Combating Covid-19 fraud is now a priority for the US Department of Justice

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Eric Mayer     
GSK Stockmann, Munich
eric.mayer@gsk.de

According to recent reports, not only is Covid-19 currently rampant worldwide but regrettably, the most diverse variants of misconduct are spreading rapidly too. In the German Armed Forces (the Bundeswehr), for example, millions of increasingly sought after facemasks are ‘disappearing’ overnight. Hospitals or elderly care homes are complaining about scarce supplies of disinfectant and some are left to wonder whether the products labelled as ‘disinfectant’ actually have a sterilising effect. What about the actual performance and readiness of the ventilators that are often so critical for survival? How to stop phishing emails from impostors posing as World Health Organization (WHO) or Center for Disease Control (CDC) officials? And how to deal with individuals selling fake cures for Covid-19 for sky-high prices on the internet?

On 16 March 2020, the US Attorney General William Barr instructed all US lawyers to prioritise the detection, investigation and prosecution of criminal conduct related to the pandemic. According to Barr: ‘The pandemic is dangerous enough without wrongdoers seeking to profit from the public panic and this sort of conduct cannot be tolerated.’[1] Several US lawyers’ offices, including ones in Oklahoma, Pennsylvania, Nevada and Maine, have created special task forces or special prosecutors to combat Covid-19 abuse. Furthermore, US lawyers from Maryland or Massachusetts, among others, have issued stern warnings calling on all citizens, who have reason to fear that they have become potential victims of fraudulent behaviour, to file criminal charges. To underline the broad scope of this instruction, the US Attorney General pointed out that the Department of Justice Criminal Division, the Antitrust Division and the Consumer Protection Division of the Civil Division are explicitly available as resources for all lawyers.

Potential consequences for non-US companies

It can be expected, therefore, that the entire US law enforcement apparatus at the federal, state and local levels will use its full arsenal of legal weaponry to combat Covid-19 fraud. With an increasing number of government agencies actively cooperating with healthcare providers, Big Pharma and BioTech companies or pharma logistics specialists in connection with the spreading virus threat, the possibility of future investigations becomes more and more likely. All public sector contractors need to be fully aware of the necessity of accuracy and robustness of all claims for payment against government agencies, given that knowledge of inaccuracies or incorrect information can lead to US False Claims Act or other criminal investigations. Similarly, contractors should carefully analyse their cost and pricing models to avoid liability risks under the US Truthful Cost or Pricing Data Act.

At this point, the importance of carefully managed financial reporting cannot be stressed enough and this is not only to support the substantiation of payment claims. Indeed, the US Foreign Corrupt Practices Act (FCPA) does not only penalise the bribery of foreign public officials but also false accounting (under the ‘books and records’ provisions) – and this with broad applicability, including to non-US companies in certain cases. It remains to be seen how European or German authorities follow this US example in the current crisis. Pressure is already mounting on the UK Serious Fraud Office (SFO) to become more vigilant in the fight of the apparently ubiquitous attempts to exploit the crises caused by the spreading virus.[2] The first Ministers of Justice on federal state level in Germany are said to have started looking closely at Covid-19 fraud, too. As both federal and state government agencies are shelling out billions of tax payers’ money to rescue businesses, the necessity to observe that all recipients of special Covid-19 subsidies and rescue packages are actually playing by the rules will require serious efforts by public administrations and public prosecutors.[3]

However, it is clear that all companies, no matter whether from Europe or the US, and local government agencies must take a careful look around when selecting and monitoring their third parties or business partners. Choosing a supplier of facemasks or disinfectants which is currently under US or any other state’s investigation could cause significant damage to reputation. The same applies to BioTech companies that depend on cooperation with specialised business partners, for example in clinical research. A thorough Business Partner Compliance Due Diligence (BPCDD) could reveal that a prospective Clinical Research Organisation (CRO) is suspected of having falsified Covid-19 vaccine test series.

In essence, these very demanding times call for a serious ‘compliance health check’ everywhere on the planet. Moreover, it does not stop with effectively fighting ‘Covidiots’, scammers, impostors or any other crisis profiteers. Democracies must stand the test today against openly competing public governance models that can both protect our citizens and our companies and uphold the rule of law. Let’s all stay healthy together!

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