and IMPACT Medical attempted to sell 3M-branded N95 respirator masks — among other items — to the State of New York, as well as to hospitals and health care systems across the country, including Amedisys, Baystate Health, Blessing Health, the Cleveland Clinic, Intermountain Healthcare, and Northern Light Health.
In some cases, Borgese and IMPACT Medical obtained purchase orders and substantial up-front payments worth millions of dollars from hospitals and health care systems by charging prices more than four times 3M’s list prices, but still failed to deliver the promised PPE and were subsequently required to make large refunds. While promising extremely quick delivery and access to large quantities of respirator masks, Borgese and IMPACT Medical never possessed or had access to any 3M-branded N95 respirator masks, and have admitted that they never delivered a single one. And while hospitals and health care systems were ultimately refunded payments made, they were still harmed by needing to devote valuable time and precious resources into vetting illegitimate suppliers, and may have temporarily lacked the necessary funds needed to purchase critically-needed PPE from reputable suppliers.
The lawsuit lays out the fraudulent and deceptive business practices Borgese and IMPACT Medical are accused of, including:
  • Falsely claiming possession of, or immediate access to, a significant quantity of 3M-branded N95 respirator masks located in the United States and falsely claiming those respirator masks were “ready to ship,”
  • Misrepresenting their ability to obtain authentic 3M-branded N95 respirators masks through legitimate channels,
  • Quoting quick delivery times for 3M-branded N95 respirators masks that they did not possess and could not obtain,
  • Depicting a counterfeit 3M-branded N95 respirator mask on their price sheets,
  • Providing an altered and deceptive test report, and
  • Providing a purchaser with a fictitious reference who would then provide false information about Borgese and IMPACT Medical’s capabilities and past sales.
The Office of the Attorney General (OAG) conducted an undercover investigation during which Borgese and IMPACT Medical made additional fraudulent and deceptive representations about KN95 respirator masks (a separate mask than the N95) they were also purporting to sell, and provided a fictitious reference, who provided false information about Borgese and IMPACT Medical’s capabilities and past sales.
The lawsuit seeks restitution for affected customers and disgorgement of their profits from their fraudulent practices.
The OAG thanks the Office of Governor Andrew Cuomo and the New York State Office of General Services for their assistance with this investigation.
Attorney General James’ lawsuit against Borgese and IMPACT Medical is part of a broader investigation by the OAG into fraudulent and deceptive solicitations by sellers of PPE seeking to take advantage of the supply-chain disruptions and increased demand caused by the COVID-19 pandemic. The OAG has been working with multiple agencies within New York State and with local agencies throughout the state, as well as with private hospitals and health care systems and with large manufacturers of PPE to identify and investigate those who are engaging in fraudulent and deceptive practices to sell significant quantities of desperately-needed masks, gowns, and other coronavirus-related supplies. The OAG thanks the 3M Company, Amedisys, Baystate Health, Blessing Health, the Cleveland Clinic, Intermountain Healthcare, and Northern Light Health for their assistance in this investigation.
Attorney General James has also issued guidance to prospective purchasers of PPE on how to avoid scammers: “Tips to Avoid COVID-19 Procurement Fraud.” Any municipalities, hospitals, health care systems, or other large-scale purchasers of PPE and other coronavirus-related supplies that believe they have been targeted by someone charging excessive prices or using fraudulent or deceptive practices to sell COVID-19 related supplies can report it to the OAG by calling (800) 771-7755, or by forwarding any suspicious email solicitations to the OAG.
Separately, but related to her efforts to stop those seeking to illegally profit off the COVID-19 crisis and take advantage of New Yorkers, Attorney General James has been on the frontlines of fighting price gouging and safeguarding consumers’ wallets since the pandemic began in March. In response to more than 7,000 complaints of excessive prices related to PPE, food, and other essential consumer items that have sprung up throughout New York State in the last three months, Attorney General James has issued more than 1,565 cease-and-desist orders to businesses that stood accused of violating the state’s price gouging statute.
This past weekend, new legislation was signed into law substantially strengthening Attorney General James’ ability to go after those seeking to price gouge during an emergency. The new law expands protections against price gouging beyond just consumer goods to include any products or services that are vital or necessary to the health, safety, and welfare of consumers or the general public — extending protection against price gouging beyond only consumers to small businesses, hospitals, and other health care providers, and even the State of New York, as they purchase products or services for the benefit of the public. The law will also protect a broader scope of products and services — including medical supplies and equipment, such as ventilators — which are critically needed during the current public health crisis.

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