Boast of 1 trillion N95 masks draws charges
The owner of a Houston-area nanotechnology firm has been accused of defrauding investors into purchasing millions of N95 respirator masks, which have been designated a scarce resource during the COVID-19 pandemic, according to a complaint filed Monday in the Southern District of Texas.
Patrick J. Abbott, 56, was charged with one count of wire fraud after arranging a transaction with undercover FBI agents posing as investors, the complaint said.
He was arrested last week and remains in U.S. Marshals custody. He appeared Tuesday at a probable cause hearing in front of U.S. Magistrate Dena Palermo, who approved bond for Abbott in an amount yet to be determined.
Abbott also is facing separate fraud and theft charges in Harris County, based on accusations that he swindled investors in the wake of Hurricane Harvey to fund a “sandless sandbag” business.
“It appears he doesn’t have any legitimate employment, but when it’s a time of crisis he attempts to take advantage of individuals,” prosecuting attorney Adam Goldman said during Tuesday’s hearing.
Abbott currently serves as chairman of 2D Global, based in The Woodlands, according to his LinkedIn page. Goldman said federal investigators believe Abbott lists his home address as his company’s location. Abbott also said the company has more than 200 other employees, but investigators did not find evidence that anyone else works for the company.
Court records say Abbott’s company touted access to 1 trillion 3M N95 respirator masks. He described himself as a longtime client of 3M, a Minneapolis-based conglomerate that manufactures a wide range of goods including adhesive tape and personal protective equipment.
It is the only company allowed to manufacture that specific respirator mask, according to the complaint. The company denied any relationship with Abbott. Further, 3M said it could not make that number of masks in several lifetimes.
“(3M) stated it would be impossible for Abbott to have access to 1 trillion masks as it would take the company approximately 909 years (at its current rate of production) to produce that amount,” investigators say in the document.
The case originally was filed in U.S. District Court in Utah. Records in that court are under seal.
Houston court records indicate 3M in August contacted the FBI’s Houston office, saying they received multiple complaints from their clients about 2D Global. Abbott’s company was presenting itself as a 30-year client when the two businesses did not have a relationship, according to 3M.
An FBI agent, posing as an interested investor, reached out to Abbott in late August about purchasing large amounts of 3M N95 respirators. Abbott described himself as a government contractor who was given special approval from the Defense Logistics Agency to be listed as a “verified” buyer of 3M products.
“Abbott explained that 2D is not a ‘distributor,’ but a ‘VIP,’ who has their own ‘concierge’ representative at 3M,” according to the criminal complaint. “This 3M representative walks 2D through the process and helps locate 3M product all over the world.”
Abbott’s attorney, federal public defender Aisha Dennis, argued Tuesday that prosecutors did not present enough evidence to charge her client. She pointed out that federal agents did not independently verify the statements from 3M, and that her client told the agents he was not a direct distributor.
“I think the government hasn’t proven sufficiently that there was any fraudulent misrepresentation with 3M,” she said.
Between August and September, Abbott held multiple phone and text conversations with an undercover agent in Houston and a second undercover agent on the West Coast, prosecutors said.
He told the agents that he did not make money from the mask sales, but “uses the tax write offs at the end of the year by routing it through a non-profit organization,” the complaint said. He said he uses his VIP status to connect buyers to 3M for humanitarian purposes. He also claimed to have recently sold a batch of masks to Ned Siegel, United States Ambassador to the United Nations, prosecutors said.
The undercover agents agreed to buy just over 3 million masks from Abbott for a total of $10 million. Abbot asked the agent to pay using a four-step process. He was arrested Sept. 11 during a sting in a parking lot at George Bush Intercontinental Airport.
Investigators said that even if Abbott had access millions of 3M masks, he would still be in violation of federal hoarding and price gouging laws for selling them at $3 each. N95 respirators have been officially deemed a scarce resource by the government.
Palermo, the federal judge, found probable cause but denied prosecutors’ request to keep him in custody before trial.
“I think that what he’s done here is obviously egregious and I’m very concerned about someone who would take advantage of people when we have the crisis of Hurricane Harvey or COVID,” she said. “But I don’t think under these circumstances there’s sufficient evidence to show he is a flight risk or a danger to the community such that the appropriate mechanisms couldn’t be in place.”