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% — was sentenced Thursday to three years’ probation.
Niki Schwarz, 56, owner of Tikkun Holistic Spa, was also ordered to pay $32,071.30 in restitution and a $25 special assessment. U.S. Magistrate Judge Jean P. Rosenbluth also imposed a $100,000 fine, the maximum allowed for the federal misdemeanor count of hoarding and price gouging.
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 obtained by City News Service.
Defense attorney Victor Sherman, however, had a different take, writing that his client — the wife of a surgeon — found a source for the masks and began selling them out of a desire “to help others, especially her employees and customers.”
Schwarz believed that wearing surgical masks was “central to controlling coronavirus in the United States,” the attorney wrote in court papers.
A friend of Schwarz, quoted by Sherman, said that “Niki was reading and listening to a lot of things from different Asian news sources, she became obsessed and started to go into panic mode.”
Schwarz began giving the masks away, and any profit made from selling N95s was offset by the $20,230 worth of masks she gave away to community hospitals, family, friends and critical care centers, according to the attorney.
In her plea agreement, Schwarz admitted 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 told Schwarz that what she was doing was a crime — and that price gouging could result in one year in prison — but Schwarz continued to sell the masks at inflated prices.
Schwarz disregarded Centers for Disease Control and Prevention recommendations last year regarding the distribution of scarce N95 masks, according to federal prosecutors.
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.
Defense attorney Sherman wrote that anyone who views what Schwarz did as a crime of greed “sorely misunderstands this defendant, her intentions and her actual activities. … Niki’s conduct arose out of a solitary campaign to protect other people’s health.”