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A medical supply company failed to deliver 130 ventilators it promised to provide New York City at the height of the coronavirus crisis this past spring, scamming the city out of more than $4 million it pre-paid for lifesaving equipment it never received, according to a new lawsuit.
In a complaint, attorneys for New York City accuse a Florida-based medical supply wholesaler called Global Medical Supply Group LLC and its joint venturer, defendant Frederick Levy, of scheming with a Chinese export company to import the equipment from China.
However, the Chinese company was not authorized to trade in ventilators under Chinese law, lawyers contend, and Global Medical Supply Group itself did not have approval from the U.S. Food and Drug Administration (FDA) to import ventilators.
Furthermore, none of the defendants had any experience trading in or was authorized to import or export medical equipment, the lawsuit alleges. This information was withheld from the city in an attempt by defendants to persuade the city into pre-paying more than $8 million for the ventilators, according to the city’s lawyers.
Defendants are Global Medical Supply Group LLC; its owners and officers, Tyler Gelb and Victoria Conlen, of Boca Raton, Florida; Frederick Levy of Highland Beach, Florida; Nations Fast Tax & Accounting 2 Inc.; Zhejiang Jinrong Trading Co. Ltd.; and Zhu Yong of Zhejiang, China, owner and officer of Zhejiang Jinrong Trading Co.
According to the lawsuit, Gelb formed Global Medical Supply Group in mid-March for the express purpose of selling personal protective equipment that was in great demand because of the coronavirus outbreak in the U.S.
Gelb allegedly worked with Conlen and Levy on a plan to source ventilators manufactured in China through Zhejiang Jinrong Trading Co., a Chinese trading company that supplied footwear and was not authorized to trade ventilators.
In late March, according to the lawsuit, the city started discussing an order of ventilators with Global Medical Supply Group, which promised it had a large quantity of the devices on hand and ready to ship in two days.
After some back and forth, the city ultimately placed an order March 30 for 130 Aeonmed model VG70 ventilators and agreed to prepay the full price of the order, $8,261,500.
But the ventilators never came.
“Exploiting the COVID-19 crisis for their own gain, defendants obtained millions of dollars from New York City through false statements about their ability to source the equipment in China, where the market for ventilators was in a state of frenzy due to overwhelming worldwide demand,” lawyers for the city allege.
When the city finally recognized the ventilators would not be delivered as promised under the contract, in early April, it demanded the company return the funds immediately.
However, it took until June 10 for the company to return a portion of the payment, $3,977,594, leaving an outstanding balance due to the city of $4,283,905, according to the lawsuit.
The city accuses defendants of breach of contract, unjust enrichment, money had and received, account stated, common law conversion, common law fraud, negligent misrepresentation, as well as several violations of New York’s False Claims Act.
It is asking the court to award damages to New York City of at least $4.2 million plus interest, reflecting the remainder of the ventilator payment not returned by the company; punitive damages; a $12.8 million fine for violating the New York False Claims Act; a civil penalty of at least $6,000 for each violation of New York state finance law; and attorneys’ fees.
What do you think the outcome of the New York ventilators lawsuit will be? Give us your thoughts in the comments.
The plaintiffs are represented by attorneys Matthew Triggs, Matthew I. Rochman, Michael A. Cardozo and Lucy Wolf of Proskauer Rose LLP; and Brian T. Horan of the Office of the New York City Corporation Counsel.
The New York City False Claims Ventilators Lawsuit is The City of New York v. Global Medical Supply Group LLC, et al., Case No. 9:20-cv-81880-AHS, in the U.S. District Court for the Southern District of Florida.
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