Vaccine kits. “Silver Solution” treatment. Even coronavirus-fighting toothpaste.
The swindles have begun. As Americans struggle to cope with the spread of COVID-19, they will also need to brace themselves for “disaster fraud”—those cons that rely on post-catastrophe chaos to separate people from their money.
In late March—two months after the first case was confirmed in the U.S.—the Justice Department filed its first enforcement action on the issue, seeking a restraining order in Austin, Texas, against a website peddling non-existent World Health Organization vaccine kits. A federal judge ordered that public access to the site be blocked.
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Indeed, fraud is now a central part of the U.S. government’s response to the pandemic. This month, the Justice Department ordered U.S. attorneys across the country to prioritize the issue and to each appoint a coronavirus fraud coordinator, spurring announcements of legal crackdowns from Vermont to Louisiana.
“They’re using people’s fears, anxiety, and confusion about what’s going on,” said Federal Trade Commission consumer education specialist Colleen Tressler of the fraudsters. “Things are changing daily, if not more frequently. People are getting things from a variety of sources.”
Earlier in March, the FTC and the Food and Drug Administration issued joint warnings to seven companies selling products they claimed could treat or prevent COVID-19. Among them was “The Jim Bakker Show,” hosted by the disgraced televangelist, which had advertised a colloidal silver called “Silver Solution.” Already the target of a lawsuit from the state of Missouri and a cease-and-desist letter from the New York attorney general’s office, Bakker was forced to stop selling the product on his website and Facebook page.
New York’s attorney general also issued a cease-and-desist to rightwing conspiracist Alex Jones, who was selling so-called anti-coronavirus toothpaste on his radio show and website, Infowars.
Schemes have proliferated so quickly that the Federal Trade Commission even released a tongue-in-cheek #FTCScamBingo card, on which you can play along by marking off common scams like “Treat COVID-19”, “Get COVID-19 test kit”, and “A COVID-19 cure!”
Disaster fraud is a phenomenon that reliably crops up every time a natural or man-made crisis strikes—and, say fraud experts, tends to fall into several major categories.
There are fake charitable solicitations, which tend to arise in the early stages of recovery. In the days after 9/11, dozens of websites cropped up claiming to take donations for victims, only to keep the money. This sort of fraud has become even more prevalent with crowdfunding platforms like GoFundMe, said Jason Zirkle, a training director with the Association of Certified Fraud Examiners.
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Identity theft is also common, as victims and workers struggle to understand who to give their information to for aid programs in the midst of chaos. During the aftermath of Hurricane Katrina in 2005, two men posing as Salvation Army workers obtained the personal data of more than 2,500 police officers, FBI agents and firefighters, after promising them debit vouchers worth up to $5,000.
Disaster fraud also arises with contractors and vendors, in which companies hired by federal agencies for cleanup and rebuilding try to tip the scales for more profit. Following the 2017 wildfires in California’s wine country, hauling companies that had won a $1.3 billion cleanup contract were paid by the ton of debris they moved. Homeowners began complaining that the haulers were digging up too much, even claiming they’d destroyed driveways, sidewalks and retaining walls in good condition.
Another common type of disaster fraud involves false property insurance claims. Following a different California wildfire, the 2018 Camp Fire that killed 85 people and destroyed more than 13,900 homes, a federal jury indicted six people who falsely claimed Paradise properties as their primary residences, receiving thousands in benefits and, in some cases, FEMA trailers to live in.
The chaos that unfolded after Hurricane Katrina provided what would be the major turning point in how the United States deals with disaster fraud. Katrina, said Zirkle, “was just so massive, it just caused an unprecedented amount of property damage”—the foundation for many types of disaster fraud.
That same year, the National Center for Disaster Fraud was established, prosecuting 1,300 Katrina-related fraud cases spanning 49 states. Since then, the center’s mandate has expanded to cover fraud related to any and all natural and manmade disasters. It hosts a hotline and relies largely, like most efforts to track and prosecute disaster fraud, on tips from the public.
“When we see a collection of complaints coming in, maybe about a particular business or practice, that’s when we start to take action,” said Tressler of the FTC.
Tennesseans, dealing this year with overlapping tornado and coronavirus disasters, are on especially high alert for scams that run the gamut from contractor fraud to price-gouging on hand sanitizer, says the state’s attorney general’s office.
In September 2019, the Tennessee Division of Consumer Affairs moved into the office of the state attorney general’s office. The idea was to “(create) a direct link” between those working with consumers “and the attorneys who investigate and work to resolve cases,” a statement explained.
It turned out to be a prescient move. Just a few months later, in early March 2020, a series of tornadoes hit the middle and western parts of the state, killing 26 people. The attorney general worked quickly to “warn Tennessee residents of the risk of fraud and common scams in the wake of the severe weather,” and direct them to the Division of Consumer Affairs.
Then came COVID-19.
“It almost seems like the tornadoes were longer ago than they really were,” said Samantha Fisher, a spokeswoman for the Tennessee attorney general’s office. Just in the last couple weeks, she added, the office has received 115 consumer complaints related to the pandemic.
“Fraud in connection with a major disaster,” a federal statute adopted in the aftermath of Hurricane Katrina, can carry a maximum 30 years in prison. But many scammers flourishing these days are candidates for wire fraud. A catch-all law, a charge of wire fraud only requires proving that some kind of electronic method was used to carry out the scam—whether an email, text or electronic transfer of funds.
This is especially relevant for the COVID-19 crisis, which is following a slightly different fraud script than many other disasters. With no real property or infrastructure damage, most pandemic-related scams are information-related.
Phishing and malware scams preying on fears of the coronavirus started cropping up as early as January 2020, said Zirkle, noting that these are the most common of the COVID-19-related schemes.
Usually, he said, it starts as a sophisticated, authentic-looking email promising updated information on the pandemic from the Centers for Disease Control and Prevention or the World Health Organization, provided you enter your email address and password. From there, the scam forwards you to the actual CDC and WHO websites as it downloads malware onto your computer or mines your data.
“You’ve got a lot of people that are at home, and a lot of people want updated news about coronavirus,” Zirkle said. “It’s a great time to trick people into clicking a link.”
Despite the efforts of various agencies, disaster fraud persists as predictable phenomenon.
“There’s always a new audience for our information,” said Tressler. “People who have never been through a weather event before. People who are from a part of the country where they didn’t experience tornadoes or floods, hurricanes or wildfires.”
With the unprecedented nature and scale of the COVID-19 disaster, that new audience just might be everyone.
“Everybody’s looking the other way, even law enforcement,” said Zirkle. “It’s just a great time for fraudsters right now.”
Eli Wolfe contributed to this report.
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