Two Texan businessmen have been arrested in the US over an alleged attempt to dupe the NSW government into spending $430 million on 50 million respirator masks that never existed.
The alleged conmen were set to receive a $100,000 initial payment from NSW, which had indicated it was interested in buying the N95 respirator masks at five times their usual cost in April at the height of the pandemic. However, the US Secret Service, which was investigating the men, intervened and blocked the money transfer, US court documents reveal.
The men are alleged to have promised NSW 50 million N95 masks at a cost of $430 million.Credit:AP
The men – Paschal Ngozi Eleanya, 46, and Arael Doolittle, 55 – have now been charged with conspiracy and wire fraud in Houston. The US Department of Justice alleges they attempted [to defraud "a foreign government out of more than $US317 million [$430 million]".
Following the arrests, US Attorney for the Southern District of Texas Ryan Patrick tweeted, "Justin Martin, my COVID fraud point person, has been investigating this case for months. Glad to finally see it come together."
Mr Doolittle was charged last month over an unrelated scam in which he is alleged to have defrauded 21 investors out of $US1.2 million with bogus oil and gas deals. That figure is small coin compared with the $US275 million he and Mr Eleanya hoped to gain from their alleged deal with NSW.
Documents before a US court allege that, in March this year, the same month the World Health Organisation declared coronavirus a pandemic, the pair began searching for purchasers interested in buying large quantities of personal protective equipment to deal with the COVID-19 outbreak.
On March 29, the men allegedly enlisted the help of another man, Paul Penn, who was asked if he knew of anyone interested in buying 30 million N95 masks, manufactured by 3M and designed to filter out 95 per cent of the tiny airborne droplets that can spread viruses. The next day, Mr Eleanya sent a text to Mr Penn upping the offer to 50 million masks and said they would be supplied from Houston.
However, US law authorities allege that at no stage did the men have the N95 mask stockpile they claimed in their possession or at their disposal.
On March 30, when new daily COVID-19 cases in NSW were in triple figures and PPE stocks were becoming scarce worldwide, Mr Penn allegedly contacted the NSW government, which said it was interested in buying the 50 million N95 masks.
A day later, the offer was made to sell the masks to NSW for $US5.50 each, well above the $US1.02 to $US1.31 they retailed for, although no money was to change hands until a representative from NSW had the opportunity to inspect the products in Houston.
Mr Eleanya and Mr Doolittle then demanded half the money be paid upfront before any inspection took place and claimed their masks were scattered in locations around Houston. They said it would cost them a lot of money to transfer all 50 million to one spot for an inspection.
It was then suggested, and agreed by both sides, that NSW would transfer $100,000 into an account to cover the costs to have the masks relocated. Mr Eleanya then also emailed a video named "3M face mask factory … " that showed boxes with 3M labels stacked on pallets.
The video allegedly shows one of the boxes open and several N95 masks on display. However, based on the lot numbers printed on those masks, it is alleged they were manufactured in 2006 and would have exceeded their shelf life in 2011.
"On or about April 3, 2020, a representative of the foreign government was going to
wire the $100,000 into the … account … to cover … "relocation expenses" for the 50 million N95 masks. However, before the wire transfer was completed, the US Secret Service intervened, and the deal was terminated," the indictment before the District Court of South District of Texas reads.
Mr Eleanya and Mr Doolittle face up to 20 years' jail and fines of up to $US250,000 if convicted.
NSW Treasury said it would not comment on the matter while it was before the courts.
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