The U.S. Department of Justice’s (DOJ) Consumer Protection Branch works with other branches and federal law enforcement agencies to investigate and prosecute civil and criminal violations of the nation’s consumer protection laws, such as the Consumer Financial Protection Act. In criminal cases, not only can targets face charges under these laws, but they can face charges for mail fraud, wire fraud, conspiracy, and other federal crimes as well.
The Consumer Protection Branch has several stated priorities. Its current “areas of enforcement focus” include (i) consumer product safety and tampering; (ii) food and dietary supplements; (iii) pharmaceuticals and medical devices; (iv) tobacco products; (v) deceptive practices, telemarketing, and data privacy; (vi) complex consumer fraud; (vii) U.S. servicemembers and veterans fraud; and, (viii) enforcement of the Class Action Fairness Act. However, the Consumer Protection Branch’s recent cases suggest that the Branch is placing particular emphasis on a handful of key areas.
“The DOJ’s Consumer Protection Branch plays a central role in the federal government’s effort to protect American consumers from harmful products and fraud. Often working alongside the FDA, FTC, and other agencies, the Consumer Protection Branch conducts comprehensive investigations and pursues both civil and criminal charges against companies and individuals.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
10 Recent Examples of DOJ Consumer Protection Branch Enforcement Actions
The areas in which we have seen a notable volume of enforcement activity include health care, data privacy, fraudulent consumer marketing practices, and affinity fraud schemes (those targeting elderly adults and other vulnerable populations). Here are 10 recent examples:
1. Doctor and Others Indicted on Allegations of Conducting Fraudulent Clinical Trial
The Consumer Protection Branch prosecuted a case in which a doctor and three other individuals were indicted for allegedly conducting a fraudulent clinical trial in Florida. The FDA’s Office of Criminal Investigations investigated along with the U.S. Attorney’s Office of the Southern District of Florida.
According to a DOJ press release, the doctor and other defendants were alleged to have generated false clinical trial data through various means, including “falsely represent[ing] that subjects were taking the drugs being studied when in fact they were not.” The defendants’ indictments included charges of conspiracy to commit mail and wire fraud, mail fraud, and making false statements to FDA inspectors.
2. Cancer Drug Manufacturer Sentenced for Concealing and Destroying Records Prior to FDA Inspection
In another case involving the FDA, the Consumer Protection Branch secured a guilty plea from a cancer drug manufacturer that was charged with concealing and destroying records before a scheduled FDA inspection of the manufacturer’s plant in India. In addition to agreeing to a $30 million fine and $20 million criminal forfeiture, the manufacturer also agreed to implement a compliance program, “designed to prevent, detect, and correct violations of U.S. law relating to [the company’s] manufacture of cancer drugs intended for terminally ill patients.”
3. Multiple Companies and Individuals Sentenced for Roles in Nationwide Telemedicine Pharmacy Fraud Scheme
A Consumer Protection Branch investigation led to the prosecution and sentencing of multiple individuals and companies accused of perpetrating a nationwide telemedicine pharmacy fraud scheme. As stated by the DOJ, the defendants were charged with deceiving consumers to fraudulently bill Medicaid, TRICARE, and multiple pharmacy benefit managers (PBMs). Charges against the defendants included conspiracy, felony misbranding, health care fraud, and multiple other federal crimes.
4. DOJ Consumer Protection Branch Aggressively Targets COVID-19 Consumer Fraud
The Consumer Protection Branch is among several federal law enforcement authorities that have been involved in combating consumer fraud schemes related to the COVID-19 pandemic. This includes consumer fraud schemes ranging from offering “World Health Organization COVID-19 vaccine kits” before there were any COVID-19 vaccines in existence to selling unproven homeopathic remedies and other supposed COVID-19 cures. Other recent cases include:
5. Texas Resident Pleads Guilty to Illegally Importing Counterfeit Vaping Products
A Texas resident pleaded guilty to conspiracy to import drug paraphernalia under 21 U.S.C. Section 841 in a Consumer Protection Branch case last year. According to the DOJ, the defendant admitted to “intentionally and unlawfully” importing counterfeit THC vaping materials from China and then selling them to local vape shops in Texas.
6. Funeral Home Operator Faces Civil Enforcement Action Related to Alleged Deceptive Marketing Practices
Attorneys from the DOJ’s Consumer Protection Branch participated in a case resulting in civil penalties; a civil enforcement action against a funeral home and an individual accused of engaging in deceptive marketing practices involving the sale of funeral goods and services. The DOJ brought the case under the Federal Trade Commission Act (FTC Act) and the FTC’s Trade Regulation Rule Concerning Funeral Industry Practices (Funeral Rule).
As summarized by the DOJ, the defendants, “made deceptive statements to consumers about pricing for funeral and cremation services, misrepresented the location where services were to be provided, and wrongfully withheld loved one’s remains.” In addition to monetary penalties, the DOJ is seeking an injunction against the defendants’ further violation of the FTC Act and Funeral Rule.
7. Home Security Company Pays $20 Million to Settle Allegations of Consumer Fraud
The Consumer Protection Branch entered into a settlement agreement with a Utah-based home security company following allegations that the company’s marketing and debt collection practices violated the FTC Act and the Fair Credit Reporting Act (FCRA). According to the DOJ, the company’s illegal practices included “(1) failing to establish an identity theft prevention program; (2) obtaining consumers’ credit reports without a permissible purpose; and (3) unfairly selling false debts to debt collectors.” Among other specific allegations, the Consumer Protection Branch accused the company of using existing customers’ credit information to secure approvals for new customers who failed their credit checks.
8. Marketing Company Agrees to Pay $150 Million After Investigation Targeting Elder Fraud Schemes
A Consumer Protection Branch investigation led to a deferred prosecution agreement (DPA) between a marketing company and the DOJ after the investigation uncovered evidence that the marketing company had facilitated multiple elder fraud schemes. According to the DOJ, “[t]he DPA relates to the company’s role in knowingly selling consumer data to clients engaged in fraud.”
The DOJ goes on to write that the company admitted to “[selling] consumer data to clients engaged in fraud despite knowing that those and similar clients had been arrested, charged with crimes, convicted, and were otherwise subject to law enforcement actions for false and misleading practices.” The company’s prohibited sales reportedly took place over almost a 10-year period.
9. New York Residents Convicted of Mass Mailing Fraud Scheme Targeting the Elderly and Other Vulnerable Adults
In another elder fraud case, the Consumer Protection Division conducted an investigation that led to the conviction of two individuals who were charged with “operating mass mailing fraud schemes that tricked thousands of victims, many of whom were elderly, into providing the defendants with money by falsely promising prizes.” The DOJ’s press release goes on to state that the defendants, “mailed millions of prize notices that falsely represented that the victims had been specifically chosen to receive a large cash prize and would receive the prize if they paid a fee. Victims who paid the requested fee, however, did not receive the promised cash prize.”
After a trial in the U.S. District Court for the Eastern District of New York, a federal jury convicted the defendants of conspiracy to commit mail fraud, mail fraud, wire fraud, fraudulent use of fictitious names, and aiding and abetting mail fraud schemes. Each defendant faces up to 20 years in prison.
10. “Grandparent Scam” Leads to Prosecution By DOJ Consumer Protection Branch
Three individuals involved in a scam targeting elderly grandparents pleaded guilty to RICO conspiracy charges following a prosecution by the DOJ’s Consumer Protection Branch. A DOJ press release states that the individuals “contacted elderly Americans by telephone and impersonated a grandchild, other close relative or friend of the victim [and] falsely convinced the victims that their relatives were in legal trouble and needed money to pay for bail, for medical expenses for car accident victims, or to prevent additional charges from being filed.”
Federal agents from the FBI participated in the investigation as well, and the Special Agent in Charge described the case as a “prime example” of collaboration among federal, state, and local law enforcement authorities.
Facing a Civil or Criminal DOJ Consumer Protection Branch Investigation
For companies and individuals that are facing scrutiny from the DOJ’s Consumer Protection Branch, it is imperative to execute a timely, strategic, and effective defense. As the cases discussed above demonstrate, Consumer Protection Branch cases can target a broad range of statutory and regulatory violations, and they can lead to severe consequences for the companies and individuals involved.
Even in civil cases, the penalties for consumer protection violations can be substantial; and, if a civil inquiry uncovers evidence of intentional fraud or other knowing conduct, the case could quickly transform into a criminal prosecution. As a result, when facing any Consumer Protection Branch investigation, it is critical to discern the scope of the investigation as quickly as possible and address all potential allegations in the target’s defense strategy.
