Department of Justice Employs Potent Weapon in Fight Against Fraud Related to COVID-19

Highlights

Since the early days of the coronavirus pandemic, the U.S. Department of Justice (DOJ) has taken an aggressive stance against those seeking to exploit the ongoing global health crisis through fraudulent and otherwise illegal schemes. On March 16, 2020, U.S. Attorney General William Barr directed every U.S. Attorney's Office to prioritize the detection, investigation and prosecution of all criminal conduct related to the COVID-19 crisis. In a follow-up memorandum, Deputy Attorney General Jeffrey Rosen highlighted a variety of reported schemes emerging from the pandemic and emphasized several tools currently available to federal prosecutors to deal decisively with the alleged criminal schemes.

A Closer Look at the Aggravated Identity Theft Statute

One such tool is the federal aggravated identity theft statute, 18 U.S.C. § 1028A, established through the enactment of the Identity Theft Penalty Enhancement Act (ITPEA) in July 2004. According to the Act's legislative history, Congress was frustrated that "many identity thieves receive short terms of imprisonment or probation" and "after their release, many of these thieves will go on to use false identities to commit much more serious crimes."

The statute imposes a mandatory minimum two-year sentence enhancement if the government proves that the defendant "during and in relation to" certain predicate felony offenses "knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person."

Like many other white collar criminal offenses, the language of the aggravated identity theft statute contains certain intricacies worth further exploration. First, the U.S. Supreme Court held in Flores-Figueroa v. United States, 556 U.S. 646 (2009), that the statute requires the government to show that the defendant knew that the means of identification at issue belonged to another person to satisfy the mens rea requirement. Second, the U.S. Courts of Appeal for the First and Ninth Circuits have narrowly construed the "use" requirement of Section 1028A to reach only defendants who attempt to pass themselves off as the third party or purport to take an action on the third party's behalf. Finally, the statute broadly defines "means of identification" to include "any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual."

Notably, the enhanced penalty must be served consecutively to any other punishment imposed for another offense, including the underlying felony offense during which the aggravated identity theft occurred. This enhanced penalty essentially insures at least a two-year prison sentence for anyone convicted of aggravated identity theft, and the U.S. Sentencing Commission statistics for 2019 demonstrate that in many cases the prison term will be much longer, as the average sentence for those convicted under this statute was 47 months.

Recent COVID-19 Enforcement Actions

Recent DOJ enforcement actions highlight the government's efforts to use this robust prosecutorial tool to combat coronavirus-related fraud.

On May 5, 2020, two New England businessmen, David Staveley and David Butziger, were the first to be charged with allegedly defrauding the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the U.S. Small Business Administration's (SBA) $660 billion Paycheck Protection Program (PPP) that it established. Specifically, Staveley and Butziger are charged with conspiracy to make a false statement and conspiracy to commit bank fraud in connection with over $500,000 in PPP loans they applied for on behalf of four different business entities for which there were no actual employees. In addition to the conspiracy charges and a charge of bank fraud against Butziger, Staveley is charged with aggravated identity theft for allegedly using his brother's name and Social Security number to, among other things, apply for PPP stimulus funds.

On May 26, 2020, federal authorities announced the arrest of Richard Schirripa of Long Island, New York, a licensed pharmacist known as "the Mask Man," on charges of violating the Defense Production Act by hoarding and price gouging N95 masks, making false statements to law enforcement, committing healthcare fraud and aggravated identity theft. According to the allegations of the complaint, Schirripa engaged in at least three distinct criminal schemes: 1) the hoarding and price gouging of N95 masks, 2) lying to U.S. Drug Enforcement Administration officers, and 3) causing Medicare and Medicaid to be billed for prescriptions based on false representations over a five-year period. In connection with the healthcare fraud scheme, Schirripa is alleged to have used the personal identifying information of his pharmacy's patients, without their authorization, giving rise to the aggravated identity theft charge.

Conclusion and Considerations

Although the government's enforcement of coronavirus-related fraud is just now ramping up, it is clear from the aforementioned actions that the government will use every means in its arsenal to prosecute those who seek to profit from fraudulent schemes as a result of the global pandemic. Given the broad reach and severe penalties of Section 1028A, and the government's prior enforcement actions in the wake of other crises, there likely will be an effort in investigations and audits related to CARES Act applications and funding to identify any potential misuse of a "means of identification."

In addition to making sure that the applications for and/or certifications regarding use of relief funds are accurate and appropriate, special attention should be paid to making sure that the use of "means of identification" is scrupulously accurate. The federal aggravated identity theft statute is a powerful tool and one the government is clearly already using in this emerging area.

Notes

Memorandum from Attorney General William Barr to all U.S. Attorneys, COVID-19 – Department of Justice Priorities (March 16, 2020).

Memorandum from Deputy Attorney General Jeffrey Rosen, Department of Justice Enforcement Actions Related to COVID-19 (March 24, 2020).

H.R. Rep. No. 108–528, at 3 (2004), reprinted in 2004 U.S.C.C.A.N. 779, 780.

18 U.S.C. § 1028A. The statute lists 11 subsections of predicate felonies, including bank fraud, healthcare fraud, mail fraud, Social Security fraud and wire fraud. Id. § 1028A(c). This wide variety of predicate offenses highlights that 18 U.S.C. § 1028A can be creatively applied by federal prosecutors across many different factual scenarios.

Flores-Figueroa v. United States, 556 U.S. 646, 657 (2009) ("We conclude that § 1028A(a)(1) requires the Government to show that the defendant knew that the means of identification at issue belonged to another person.")

See United States v. Hong, 938 F.3d 1040, 1051 (9th Cir. 2019); United States v. Berroa, 856 F.3d 141, 156 (1st Cir. 2017).

18 U.S.C. § 1028(d)(7).

U.S. Sentencing Commission, Quick Facts – Section 1028A Aggravated Identity Theft Offenses.

Press Release, DOJ, Two Charged in Rhode Island with Stimulus Fraud (May 5, 2020).

Press Release, DOJ, Licensed Pharmacist Charged With Hoarding and Price Gouging of N95 Masks in Violation of Defense Production Act (May 26, 2020).