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N.C. attorney general accuses company of price gouging over offers to sell N95 masks

N.C. attorney general accuses company of price gouging over offers to sell N95 masks

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Comparing masks

RALEIGH — The state has accused a New Jersey-based company of price gouging when it tried to sell N95 masks and other personal protective equipment to hospitals, the Red Cross and a state agency in March, as demand was spiking in the early weeks of the COVID-19 pandemic.

N.C. Attorney General Josh Stein says Stephen Gould Corp. offered to sell masks for as much as 15 times the prevailing market price and more than twice as much as Gould had agreed to pay for them. In a lawsuit filed in Wake County on Tuesday, Stein also says the company then told prospective buyers that its markup was 3%, when in fact it was more than 100%.

The lawsuit says Gould made separate offers to sell millions of masks to Duke Health, UNC Health, the state Division of Emergency Management and the Charlotte chapter of the American Red Cross.

"At the height of the pandemic, officials in government, health care systems, and charitable organizations were trying to protect their health care workers so they could safely care for people in an environment that was extremely dangerous and potentially deadly," Stein said in a written statement. "At the same time, we allege, this company sought to exploit the taxpayer and health care systems for huge profits. This is unconscionable and illegal — and my office will see them in court."

None of the sales took place, notes Ripley Rand, a former U.S. attorney in North Carolina who will represent Stephen Gould. Rand issued a statement on behalf of the company Wednesday.

"Stephen Gould was surprised by the filing of the action yesterday by Attorney General Stein," the statement says. "Stephen Gould did not sell a single mask, at any price, to any North Carolina person or company, either before or after the pandemic hit. We will defend against this complaint vigorously in court."

Stein says it doesn't matter that Gould didn't complete a sale. The state's price gouging statute prohibits selling or attempting to sell essential goods and services at "unreasonably excessive" prices during a state of emergency.

Gov. Roy Cooper declared a state of emergency for coronavirus on March 10. A few days later, according to the lawsuit, the manager in charge of Stephen Gould's Morrisville office sent an email to Duke Health offering to sell 7 million Halyard FluidShield N95 face masks for $8.45 a piece, plus shipping costs from Florida.

The suit says that email was followed by others, offering the same number of masks shipped from South Carolina for $7.50 each and the same 7 million masks from Florida for $8.30 each. One of the emails also offered to sell various types of N95 masks made by 3M for $8.75 each, according to the lawsuit.

About this same time, the company was making similar offers to UNC, the state Division of Emergency Management and the Red Cross, according to the lawsuit.

The lawsuit says the market price for the Halyard masks was 55 cents or less apiece, while the 3M masks ranged in price from $1.02 to $1.31 apiece "through normal, manufacturer authorized distribution channels." It says Stephen Gould had agreed to pay its supplier $4.15 for each Halyard mask and $5.65 for each 3M mask, with plans to add "an unreasonably excessive markup on top of already inflated prices."

The state asks the court to order Stephen Gould to stop offering or selling goods at "unreasonably excessive" prices during the state of emergency and to pay a civil penalty of at least $75,000.

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