A New York company today admitted its role in price gouging a chain of New Jersey grocery stores in connection with the sale of KN95 masks during the COVID-19 pandemic after the Secretary of Health and Human Services declared a national public health emergency.
At a time when the new coronavirus was rapidly spreading across the country and health care professionals were desperate for these face masks — which filter out at least 95% of airborne particles — to protect sick people and themselves, a price like that smacks of profiteering by someone in the supply chain but price gouging was made a crime under the Defense Production Act.
Milk & Honey Ventures LLC (MHV), a company based in Brooklyn, New York, pleaded guilty by videoconference before U.S. Magistrate Judge Jessica S. Allen on March 28, 2022, to an information charging it with price gouging in violation of the Defense Production Act.
According to U.S. Attorney Philip R. Sellinger, documents filed in this case and statements made in court, MHV and two partners purchased 250,000 KN95 filtering facepiece respirators from a foreign manufacturer in March 2020.
MHV and one of those partners then sold 100,000 of those masks to a chain of New Jersey grocery stores at prices in excess of prevailing market prices.
MHV sold the masks at a price of $5.25 per mask, which amounted to a markup of more than 400 percent from its acquisition cost.
Prior to the spread of COVID-19, the company had no history of selling personal protective equipment.
As health care professionals began to beg for supplies to protect themselves from COVID-19 infection, a Texas company found a seller with at least 2 million masks and quietly offered them for sale at $6 each, about six times the usual cost.
A violation of the Defense Production Act carries a maximum fine of $200,000, or twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss sustained by any victims of the offense, whichever is greatest.
Sentencing for MHV is scheduled for Aug. 9, 2022.
U.S. Attorney Sellinger credited special agents of the Department of Homeland Security, Homeland Security Investigations, under the direction of Special Agent in Charge Peter Fitzhugh in New York, with the investigation leading to today’s guilty plea.
The government is represented by Assistant U.S. Attorney David V. Simunovich of the Government Fraud Unit in Newark and Nicholas P. Grippo, Chief of the Criminal Division in Newark.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud.
The task force bolsters efforts to investigate and prosecute the most culpable domestic and international criminals and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts.
For more information on the Department’s response to the pandemic, please visit: https://www.justice.gov/coronavirus.