Investigations Bulletin: DOJ Charges 47 People in Largest COVID-19 Fraud Scheme Yet | Arent Fox Schiff


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DOJ indicts 47 people in largest COVID-19 fraud scheme yet

On September 20, 2022, the United States Department of Justice (“DOJ”) announced federal criminal charges against 47 defendants from the non-profit organization Feeding Our Future (“FOF”), including the founder and executive director of FOF , Aimee Bock, for defrauding the federal government. Child Nutrition Program (“FCNP”).

The United States Department of Agriculture (“USDA”) administers FCNP and disburses funds to state governments to provide free meals to children in need. The Minnesota Department of Education (“MDE”) administers and oversees FCNP in Minnesota. In Minnesota, meals provided to children in need are served by “sites” that are sponsored by an authorized sponsoring organization. Each authorized sponsoring organization is responsible for monitoring its sites and preparing reimbursement requests, of which it retains 10-15% as administrative costs.

According to the DOJ press release, the defendants, using FOF sponsorship of various venues, obtained and misappropriated millions of dollars in FCNP program funds intended to reimburse the cost of serving meals to children during the COVID-19 pandemic. 19.

As part of this scheme, the defendants allegedly: (i) created shell companies to register on FCNP sites and receive and launder funds; (ii) recruited individuals and entities to open FCNP locations in Minnesota; (iii) created and submitted false documents, including false invoices and false attendance lists with false names; (iv) submitted fraudulent claims to MDE and disbursed fraudulently obtained funds to those involved in the scheme; and (v) bribes paid in cash often disguised as “consulting fees”. In total, FOF has opened more than 250 locations in Minnesota and in 2021, FOF received nearly $240 million in FCNP funds, a substantial increase from the $3.4 million it received and disbursed in 2019. As a result, the defendants were awarded over $18 million in administrative costs. fees and are accused of using the proceeds on luxury cars, homes, jewelry, property and to fund international travel.

Read the DOJ press release here.

New DOJ guidelines aim to speed up white-collar investigations

On September 15, 2022, the DOJ made substantial revisions to white-collar criminal investigation guidelines in an effort to expedite charges against executives. The memorandum raises the stakes for companies facing a potential government investigation by promising executives that their companies will not face a guilty plea or a potential compliance monitor if they quickly and voluntarily hand over information . The DOJ also suggests it will give less weight to any potential crimes committed at least ten years prior that are not relevant to the current investigation.

Deputy Attorney General Lisa Monaco said the DOJ’s goal is to strengthen criminal law enforcement policies regarding individual accountability by charging individuals at a faster pace. Among other guidelines in the memorandum, the DOJ said that for companies to be eligible for any co-op credit, companies must timely disclose all relevant, non-privileged facts about individual wrongdoing. Additionally, the DOJ said that, where appropriate, DOJ prosecutors may wait to initiate federal prosecutions to better understand the scope and effectiveness of a prosecution in another jurisdiction.

Read the DOJ memorandum here.

E-Cig Company, Juul, Sues FDA Over FOIA Documents

Juul Labs Inc. sued the United States Food and Drug Administration (“FDA”) in DC federal court for failing to provide documents as part of Juul’s Freedom of Information Act (“FOIA”) requests for the scientific disciplinary review behind the FDA’s decision to deny Juuls’ premarket tobacco marketing application and now suspended the order to ban Juul from the market.

Prior to its decision to deny Juul’s premarket tobacco marketing application, the FDA blamed vaping company Juul for the rise in youth vaping. The FDA said Juul’s applications to market tobacco and menthol flavored products did not have enough evidence on the products’ toxicology to show that marketing is safe enough to protect public health. Despite questions from the FDA, the FDA allowed Juul’s products to remain on the shelves, pending further scientific review of Juul’s claim. In its case against the FDA, Juul argues that the FOIA requires the FDA to make public the scientific facts underlying its decision to deny Juul’s application and that the information and documents sought reflect the factual and scientific conclusions to which reached the scientists of the agency. While the FDA routinely releases such documents regarding its decisions for other tobacco products, here the FDA invoked “deliberative process privilege,” which protects information about how a government agency makes a decision from the disclosure, in its refusal to provide Juul with the requested documents.

The case is captioned Juul Labs Inc. v. Food and Drug AdministrationCase No. 1:22-cv-02853 in the United States District Court for the District of Columbia.

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