Sunday, August 16, 2020

Two Ocean County Companies Agree to Resolve Price-Gouging Charges Involving 11 Million Items of Scarce Personal Protective Equipment by Selling Them at Cost

 

  Two Ocean County, New Jersey, import companies have agreed to resolve violations of the Defense Production Act (DPA) of 1950 for price-gouging customers of personal protective equipment (PPE) during the COVID-19 pandemic by agreeing to sell at cost approximately 11 million items of PPE seized from three warehouses by law enforcement in April 2020, U.S. Attorney Craig Carpenito announced today.

The two companies – CSG Imports LLC and KG Imports LLC, both of Lakewood, New Jersey – have also agreed to disgorge $400,000 in profits relating to transactions with two customers who purchased PPE from CSG Imports at excessive prices and to compensate those customers for their losses.

“The defendants in this case sought to profit illegally from a pandemic just as it was starting to sweep across the country,” U.S. Attorney Carpenito said. “Today’s agreements will ensure that needed personal protective equipment gets into the hands of the people who need it, and at a fair price. We will continue to investigate these price-gouging cases with our law enforcement partners and make sure that vendors stop trying to make excess profits during this national emergency.”

“Profiteers who choose to shamelessly defraud the America public should know the FBI will utilize every means under the law to bring them to justice,” FBI Newark Acting Special Agent in Charge Joe Denahan said.

Prior to the COVID-19 pandemic, CSG Imports had never imported PPE or health-care equipment or products of any kind. KG Imports was formed after the pandemic began specifically to import PPE into the United States.

The resolutions arise out of law enforcement’s April 22, 2020, seizure of over 11 million items of PPE – predominantly N-95 respirator face masks and three-ply disposable face masks – owned by CSG Imports and KG Imports from three warehouses in Lakewood. Law enforcement seized the PPE after learning that the companies were violating the DPA by offering for sale and selling scarce PPE at prices in excess of prevailing market prices for those items.

Both CSG Imports and KG Imports entered into deferred prosecution agreements with the U.S. Attorney’s Office for the District of New Jersey in connection with criminal complaints filed today charging each company with one count of violating the DPA. CSG Imports has committed to selling the seized PPE at cost and compensating two entities that it sold PPE to in excess of prevailing market prices in the amount of $400,000. The agreement provides that CSG Imports must pay a minimum of $200,000 to these entities directly in amounts proportionate to CSG Imports’ profits on PPE sold to those entities and that CSG Imports may compensate the remaining portion of the $400,000 by transferring PPE to these entities at no cost. Pursuant to a separate deferred prosecution agreement, KG Imports has also agreed to sell the seized PPE at cost. 

According to the admissions:

CSG Imports

            Beginning in March 2020, with the COVID-19 pandemic affecting New Jersey and the rest of the United States and world, CSG Imports began to obtain directly from international manufacturers and import various items of PPE into the United States. When it did not deliver directly to customers, CSG Imports stored the PPE at warehouses in Lakewood and sold the PPE to customers, including hospitals, health care providers, health care suppliers, and end users in New Jersey and elsewhere.

            From March 2020 through May 2020, CSG Imports imported into the United States and offered for sale PPE and other health and medical resources that were Designated Scarce Materials in excess of prevailing market prices. For example, CSG Imports imported N-95 masks for a blended per-unit cost of $3.47 and sold them with markups ranging from $0.78 to $2.53. CSG Imports also imported three-ply disposable face masks for a blended per-unit cost of $0.37 and sold them with markups ranging from $0.09 to $0.28.

KG Imports

            Beginning in March 2020, KG Imports also began to import various items of PPE that were stored in warehouses in Lakewood and sold to customers in New Jersey and elsewhere. Until that time, KG Imports had not dealt in such products.

            From April 2020 through May 2020, KG Imports offered and sold these items at prices that exceeded prevailing market prices. For example, KG Imports imported three-ply disposable face masks for a blended per-unit cost of $0.37 and sold them with markups ranging from $0.11 to $0.43.

As part of the agreements, both CSG Imports and KG Imports agreed to continue to cooperate with the government in any ongoing or future criminal investigations during the term of their respective agreements. 

The government reached these resolutions with CSG Imports and KG Imports based on a number of factors, including: both entities’ failure to timely and voluntarily self-disclose the conduct that triggered the investigations; the nature and seriousness of the offenses; and credit for each company’s respective cooperation. Both entities also agreed to sell all PPE seized by the government at prices not to exceed their costs in obtaining the PPE and to provide semi-annual written reports to the government regarding their PPE sales.

Attorney General William P. Barr created the COVID-19 Hoarding and Price Gouging Task Force, led by U.S. Attorney Carpenito, who is coordinating efforts with the Antitrust Division and U.S. Attorneys across the country wherever illegal activity involving protective personal equipment occurs. The Secretary of Health and Human Services has issued a Notice designating categories of health and medical supplies that must not be hoarded or sold for exorbitant prices. 

Please report COVID-19 fraud, hoarding or price-gouging to the National Center for Disaster Fraud’s National Hotline at (866) 720-5721, or e-mail: disaster@leo.gov

U.S. Attorney Carpenito credited special agents of the FBI under the direction of Acting Special Agent in Charge Joe Denahan, with the investigation leading to today’s resolutions. He also thanked the Lakewood Police Department for its assistance.

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