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A Bankrupt Firm's Unit Won a $55 Million FEMA Mask Contract. Its Co-Owner Pleaded Guilty

FEMA gave a bankrupt company's unit a $55 million no-bid N95 order that never arrived. A co-owner later pleaded guilty to lying to FEMA and to taking $141,000 from a disaster loan program.

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In April 2020 FEMA awarded Panthera Worldwide, LLC, of Leesburg, Virginia, a $55 million contract for N95 masks, without competition, at $5.50 a mask, according to the House Select Subcommittee on the Coronavirus Crisis. The subcommittee said the company had no history of making medical equipment.1 Panthera's parent company had filed for bankruptcy seven months earlier. No masks were delivered, and FEMA canceled the order. In October 2021 James Victor Punelli, a half owner of the parent, pleaded guilty to lying to FEMA to get the contract and to taking $141,000 from a disaster loan program in the same weeks.23

A training contractor, a bankruptcy and a mask order

According to the criminal information, Punelli owned 50 percent of Panthera Enterprises, LLC, a government contractor that provided tactical training to federal agencies. Panthera Enterprises owned all of Panthera Worldwide. In 2019 it filed for Chapter 11 bankruptcy in the Northern District of West Virginia, owing millions of dollars to creditors.4 The subcommittee's letter to FEMA puts the filing on September 13, 2019, "more than seven months before the contract was awarded," and says Panthera Worldwide had received "only one other unrelated federal award in its entire history."1

The same letter compares the price with the manufacturer's. Panthera charged $5.50 per mask; the manufacturer's list prices ran from $0.68 to $3.40.1

Ten million masks "currently available"

Prosecutors described the pitch in their sentencing filing. Beginning on or about March 26, 2020, Punelli sought a FEMA contract to supply ten million masks and said Panthera had ten million available and could deliver one million a week. It did not have them. FEMA awarded the contract, which "called for payment upon delivery and inspection."2

The prosecutors also wrote that Punelli then made "sincere but unsuccessful attempts" to buy the masks from manufacturers and distributors. When those failed, he asked FEMA for more time and told it the masks were in the United States and awaiting transport, which was also false. FEMA canceled the contract. Because it paid only on delivery, "FEMA suffered no actual financial loss."2

The two government accounts of the order differ. The House letters describe a $55 million contract for N95 masks at $5.50 each, which is ten million masks.15 The prosecutors' filing describes ten million surgical masks for $56,300,000.2 Neither document explains the gap.

The loan that did pay out

On or about March 30, 2020, Punelli applied for an Economic Injury Disaster Loan for Punelli Partners, a consulting company he had formed in 2010. Prosecutors said the application listed his wife as the sole owner, reported $287,167 in gross revenue for the twelve months before January 31, 2020, and claimed two employees. The company had no revenue in that period and no employees. The SBA disbursed $141,000 on April 14 and April 21, 2020, and Punelli spent it on prohibited purposes, including personal expenses and costs tied to the pre-existing bankruptcy.24

Probation and $141,000

Punelli pleaded guilty on October 19, 2021, to making false statements to FEMA and to theft of government funds.2 The guidelines range was 10 to 16 months. Prosecutors asked for probation instead.2 On March 7, 2022, the court sentenced him to two years of probation with 100 hours of community service, a $5,000 fine and $141,000 in restitution, payable to the Small Business Administration.36

The restitution matches the disaster loan to the dollar. The mask contract, at $55 million or $56.3 million, added nothing to it.

Documents cited

Notes

  1. House Select Subcommittee on the Coronavirus Crisis, letter to the Secretary of Homeland Security and the Acting FEMA Administrator on PPE contracts (March 30, 2021). ↩1 ↩2 ↩3 ↩4
  2. Position of the United States with Respect to Sentencing, United States v. Punelli, No. 1:21-cr-00224 (E.D. Va. filed Feb. 28, 2022) (ECF 14). ↩1 ↩2 ↩3 ↩4 ↩5 ↩6 ↩7
  3. Judgment in a Criminal Case, United States v. Punelli, No. 1:21-cr-00224 (E.D. Va. Mar. 7, 2022) (ECF 17). ↩1 ↩2
  4. Criminal Information, United States v. James Victor Punelli, No. 1:21-cr-00224 (E.D. Va. Oct. 19, 2021) (ECF 4). ↩1 ↩2
  5. House Select Subcommittee on the Coronavirus Crisis, letter to James Punelli, Panthera Worldwide, LLC (July 14, 2020). ↩
  6. Restitution Order, United States v. Punelli, No. 1:21-cr-00224 (E.D. Va. Mar. 7, 2022) (ECF 19). ↩
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