Feds bring first prosecution under Defense Production Act

In an unprecedented move, the federal government has brought its first criminal prosecution under the Defense Production Act, charging Bobby Singh, a business owner in Long Island, with hoarding and price-gouging personal protective equipment. Under the Defense Production Act, the president can issue an executive order recognizing certain products and materials as “scarce materials” and tightly regulate their pricing and supply.

In this case, the criminal complaint alleges that Singh knowingly and intentionally accumulated such “scarce materials,” in this case personal protective equipment like face masks, hand sanitizer, “in excess of reasonable demands of business, personal, and home consumption,” and “for the purpose of resale at prices in excess of prevailing market prices.” In other words, the federal government is accusing Singh of hoarding and price-gouging PPE by buying more PPE than he needed to and charging more than a fair price.

The criminal complaint makes a host of allegations against Singh, featuring pictures from his business’s Instagram page and other social media posts showing Singh in front of a large supply of PPE, with captions stating things like “Face Shields in stock now.” The complaint then details the quantity of PPE Singh purchased, what he paid for it, and how much he charged when selling it. Some of Singh’s pricing seems innocuous–he bought masks in bulk at 7 cents a piece and sold each one for a dollar, a mark up of over 1000%, but perhaps not an unreasonable one given that the masks were selling for just a dollar. Prosecutors will instead likely focus on more sensational items, such as Singh charging $80 for $30 thermometers and $25 for a bottle of hand sanitizer.

It’s clear the federal government is trying to send a signal to retailers regarding their business practices in the age of the coronavirus. And to be clear, we certainly need regulations to protect against bad faith actors who hoard and price-gouge scarce medical equipment. But as in any criminal case, important questions need to be asked when the feds seek a criminal conviction. In this case, with these charges, that means asking: what quantity of PPE constitutes “in excess of reasonable demands”? What are “prevailing market prices,” especially during a pandemic? Why was Singh arrested without any prior notice that his business practices exposed him to criminal liability under a law that has never before been used to prosecute a business in this manner?

The prosecution makes good on a DOJ memo issued in late March directing prosecutors to consider bringing charges for hoarding and price-gouging under the Defense Production Act.

No doubt, Singh is likely arguing that he was doing what any business would do–recognizing an opportunity and capitalizing on it, especially in an environment where many businesses are struggling to stay afloat. The prosecution, for its part, will no doubt rely the public’s emotional reaction to the COVID-19 pandemic to paint Singh as a greedy individual exploiting a crisis. This prosecution will be one to watch, as will watching whether the feds bring more charges under the Defense Production Act. For what it’s worth, this author has seen face masks and gloves for sale at his neighborhood gas station at a far higher price than those charged by Singh.

Click here to read the federal government’s criminal complaint.

 


Tom Church

Tom is a trial and appellate lawyer focusing on criminal defense and civil trials. Tom is the author of "The Federal Docket" and is a contributor to Mercer Law Review's Annual Survey in the areas of federal sentencing guidelines and criminal law. Tom graduated with honors from the University of Georgia Law School where he served as a research assistant to the faculty in the areas of constitutional law and civil rights litigation. Read Tom's reviews on AVVO. Follow Tom on Linkedin.

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