IEDC battles $3 million mask lawsuit involving federal sting operation

Employees at a New York company thought they were arranging a $2.95 million face mask delivery — of what they claimed to be 1 million authentic masks — to Indiana’s Economic Development Corporation at the height of the pandemic.

But the quasi-government agency was working behind the scenes on its own plans: helping federal agents organize an October 2020 seizure of what they said was a counterfeit product from a seller already under investigation.

Agents assured the IEDC that it wouldn’t face legal consequences for setting up the handoff and refusing to pay up for fake goods.

That didn’t stop the company — Edward Roberts, LLC, which does business as ERlifescience — from suing the IEDC for the mask shipment’s full purchase price a year later. The dispute is ongoing.

Legal action — and a pricey contract

ERlifescience’s lawsuit, filed in February 2022 in the Eastern District of New York, accuses the IEDC of breaking a contract and stealing the product.

The IEDC’s counterclaim, meanwhile, says there was never a contract. And the agency said it was U.S. Customs and Border Control that “seized the masks and refused to give them back,” according to its counterclaim. It argued, for that and other reasons, it was immune from liability under Indiana’s Tort Claims Act.

Instead, the IEDC accused the company of committing fraud and counterfeiting.

The agency has hired Indianapolis law firm Bose McKinney & Evans to defend it — with a November 2022 contract capped at $200,000.

Spokeswoman Erin Sweitzer said the IEDC has processed three invoices totaling $76,000 so far. She added that the entity couldn’t comment on pending litigation.

Company says it was wronged

ERlifescience officer Matthew Dweck contacted Luke Bosso, then the IEDC’s chief of staff, in mid-September 2020 with an offer to sell the state masks, according to court filings. The two arranged a delivery of mask samples, followed by the delivery of 1 million, that month.

“I would like to put in an order ASAP,” Bosso wrote as part of those discussions, according to emails inserted into the lawsuit.

At the time, the IEDC was vetting prospective suppliers for Indiana’s personal protective equipment inventory. The effort was intended to make masks, eye protection, hand sanitizer, gloves and disinfectant more accessible to Hoosier businesses, nonprofits and schools.

The lawsuit notes that Dweck repeatedly asked Bosso for a purchase order for over a week — and that the IEDC ultimately supplied only a number, rather than a written document.

Bosso also sent a seven-part list of terms — which said Indiana could refuse to accept the masks, but could only seize and hand them over to higher authorities if they didn’t “pass fit test standards.” Dweck agreed.

The company delivered the masks to an Indiana National Guard Association facility in Indianapolis through two October 2020 shipments, according to the lawsuit. It accused the IEDC of “falsely” claiming the product was fake and turning it over to federal authorities.

The company said it was “unaware that there was any problem” in the lawsuit. It had counsel spend “several months compiling documents” it claimed showed the masks were real, and which tracked mask movement from a Chinese factory to Indiana delivery.

“Instead of refusing delivery, defendant breached the contract by accepting the masks and then failing to pay Plaintiff the agreed upon sum of $2.95 per mask,” the lawsuit asserts.

Alternate timeline reveals backstage maneuvers

But the IEDC says there was never a contract.

Not only did Bosso not have the authority to enter one, it would’ve been void under Indiana law because it never got the needed approvals or appropriated funding, the IEDC argued in its response to the lawsuit.

Bosso suspected the masks were counterfeit early on in his communications with ERlifescience, according to the counterclaim.

The company sent a master distributor certificate with a date several days into the future and with several typographical errors, the filing notes. The IEDC also said it noticed “discrepancies” in the samples compared to real masks it had previously purchased.

As the company pushed the IEDC over email to get it a purchase order, emails inserted into the counterclaim show Bosso was involved in a flurry of emails with federal agencies that wanted to seize the product. Bosso repeatedly asked agents from the Food and Drug Administration and the Department of Homeland Security how to respond to the company’s emails.

They went through with the seizure — and the company came knocking for its payment.

Payment, legal concerns

Agents told Bosso not to respond, adding, “If the masks are indeed counterfeit, [Indiana] would be absolved of any legal recourse [the company] would attempt,” according to emails in the filing. Later communications indicate the masks were fake.

But the company was persistent.

“Hey Guys, They are becoming more aggressive in there phone calls and emails. I haven’t picked up the calls but they’ve called from a private number 3 times in the last hour,” Bosso wrote in a November email to the agents visible in the filing. “They’ve also sent emails about payment.”

One apologized for the situation becoming “a hassle” and wrote that he would have an undercover federal agent posing as an IEDC employee email the company “in a more confrontational tone” about the discrepancies.

“In the end, I’d imagine you would just want [ERlifescience] to stop contacting you,” he concluded.

The company then dealt an agent claiming to be “Casey Donoghue, the Consulting Director of Marketing Analysis at the IEDC.”

The agent sent this email “Given the lack of verifiable proof that the goods in question are authentic Harley Commodity products, I cannot in good conscience recommend the furtherance of any business dealings with your company. Please be advised that all products received from ERLife have been turned over to Customs and Border Protection.”

The masks were supposed to be N-95 masks manufactured by Guangzhou Harley Commodity Limited in China.

Current state

The U.S. seized millions of counterfeit masks over the course of the pandemic — with 18 million in the first three months of 2021 alone, according to CBP. But it’s unclear how Indiana will fare after its role in such an operation.

A federal judge in November rejected an attempt to move the case to Indiana. The IEDC and ERlifescience went to mediation in February this year.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.