CBD entrepreneur dupes philanthropist trying to buy $16M in masks for Texas, feds say
A CBD entrepreneur duped a philanthropist trying to buy more than $16 million in masks for Texas as governments raced to acquire medical supplies in the spring, authorities say.
At the beginning of the COVID-19 pandemic, the philanthropist offered a $20 million line of credit to help Texas officials immediately purchase personal protective equipment, or PPE. A business associate of the philanthropist led the effort to obtain the PPE and coordinated with a state task force.
The associate turned to a PPE broker in Illinois for help in obtaining 9 million masks manufactured by 3M, a major supplier in health care supplies. One of the broker’s “local contacts” introduced him to Dale Hipes, according to court documents. The broker’s contact “vouched” for Hipes because he rented a warehouse to him in Scottsdale, Arizona.
Hipes said he was an authorized 3M distributor and promised the order within three days, but he wanted the payment up front, court documents say.
The Illinois broker transferred $16.6 million from the philanthropist’s trust to what Hipes purported to be an escrow account. But Texas never received a single mask from Hipes, authorities say.
After the broker demanded he return the money, Hipes sent back $12 million, authorities say. Hipes stopped responding when the broker asked for the remaining amount, authorities say.
According to Arizona state records, Hipes formed the limited liability company in April. His other businesses are in the cannabidoil, or CBD, industry.
Although the business has an account to do business with Texas, it doesn’t appear any state or federal tax dollars went to the company, a spokesman for the Texas comptroller’s office told McClatchy News.
The Texas Division of Emergency Management, which distributes PPE and COVID-19 tests, did not immediately respond to questions from McClatchy on Friday.
Hipes was charged with wire fraud and money laundering last week.
Authorities say he used much of the money to buy a $2 million home in cash and a Winnebago trailer for $62,000.
“It’s truly reprehensible that someone would misrepresent themselves and promise to provide personal protective equipment during a pandemic then take millions of the fraudulently obtained money and use it for their own personal gain,” Sean Kaul, Special Agent in Charge of the FBI Phoenix Field Office, said in a news release. “It is also not lost on us that this act is deliberately contrary to the actions of the philanthropist who fronted the money to the state of Texas in the first place.”
This story was originally published December 18, 2020 at 6:37 PM.