Santa Monica spa owner faces sentencing for price-gouging N95 masks, with some mark-ups as high as 220%
LOS ANGELES - A Santa Monica spa owner who accumulated N95 respirator masks at the outset of the coronavirus pandemic and then sold the scarce items at up to $15 each -- sometimes charging mark-ups as high as 220% -- faces sentencing Thursday.
Niki Schwarz, 56, owner of Tikkun Holistic Spa, pleaded guilty in January to a federal misdemeanor count of hoarding and price gouging, according to the U.S. Attorney's Office.
Prosecutors are asking for a sentence of three years' probation, plus fines and restitution totaling about $128,284.
Schwarz "is a small business owner from an affluent family who took advantage of the fear that gripped our nation at the beginning of the COVID-19 pandemic," prosecutors wrote in sentencing papers.
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More than 270 people fell victim to the scheme, prosecutors say.
Schwarz admitted that she began accumulating N95 respirators in February last year in anticipation of a shortage that would be caused by the pandemic.
From the beginning of the pandemic until the end of June last year, she accumulated nearly 20,000 N95 masks that had been manufactured by 3M -- list price ranging from $1.02 to $1.27 -- and Alpha Pro -- list price 86 cents, according to papers filed in Los Angeles federal court.
In March 2020, the United States government designated N95 respirators as "scarce materials" under the Defense Production Act of 1950, due to the overwhelming need of health-care providers dealing with COVID-19 patients to use personal protective equipment.
Schwarz admitted that she obtained the N95 respirators for the purpose of reselling them at above-market rates, and that she sold the masks for up to $15 each.
The defendant "accumulated and resold the masks at prices in excess of the prevailing market prices willfully, that is, with knowledge that masks had been designated as scarce materials and with knowledge that accumulation of the designated materials to resell in excess of prevailing market prices was unlawful," her plea agreement states.
On March 1, 2020, an associate informed Schwarz that the associate was going to stop selling N95 masks because she believed it was crime -- and that price gouging could result in one year in prison -- but Schwarz continued to sell the masks at inflated prices.
Schwarz, the wife of a surgeon, disregarded Centers for Disease Control and Prevention recommendations last year regarding the distribution of scarce N95 masks. At that time, the CDC recommended that the general public not purchase or use N95 masks due to their scarcity and need by medical professionals. Instead, the CDC recommended the public wear surgical masks or cloth masks.
The defendant told an informant that the CDC's advice that only doctors need to wear N95s was nonsense, according to the government.
Schwarz described cloth masks, as opposed to N95 masks, as "ridiculous," adding that the people wearing cloth masks were not actually protected and it was worse than wearing nothing at all.
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