On August 6, 2020, the United States Attorney’s Office for the Northern District of Georgia announced that it had charged a Georgia businessman with “hoarding and price gouging” in violation of the Defense Production Act of 1950 (DPA).  

According to the government’s press release, from early March 2020 to May 2020, the defendant Milton Ayimadu “engaged in hoarding and price gouging of more than 200,000 face masks in violation of the DPA.”  Specifically, the government alleges that Ayimadu purchased more than 200,000 face masks from a foreign country for approximately $2.50 each and then re-sold them to American consumers through his website for approximately $5 each.  The government’s press release goes on to allege:

During the two months in which Ayimadu sold face masks, he engaged in over 22,000 financial transactions.  While Ayimadu priced his masks in excess of prevailing market prices to maximize his profits to the detriment of consumers desperate for personal protective equipment during the COVID-19 pandemic, manufacturers of authentic N95 masks continued selling face masks for the pre-pandemic price of under $2.00 per mask.      \

The DPA was signed into law in 1960, at the start of the Korean War.  In relevant part, the DPA prohibits the hoarding of “designated scarce materials.”  Specifically, the DPA provides:

In order to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation.

50 U.S.C. App. § 2072.  Willful violations of the DPA can be punished by a fine of not more than $10,000 and imprisonment for not more than one year, or both.  

In March 2020, the federal government identified 15 categories of products as “scarce materials” under the DPA, including but not limited to personal protective equipment (PPE) such as N-95 and other face masks, respirators, portable ventilators, PPE coveralls, medical gowns, face shields, and surgical gloves.

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with white collar criminal matters and government investigations.  If you need assistance with such a matter, please contact us today.