Watch CBS News

Justice Department announces arrest in multimillion-dollar COVID-19 scheme

Stockpile of medical supplies "very stressed"
U.S. stockpile of medical supplies "very stressed" 02:57

A Georgia man was arrested on Friday for trying to defraud the Veterans Affairs Department out of millions of dollars, in one of the first big coronavirus related fraud cases brought by the Justice Department's new COVID-19 Hoarding and Price Gouging task force.

Christopher Parris allegedly told the VA he had 125 million 3M masks and would sell them for $6.45 each. In fact, the equipment for sale did not exist, and the exchange would have totaled over $750 million. Lawyers for 3M say that these masks are typically sold for $.60 to $1.20 each. Parris is accused of exploiting the COVID-19 pandemic and trying to "obtain large upfront payments for scarce PPE that Parris knows he cannot fully obtain or deliver," according to a Justice Department affadavit supporting the complaint.

"We are still investigating," a DOJ official told CBS News. "But we have been able to demonstrate as set forth in the complaint that orders, significant orders of...several million dollars were made by entities to the defendants. And there were attempts that we know of to date to gain money by representations that we allege to be fraudulent, that were in the hundreds of millions of dollars."

The complaint alleges that law enforcement was tipped off to Parris' scheme in late March, while the VA office of the inspector general was investigating "Company A," a Louisiana-based company that says it sells industrial safety supplies. "Person B," an agent of the company, offered an undercover agent 3M 8210 and 1860 respiratory masks at the price of $7.13 per mask, with a minimum purchase of 1 million masks. The masks, the individual said, would be manufactured at plants in California and Illinois. But 3M has not converted those facilities to make masks. Person B identified Parris and his company, Encore Health, as one of Company A's suppliers.

In another attempted transaction, Person B also spoke with an undercover Homeland Security officer who was pretending to be a procurement officer for the state of Louisiana, and offered to sell Louisiana large quantities of 3M N95 masks, isolation gowns and Tyvek suits, all of which have been difficult to secure during the coronavirus crisis. Person B offered a quote of $7.25 per 3M mask. 

At the same time, the Louisiana Governor's Office of Homeland Security and Emergency Preparedness (GOHSEP) placed orders worth over $7 million from Company A. However, Louisiana has so far only received about 40,000 chemical suits, which cost the state $794,000. Person B later said that Parris and Encore Health were to supply the PPE for the Louisiana contract.

"The 160,000 units of 3M-branded, 1860 model masks have not arrived," the complaint states. "In other words, the State of Louisiana expected to be in possession of 160,000 masks for its emergency response efforts that it does not have."

On April 1, after receiving a referral from Person B , Parris called the undercover agent in Louisiana, whom he believed to be a Washington, D.C.-based VA procurement employee. Parris claimed to be able to obtain PPE, like ventilators, masks, and other items on the scarce materials list, from companies like 3M in one to two weeks.

The next day, after a request from the undercover agent, Parris called him and said "he had a rare occurrence" — he had a shipment of 3M brand, 1860 model masks "on the ground."

Parris told the undercover agent that bigger orders would be "easier to obtain," and that he could sell masks for $6 or $6.50. In these conversations, Parris told the agent that he would need Louisiana to commit to a purchase of 25 million masks to "trigger the process" and that Encore Health Group, "consistently does nine figure deals."

But 3M lawyers "cast strong doubt" on the representations Parris made to the VA, and said in the complaint that Encore Health isn't a 3M partner, and "it is simply not possible for 'anyone' to obtain five million 3M respirator masks in the current climate of the COVID-19 pandemic."

California was almost defrauded by Parris too. According to the complaint, Parris tried to sell the state more than $40 million in PPE but California ultimately canceled its purchase when it suspected fraud.

On March 24, Attorney General William Barr announced the creation of the task force, directing it to coordinate the investigation and prosecution of such illicit activities and work on developing enforcement measures. New Jersey U.S. Attorney Craig Carpenito leads the task force.

"This is just an example of the department's commitment to handling such a sensitive matter rapidly and a priority matter so rapidly, and doing so across multiple jurisdictions and multiple agencies, and I don't think it could have gone smoother," a Justice Department official said.

Parris, who was previously arrested in January on federal charges stemming from a decade-long Ponzi scheme in which he allegedly conned investors out of $115 million. Today, the Western District of New York revoked Parris' bond to ensure he would be detained pending further action in the two cases.

He will be extradited from Atlanta to the District of Columbia, where he faces up to 20 years in prison and a $250,000 fine if convicted.

Read the affadavit here:

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.