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Buyer Beware: PPE Industry Plagued by Rampant Scams

by | Nov 23, 2020 | COVID-19 Resources

Covid-19 has changed the world as we know it and nowhere is its impact more apparent than in the Personal Protective Equipment (“PPE”) industry. Worldwide shortages in desperately needed PPE has led to opportunists trying to take advantage and make a quick profit through shady business dealings and outright scams.

One frequent target of these scams has been 3M. The pandemic has severely affected global supply chains, not only because workers are falling ill but also because many countries, particularly China, have been hit hard in production. Most countries have also enforced tight controls over export of PPE resulting in higher demand for domestic supply. Quality control has also led to increased demand for domestic production. The resulting bidding wars for PPE have led to the rise of an unregulated and often dubious PPE industry run by unscrupulous brokers with little understanding of PPE or even common commercial transaction practices.

One such example of the scams being run in the PPE industry is a recent federal court order in Minnesota. On October 27, 2020, U.S. District Judge Susan Richard Nelson, approved an agreement between 3M and an unnamed individual related to AMK Energy Services, LLC, and issued a permanent injunction preventing the individual from representing that he is associated with 3M.

According to 3M, this individual, a former Marine, offered to buy 900 billion N95 masks on behalf of the Bill and Melinda Gates Foundation, Elon Musk, and Richard Branson, as donations to Africa. In the lawsuit 3M noted that 900 billion masks would take the Company hundreds of years to produce and would cost $1.143 trillion. To put things into perspective, in response to Covid-19, over the summer, 3M tried to double its annual production of only 1.1 billion N95 respirators, a far cry from 900 billion.

He also represented to 3M that he had high-level military experience and ran the “air war” in Iraq and Afghanistan, then used the names of 3M attorneys he learned through his interactions with the Company to represent to potential buyers that he was a 3M distributor, which was also false.

People like this are not a rarity in the PPE world where desperate brokers have created an entire industry, practically overnight, in the hopes of becoming millionaires by selling masks. Many brokers pass around badly written template documents, purportedly from 3M, to lure potential buyers. The overwhelming majority of these transactions fail because the product that is being sold as “on the ground” does not in fact exist.

Our clients have reported several instances of arriving at a warehouse to inspect products, only to find that the warehouse is empty, or does not even exist. Other clients have reported brokers claiming direct connections to 3M, only to find after spending considerable resources pursuing a transaction, that they have no connections to 3M and no access to any product.

Qi Men, Senior Counsel at YK Law, reports that one of her clients, who is a producer of face shields in China was almost scammed by a fake buyer in the U.S. The fraudulent buyer faked her identity, and used the name of an established pharmaceutical company, to try to scam the client for fake legal fees, to provide a made up “guarantee service”. The client was saved by our thorough due diligence and avoided a costly mistake.

Lack of clarity of process from 3M and the desperation of buyers has resulted in a tumultuous and dubious industry being formed around PPE, where misinformation rules, and which inevitably results in real buyers and sellers being scammed. Potential buyers and sellers of PPE are advised to use caution and reasonable judgment when attempting to purchase or sell PPE and to speak to expert attorneys prior to engaging in potential PPE transactions, especially those that seem too good to be true.

If you have any questions or would like more information, please reach out to us at [email protected].