Two Lakewood Companies Who Price Gouged PPE Agree to Resolve DPA Violations
Two import companies based in Lakewood have agreed to terms in resolving their violations of the Defense Production Act of 1950 for running a price gouging scheme overcharging the sale of 11-million pieces of PPE at the beginning of the Covid-19 Pandemic, U.S. Attorney Craig Carpenito announced on Friday.
CSG Imports LLC and KG Imports LLC ran a combined three warehouses that were raided by law enforcement including the FBI on April 22 with the seizure of the 11-million items of PPE including N-95 respirator masks and three-ply disposable face masks.
Beginning in March, Carpenito sad that CSG Imports began importing PPE items from international manufacturers into the United States.
When it did not deliver directly to customers, CSG Imports intercepted and stored the PPE at warehouses in Lakewood and then sold the PPE to customers, including hospitals, health care providers, health care suppliers and end users.
CSG Imports continued to import PPE into the United States through May Carpenito said and offered the PPE for sale and other health and medical resources.
"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 ran a similar scheme in the same time frame by offering and selling PPE 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 reached this week, both CSG Imports and KG Imports will cooperate with the government in any ongoing or future criminal investigations during the term of their deals.
Attorney Carpenito said both companies have also agreed to return $400,000 in profits that they made selling the PPE at excessive prices and they must also compensate those customers for their losses as well.
“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 in a statement. “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.”
Carpenito said that prior to the COVID-19 pandemic, CSG Imports had never imported PPE or health-care equipment or products of any kind and KG Imports was formed after the pandemic began specifically to import PPE into the United States.
"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.
CSG Imports and KG Imports have now entered into deferred prosecution agreements with the U.S. Attorney's Office for the District of New Jersey in connection with criminal complaints charging each company with one count of violating the DPA.
Carpenito said that CSG Imports has also 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 states 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.
KG Imports has also agreed to sell the seized PPE at cost that goes along with a separate deferred prosecution agreement.
The government is represented by Senior Trial Counsel Jason S. Gould and Assistant U.S. Attorney Nicole F. Mastropieri of the Health Care Fraud Unit.