As the coronavirus crisis reached a boiling point in the United States, government officials squared off in countless internal arm-wrestling matches about how to handle it. But at least one of those debates — involving officials from the White House and the Department of Justice — was philosophical: How exactly should the federal government deal with pandemic-related hoarding and price-gouging?
The debate came as scammers and fraudsters looked to cash in on the worldwide hunt for face masks, surgical gowns, gloves and other types of personal protective equipment (PPE). Many dealers were charging desperate buyers exorbitant prices for the life-saving material. And as hospital workers grew sick and died without adequate protective gear, many purchasers felt they had no choice but to cough up as much cash as was asked.
So in late March, the Justice Department rolled out a task force that would focus on hoarding and price-gouging. Attorney General William Barr touted its work at a White House nwes conference, and deputized Craig Carpenito — the U.S. attorney for New Jersey — to lead the nationwide effort. “[W]e will aggressively pursue bad actors who amass critical supplies either far beyond what they could use or for the purpose of profiteering,” Barr wrote in a memo to U.S attorneys’ offices around the country. “Scarce medical supplies need to be going to hospitals for immediate use in care, not to warehouses for later overcharging.” Each office was directed to name one attorney to coordinate the efforts, and the department set up a hotline for tips. And soon enough, the task force brought a headline-grabbing case against a man who lied about medical supplies he had accumulated and then claimed to have Covid-19 before coughing on FBI agents.
But behind the scenes, according to people familiar with the discussions, some White House officials expressed reservations and concerns about the task force’s approach, and some disagreed with DOJ officials about how to use one particular legal authority. The people helming the response faced a brave new legal challenge: how to target price-gougers and hoarders under the Defense Production Act, a decades-old law that grants the feds broad authority over the private sector during national emergencies.
And now, three months after its inception, some advocates say the task force isn’t cracking down hard enough on Covid profiteers. DOJ spokespeople didn’t provide a list of price-gouging cases it has brought, and searches of department news releases reveal only a handful of cases. In a recent op-ed for Law360, Carpenito wrote that the task force has taken “numerous enforcement actions” and “disrupted numerous potential price-gouging operations” — but did not specify how many.
It is unclear whether White House officials’ articulated concerns about the task force have impeded its work. A source with knowledge of the task force said it currently has hundreds of investigations open around the country.
“This was more of a philosophical dispute between people who wanted to go aggressively after those who were hoarding and gouging, and those more partial to letting the market sort it out,” said one of the sources with knowledge of the discussions.
“The White House folks had no involvement in charging decisions, but there is a degree of overlap with certain actions that need to be taken under the DPA, so there had to be some coordination,” the source added.
A White House official said Trump moved fast to target hoarders and price-gougers. “We’ve charged several of these scammers and as of early April we’ve distributed more than half a million medical supplies confiscated from price gougers,” the official said.
The resistance from White House staffers materialized shortly after the rollout of the task force, according to the people familiar with the situation. It came from staffers whom one source described as “free-marketeers,” who felt the massive influx of people wheeling and dealing for PPE was a sign that the free market was working efficiently to move materials where they needed to go. One free market tenet is that market forces act as an invisible hand, moving goods and services when and where they need to be in the most efficient way possible and unlocking supplies that may previously have gone untapped. If prices of, say, N95 masks seem exorbitantly high—well, that’s what market conditions dictate. Government intervention, in this view, only gums things up—at best. White House staffers who raised concerns about the task force’s work were of that school of thought.
Meanwhile, the news media were rife with stories about how unsavory characters were ripping off hospitals and local governments by charging them jaw-dropping sums for life-saving equipment. New York’s state government paid up to 15 times the typical price for PPE, according to a ProPublica analysis. And the top financial officer of one New York hospital told the Associated Press his team had to pay $7 for face masks that usually cost just 50 cents. For some hospital systems, the pandemic also brought grave financial peril.
The White House generally has limited visibility into the day-in-day-out work of the Justice Department. But DOJ officials discussed the task force’s work with the White House in part because they didn’t want to bring criminal charges against potential defendants who had already secured approval of their practices from other corners of the U.S. government.
Some White House and DOJ officials disagreed about how to use important legal tools known as “allocation orders,” which let U.S. government officials force dealers to sell them PPE at a price the officials deem fair, which they pay later, per one of the sources. Some White House aides wanted to pay sellers the prices they asked when using allocation orders, even if those prices seemed inflated, the source said. The Department of Health and Human Services had technical authority to issue allocation orders, but it was the White House that actually decided whether or not to issue them, according to a participant.
Another source described two broad mindsets at play. The first mindset was held by those with prosecutorial sensibilities, who viewed the massive, lightning-fast influx of newcomers into the PPE sector with deep suspicion. The second was held by the free market proponents, who saw it as a sign the invisible hand was doing what it does best: moving goods where they needed to go.
An administration official familiar with the back-and-forth said the historically challenging circumstances meant DOJ and White House officials had to navigate a new, uncharted gray area of legal and practical issues.
“There was an ongoing discussion, throughout the pursuing and building of the cases, about philosophical issues in play—prosecuting illegal activity, but not taking prosecutorial discretion to an extreme that wasn’t consistent with how DOJ would normally approach cases,” that source said. “The view that this was a philosophically complex issue was recognized both within the White House and within DOJ leadership, during a unique and unprecedented time.”
The task force’s record thus far has drawn criticism from the left. Kyle Herrig, head of the progressive government watchdog group Accountable.US, said it hasn’t done enough.
“The Trump administration has never met a consumer it wanted to protect or a nefarious business it wanted to prosecute. That the DOJ is allowing companies to take advantage of Americans during a global pandemic is as shocking as it is shameful,” he said in a statement. “The lack of price-gouging enforcement has cost Americans millions of dollars and endangered lives — further proof that the administration is not looking out for its citizens in a time of crisis.”
By Accountable.US’ count, more than 49,000 complaints about price-gouging have been submitted to law enforcement officials in 22 states. The number of complaints exponentially outnumbers the number of cases the DOJ task force has brought. The Eastern District of New York — whose top prosecutor will soon decamp for DOJ headquarters — has brought several, and the district of New Jersey charged the man who coughed at FBI agents.
The source familiar with the task force said these cases are quite complex, both legally and factually. Building them takes significant time and resources, that source said, and will be a long-term project for the task force.
Source: politico.com
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