The Washington Post: Scramble for N95 Masks Leads Trump Administration to Pay Premium
Summary
Document 159-1, filed June 5, 2020, in No. 2:19-bk-00787, made up of printed news articles about N95 mask purchases. A Washington Post article dated April 15 states that the Trump administration awarded bulk contracts to third-party vendors in recent weeks, and that purchasing records show orders for masks worth at least $628 million. It reports that FEMA awarded a $55 million contract for N95s to Panthera Worldwide LLC at about $5.50 per mask, and quotes James V. Punelli, one of the company's executives. A Business Insider article states that FEMA told Insider the company is scheduled to deliver the masks on April 23. A closing article discusses VA mask contracts, including one with an initial $35.4 million value.
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- Date
- 2020-04-17
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“The Washington Post: Scramble for N95 Masks Leads Trump Administration to Pay Premium.”
Dated 2020-04-17. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2020-04-17-coronavirus-uve-updates-u-s-map-worldmap-faqs-howtohelp-flatteningthecurve-news/
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Coronavims scramble for N95 masks leads Trump administration to pay premium to third... Page 1 of 4 The Washington Post CorOnavirUS Uve updates U.S. map Worldmap FAQs Howtohelp Flatteningthecurve Newsletter National In coronavims scramble for N95 masks, Trump administration pays premium to third-party vendors By Isaac Stanley€ecker, Desmond Butler and NickMIroff April 15 The Trump administration bas awarded bulk contracts to third-party vendors in recent weeks in a scramble to obtain N95 respirator masks, and the govemment bas paid the companies more than $5 per unit, nearly eight times what it would bave spent in Januaiy and February when U.S. intelligence agencies wamed of a looming global pandémie, prociu%ment records show. The N95 masks are essential protective gear for health-care workers and others at elevated risk of coronavims infection, and the govemment bas recommended that people across the countiy wear masks and other lace coverings when outside. Demand for the masks bas created a frenzied, freewheeling global market that bas pitted U.S. states against the fédéral govemment and rich nations against poorer ones. Administration officiais leaped into the fray late, then embarked on a voracious spending spree. Though U.S. fédéral agencies made a smah number of relatively modest purchases before the second balf of March, the govemment bas ordered more than $600 million worth of masks since then. Large U.S. companies such as Honeywell and 3M bave received the biggest orders, but the Tmmp administration also bas signed high-doUar deals with third-party vendors selling masks for many times the standard price. The Fédéral Emergency Management Agency awarded a $55 million contract for N95S this month to Panthera Worldwide LLC, which is in the business of tactical training. One of its owners said last year that Fanthera's parent company had not had any employées since May 2018, according to swora testimony. It also bas no histoiy of manufacturing or procuring médical equipment, according to a review of records produced as a resuit of légal disputes involving the company and its affiliâtes. Panthera Worldwide's parent company filed for bankmptcy last fall, and the LLC is no longer recognized in ^^Iginia — where it bas its main office — following nonpayment of fees, which according to Virginia code results in "the existence of a limited liability company" being "automatically canceled." James V. Punelli, one of the compan/s executives, said he is working bis militaiy contacts to obtain the masks. "WeVe done DoD médical training over the years and through those contacts with that community were brought sources of supply in order to assist in the COVID-19 response," Punelli said in a text message to The Washington Post, referring to the Defense Department. "We made the connection with FEMA and offered these supplies to them." Asked about deliveiy of the masks, Pxmelli said: "We will provide these masks before May 1 for certain, in full and with a veiy high-quality product." He said the company is registered as an LLC in Delaware and allowed its Virginia registration to lapse "because we're not doing business in Virginia." According to its website, Panthera offers "elite training and mission support" for the U.S. militaty and I EXHIBIT other agencies. But in 2018, it entered into a 42-year lease handing over its principal asset — a 750-acre training facility in West Virginia — to a separate company that now opérâtes the site. The facility features a mock village for training exercises in anti-terrorism and tactical opérations. KifVniDI I A- https://\vww.washingtonpost.coni/national/coronavirus-trump-masks-contracts-prices/2020... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 1 of 12 Coronavirus scramble for N95 masks leads Trump administration to pay premium to third... Page 2 of 4 "They don't have masks. The/re not in that line of business," said Robert Starer, a Vii^nia businessman wbo leased the training center fn)m Pantbera's owners. "Is it possible tbat tbey bave a relationsbip witb someone in tbe world wbo could provide tbose masks? Wbo knows." Starer is now suing tbe compan/s two executives — Pimelli and Raymond C. Jones — alleging tbey overstated tbe extent of tbeir contiacts and customer base, resulting in financial losses for bis company. In a complaint filed in Virginia's Hanover County Circuit Court, Starer allégés tbat tbe two men misrepresented "estimated revenue" as "actual casb payments... based on existing contracta," causing bim to suffer casb losses in 2018 and 2019. Punelli and Jones bave not responded to tbe lawsuit, according to an attorney wbo représenta Starer. Jones did not respond to requests for comment. Punelb said of tbe lawsuit, "Tbose frivolous daims are being addressed in due coiu^." Tbe FEMA contract witb Pautbera, wbich was awarded witbout compétitive bidding, bas a start date of Aprfl 1, according to a summary. lizzie Litzow, a FEMA spokeswoman, said tbe Pantbera contract is for 10 million masks, adding, "Pantbera is not a manufacturer, tbey are a distiibutor of N95 masks." Tbe price that FEMA is paying Pantbera per mask, about $5.50, is significantly bigber tban wbat tbe govemment pays companies sucb as 3M, whicb charges as little as 63 cents per N95 mask, witb an average cost of about $1.50 for more advanced models, according to a price index. Prestige Ameritecb, tbe laigest domestic mask manufacturer, is cbaiging FEMA about 80 cents per mask for tbe govemment's order of 12 million N95 respirators, part of a $9.5 million contract tbat started April 7. BQ^ond tbe premium tbe fédéral govemment is paying to Pantbera, tbe décision to award a contract to an insolvent oiganization witb no apparent expertise in tbe given field struck experts as unusual. "Sometbing is amiss tbere," said Cbuck Hagel, a former defense secretaty and Republican senator from Nebraska. "Tbis is not bow the govemment procures training or any type of supplies. You just wouldn't do business witb somebody like tbat." In its bankmptcy filing, Pantbera Enterprises estimated tbat it bad as many as 99 creditors and said its liabiUties could be as bigb as $50 million. Punelli said Pantbera Worldwide "bas no significant debt," but botb companies are jointly owned by him and Jones and use the same facilities, according to cotirt records. Founded as TenX Group in 2011, tbe parent company is incorporated in Delaware but bas its primary office in Leesburg, Va., according to court records. It bas received a bandfiil of fédéral contracts in recent years, primarily for training exercises sucb as "bigb-risk driving," according to a contract summary ftom 2018. But Punelli said in swom testimony in October 2019 tbat tbe subsidiaiy now under contract witb FEMA — focused primarily on "activities outside tbe countiy" — was bringmg in no income. "Not rigbt now," be told a U.S. attomey wbo asked wbetber tbere were any eamings. Litzow, in response to questions about FEMA's contract witb Pantbera, said tbe agency is "bound by law to follow fédéral acquisition requirements and processes" and did so in tbis case. "Per tbese fédéral acquisition requirements and processes, tbe Contracting Officer conducted a contractor responsibility détermination." Tbe Department of Healtb and Human Services began gatbering information on global supplies of N95S in Januaiy and posted a formai notice Feb. 24 to companies tbat it was preparing to place large orders, according to a department spokeswoman. On Marcb 21, HHS bought 600 million N95S ffom five companies, witb tbe laigest orders going to 3M and Honeywell. If tbe U.S. govemment bad attempted to make large purcbases before tben, it would bave tbrown global markets out of wback, according to Stéphanie Bialek, a spokeswoman assigned to tbe agency*s Stratégie National Stockpile. https://www.washingtonpost.com/national/coronavirus-trump-masks-contracts-prices/2020... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 2 of 12 Coronavirus scramble for N95 masks leads Trump administration to pay premium to third... Page 3 of 4 "It is never the intent of tbe SNS to disrapt the supply cbain wben supply is able to meet demand, even if demand is bigb," sbe said. "Making laige goverament purcbases at tbat time likely would bave disrapted supplies." Among membets of tbe public, too, demand for masks bas climbed, as tbe Centers for Disease Control and Prévention bas recommended tbat Americans wear masks and face coverings wben in public. On Wednesday, Gov. Andrew M. Cuomo (D-N.Y.) said be would issue an executive order requiring tbem for ail New York residents. Purcbasing records sbow tbe Trump administration bas placed at least $628 million wortb of orders for masks in recent weeks. HHS bas placed more tban $400 million in mask orders, and tbe Department of Vétérans Affairs bas placed orders wortb about $82 million. One of tbe biggest buyers is FEMA, wbicb bas transformed itself into tbe supply cbain manager for tbe Wbite House coronavirus task force. Tbe agency proposed a deal in recent weeks to obtain an additional 114 million Ngs masks from Nutratrade Australia, wbose website says it specializes in bulk sbipments of grains, daiiy products and otber foodstufk. Tbe FEMA proposai was for $591 million wortb of N95 masks, at an average cost of $5.19 per mask, according to documents obtained by Tbe Washington Post. Tbe agency said late Wednesday tbat it does not bave a contract witb Nutratrade Australia. A représentative for Nutratrade reacbed Wednesday declined to respond to questions about tbe proposed contract. FEMA is importing most of tbe médical supplies tbrougb a process tbe Trump administration calls "Project Airbridge," and uses cbartered cargo fligbts to slasb deliveiy times and steer sbipments directiy to bospitals. Tbe goverament pays the cost of tbe fligbts, but it bands over approximately balf of tbe supplies to large private médical supply companies, wbicb tben distribute tbem to tbeir clients, according to FEMA. Critics of tbe arrangement say it amounts to a lavisb giveaway to tbe private companies, but administration officiais say tb^ are just tiying to get badly needed suppbes to bospitals as quickly as possible. "Ail tbe traditional procurement raies are ont tbe window," said Rick Grimm, executive director of tbe National Institute of Governmental Purcbasing, wbicb trains and advises state and local governments on procurement. Grimm said tbat wben tbe market is unstable, it can invite price manipulation or tbe possibility "you may end up witb an inferior product you can't use." Jennifer Ebrbcb, a spokeswoman for 3M, said tbe company bas not raised its prices and bas taken aggressive légal action against vendors selling its products at a significant markup. Tbe company is planning to increase its output from about 1.1 billion masks per year to 2 billion during tbe next 12 montbs, Ebrlicb said. Tbe company bas ffied several lawsuits witbin tbe past week against companies it says bave been engaged in price-gouging and ftaudulent sales, including one company tbat tried to sell 45 million 3M masks to New York City officiais at bloated prices and anotber tbat tried to sell "tens of millions of likely nonexistent 3M N95 respirators at grossly inflated prices to tbe fédéral Division of Stratégie National Stockpile, ail tbe wbile falsely affiliating itself witb 3M." Isaac Stanley^ecker Isaac Stanley-Becker is a national political reporter. Follow Desmond Butler Desmond Butler is an Investlgatlve reporter on The Washington Post's climateand environmentteam. He previousiy reported forthe Assoclated Press in Washington, Istanbul and I Nick Miroff Nick Miroff covers immigration enforcement and the Department of Homeland Security for The Washington Post He was a Post foreign correspondent In Latin America from 20101 https://www.washingtonpost.eom/national/coronavirus-trump-masks-contracts-prices/2020... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 3 of 12 FEMA paid bankrupt company with no employées $55 million for N95 masks - Business ... Page 1 of 6 = Q BUSINESS INSIDER Uve updates The Trump administration paid a bankrupt company with zéro employées $55 million for N95 masks, which it's never manufactured John Haltiwanger m A pharmacy offering N95 face masks in New York City. Reuters The Trump administration has awarded a $55 million contract for N95 masks to a company with no experience producing médical supplies and whose parent company filed for bankruptcy protection last year. The Fédéral Emergency Management Agencytold Insider that the company, Panthera, is scheduled to deiiver the masks on April 23. Former Defense Secretary Chuck Hagel told The Washington Post that something was "amiss" about this order. The Centers for Disease Control and Prévention rArrnmmisnrift thAt npnnlp rrtvor fhpir mmith And nnsp 0©p) https://www.businessinsider.com/fema-paid-bankrupt-company-no-employees-55-million-... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 4 of 12 FEMA paid bankrupt company with no employées $55 million for N95 masks - Business ... Page 2 of 6 Panthera's parent company filed for bankrugtg^g o lâst fall, and one of its owners last year said employées since May 2018, The Post reported, citing sworn testimony. It's no longer listed as an LLC in Virginia, where its main office is, after fees went unpaid, the newspaper said. Panthera, which describes itself as a tactical training company for the US military and other government agencies, has no record of producing médical supplies or equipment, The Post said. Read more: Morgan Stanley just released a comprehensive timeline ofthe coronavirus outbreak. Here's when analysts think the US mil increase testing, gel a vaccine, andflnally return ta work. The company's website says it "provides elite, scenario- based tactical, aviation and intelligence training and instruction for Defense Department, State Department, Fédéral Agency and Law Enforcement teams who operate in sensitive environments worldwide, to enable those teams to meet their mission goals and requirements." Panthera's executives are being sued by a Virginia businessman who leased the company's primary asset, a training facility in West Virginia, The Post reported. James V. Punelli, one of Panthera's executives, told The Post that the company was working with military contacts to obtain the masks. "We've done [Department of Defense] médical training over the years and through those contacts with that community were brought sources of supply in order to assist in the COVID-19 response," Punelli said in a text message to The Post. "We made the connection with FEMA and offered these supplies to them." https://www.businessinsider.com/fema-paid-bankrupt-company-no-employees-55-million-... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 5 of 12 FEMA paid bankrupt company with no employées $55 million for N95 masks - Business ... Page 3 of 6 = Q ^ BUSINESS o ~~ ^ INSIDER « "We will provide these masks before May 1 for certain, in full and with a very high-quality product," Punelli said, adding that the company is registered as an LLC in Delaware. The Post reported that the Fédéral Emergency Management Agency was paying Panthera about $5.50 per mask, decidedly more than what the government pays companies with an established background in producing médical supplies such as 3M, which charges about $0.63 per mask. An N95 respirator made by 3M, whIch was contracted by tha US government to produce extra masks in response to the countr/s novel coronavirusoutbreak. Reuters Chuck Hagel, a former defense secretary, told The Post something was "amiss" about this order. "This is not how the government procures training or any type of supplies," he said. "You just wouldn't do business with somebody like that." A FEMA représentative told Insider that there was nothing in the standard background checks conducted in relation https://\vww.businessinsider.com/fema-paid-bankrupt-company-no-employees-55-million-... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 6 of 12 FEMA paid bankrupt company with no employées $55 million for N95 masks - Business ... Page 4 of 6 tojgovernment contracts that indicated PantgiQi^i'ii^i^ rësponâble." IN SID E R "As with any contract, FEMA is bound by law to follow Fédéral Acquisition requirements and processes. Per these Fédérai Acquisition requirements and processes, the Contracting Officer conducted a contracter responsibility détermination. The Fédérai Awardee Performance and Integrity Information System (FAPIIS) was examined and Panthera met the necessary requirements. The company did not appear on the Excluded Parties List System (EPLS)," FEMA said, adding that a review did not find Panthera showing "any deiinquent fédéral tax (of more than $3,500) in the iast three years." "FEMA does not enter into contracts uniess it has reason to beiieve they wiil be successfuiiy executed. The required review ied us to conclude that Panthera would abie to deliver on their contract," the représentative said. "As with any contract if the company cannot deiiver or deiivers sub standard product, the agency can use iegal means against a company." The représentative said that the ordered equipment hadn't arrived yet but that Panthera had provided written confirmation that the masks were in the shipping phase of delivery. The deiivery is scheduled for April 23. Since mid-March, the government has purchased more than $600 million worth of masks, according to The Post. The Centers for Disease Control and Prévention recommends that peopie cover their mouth and nose with a cioth when they're around others but says to "not use a facemask meant for a heaithcare worker." Gov. Andrew Cuomo said this week that residents in New York, which has been hit hardest by the coronavirus outbreak in the US, wiii be required to wear masks or face https://www.businessinsider.com/fema-paid-bankrupt-company-no-employees-55-million-... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 7 of 12 FEMA paid bankrupt company with no employées $55 million for N95 masks - Business... Page 5 of 6 çoverii^s in public when it's not possible to Sîstancing guidelines. i N s i D E R Doyou have a personal experience with the coronavirus you'd like to shareîOra tip on howyour town orcommunity is handling the pandémie? Please email covidtips@businessinsider.com and tell usyourstory. Get the latest coronavirus business & économie impact analysisfrom Business Insider Intelligence on how COVID-19 is affecting industries. SEE ALSO: The US is 'not a global power' thanks to Trump's disastrous coronavirus response as China fllls the vold, former US officiais wam » DON'T MISS: Trump's plans to eut WHO funding amid the coronavirus could exacerbate the crisis and cost more American llves » NOWWATCH: More: N95 COVlD-19 coronavirus FEMA v ' CopvrioM 02020 Insider Inc. Ail lights reseived. Registration on or use of this sde consMutes ecceptance of our Temo of Senéce. Privacv PoUcv end Cookies Policv. SHemaolDisclaimer 1 Commerce Pofcv ICA Privacv RoMs ICouoons I MndeInNYC Stock quotes by tlnanzen.net I Reorinls & Permissions IntematbnaiEditions: ML lâUS IQE ISS lEB iUl III lil£ lUÏ IU2i INL ISS lEL ISS IZÂ https://www.businessinsider.com/fema-paid-bankrupt-company-no-employees-55-million-... 4/17/2020 No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 8 of 12 4/18/2020 CORONAVIRUS U.S. Pays High Prices for Masks From Unproven Vandors in Coronavirus Fight - WSJi • LIVEUPDATES | | SYMPTOMS i , WHO'SHIRING j I YOUASK,WEANSWER | STATELOCKDOWNS ^ i DAHYLIFE | ! TESTINGANDTREAÎMENT i | k DAILYBRIEFU Thiscopyisfor your Personal, non-oommerdaluseonly.Tûorder presentdtionTeady copies for distnbution toyourcolleagues, clients or cu&tomers visit https:/ ww w^^reprints.com. httpsv'vvww.wsj.com/articies/u*s'pays*high*prices-for*masks-fron*i•unproven«vendors*m*coronavirus*fight'115â7218400 U.S. Pays High Prices for Masks From Unproven Vendors in Coronavirns Fight Average price for masks from vendors offering quick delivery is close to $6 apiece, roughiy six times the list price The Trump administration, under fire for its slow response to the coronavirus pandémie, has ordered 600 million N95 masks from major producers. PHOTO: MICHAELDWYER/ASSOCIArEDPRESS April 18, 202010:00 am ET The fédéral govemment, scrambling to find N95 masks to protect health-care workers from coronavirus infection, has placed more than $110 million in mask orders at high prices with unproven vendors, according to a Wali Street Journal review of fédérai contracting data. Of the more than 20 million N95 masks the govemment ordered for fuil delivery by the end of May. at least 80% were ordered from suppliers that either had never done business with the fédéral govemment or had only taken on small prior contracts that didn't include médical supplies, according to the data. Some of the vendors already have missed delivery deadlines or have backed out because of supply problems. The parent company of one supplier is in bankruptcy and its owners have been accused of fraud in lawsuits by multiple business partners. The average price the govemment agreed to pay for masks from vendors offering quick deliven is close to $6 apiece, roughiy six times the list price but in line with the current market rate. Most of the orders were placed with no-bid contracts, fédéral databases show. The govemment generally doesn't pay for goods until they are delivered. The Trump administration, under fire for its handling of the novel coronavirus pandémie, has signed more than $3 billion in pandemic-related contracts recently That includes orders for 600 million N95 masks from major established producers like 3M Co. and Honevwell International Inc. for less than $1 each. Those orders stretch out until late 2021 but are starting 10 trickle in. 3M and other manufacturera are also selling many masks to hospitals through their normal distribution networks. Major vendors like these have previouslybeen vetted and have shown their ability to deliver. A Trump administration spokeswoman didn't immediately respond to a request for comment. No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 9 of 12 U.S. Pays High Prices for Masks From Unproven Vendors in Coronavirus Fight - WSJ Meanwhile, the N95 masks, which block 95% of very small particles, including droplets that ma^ contain the coronavirus, are in short supply. That has spawned a marketplace full of middlemen, counterfeits and new entrants sensing large profits. One ofthe companies trying to navigate this market is more than a weekbehind on its original April 8 contractual deadline to deliver 785,000 N95 masks for about $7 each, including shippinj and distribution costs, to the Department of Vétérans Affairs. The company's président, Bernard Wright Jr., was posting messages on Linkedin as recently as a few days ago, seeking masks from people claiming to have them. "I am looking to procure 3M N95," he wrote last week. "Needs to be in stock in the US." The VA has a face mask .shnrfage and is only providing N95 masks to some workers, the Journal reported. "It's late. I know it's late. But there are things I just can't control," Mr. Wright said in an interview. "The VA is not happy with the speed of how things are going." VA Secretary Robert Wilkie, when asked about the contract Friday, said, 'T'm not going to comment on any particular case," adding that he updates the Fédéral Emergency Management Agency regularly with the department's needs. Mr. Wright said his firm, Wright Consultants & Associâtes LLC, usually gets contracts to renovate government hospitals. He signed the $5.5 million contract with the VA on April 1. He said he thought it would be simple to buy masks through his normal network of suppliers. Insteadhe has been stymied by sellers that don't really have high-quality masks or who jack up the price, he said. N95 masks, which block 95% of very small particles, including droplets that may contain the coronavirus, are in short supply. PHOTO; BRENDAN MCDERMID/REUTERS "It's a market that has been infiltrated by a lot of fraudulent activities and fraudaient personnel," he said. He said his firm is buying only 3M masks that are in the U.S. Mr. Wright said he recently found a supply and is now working to get them delivered to his warehouse. The Justice Department on April 10 arrested a Georgia man on charges that he attempted to sel the VA millions of nonexistent masks and other protective gear. Investigators said they are pursuing similar cases against others. Many local governments and hospitals also are turning to unconventional suppliers and paying rich prices for masks amid the coronavirus pandémie. New York City has eut deals with about 1! companies to supply face masks, accordingto city contracting data. Two-thirds of them have n( recent history of working with the city. Market players say demand is so brisk that being even a few minutes late with payment can resuit in products going to somebody else. No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 10 of 12 4/18/2020 U.S. Pays High Prices for Masks From Unproven Vendors in Coronavirus Fight - WSJ The VAhasa face maskshortageand isonly providing N95 masks to some workers. PHOTO: MIKE SEGAR/REUTERS "The mask cornes at 9 o'clock off the truck. At 9:10, in about 10 minutes, it's gone. Like crack anc cocaine," said Mohamed Shafeek, a mask broker in Miami who daims to have facilitated the sali of more than four million masks this week alone. In some ways, the deals are normal: Lawyers make contracts and set up escrow accounts for funds. In the current crisis, however, mask sellers typically provide buyers with a "proof of life" video that shows their warehouse, the date and the goods, Mr. Shafeek said. Bill Childs, a lawyer for 3M, said vendors have flocked to government contracting agents because "that's where the money is." 3M has filed lawsuits against prospective mask sellers, accusing them of trying to sell to government officiais at high prices while pretending to be associated with 3M. One of the largest fédéral mask contracts went to a small Virginia company, Panthera Worldwide LLC, which has no history in the mask business and some red flags in its owners' backgrounds. UNDERSTANDING CORONAVIRUS ♦ What WeKnow About the Virus Covid-19 Tests and Treatment • A Guide to State Lockdowns In a no-bid contract, Panthera agreed to provide 10 million N95 masks to the Fédéral Emergency Management Agency for $55.5 million, promising delivery by May 1, according to fédéral contracting data. Panthera's parent company is in bankruptcy. Its two owners have been accused of fraud in lawsuits by business associâtes—which the owners deny—and both had 1RS tax liens filed against them in 2018 for alleged unpaid taxes. "l'm flabbergasted that a contract of that size went to these guys," said Douglas Kahle, a Virginia attorney suing the company's owners for fraud on behalf of a business associate. "It's hard to imagine the government did any sort of due diligence or vetting." James V. Punelli, a Panthera co-owner, said the entity supplying the masks isn't in bankruptcy and has a successful history as a government contractor. He called the fraud allégations "false and frivolous" and said a lawsuit filed in 2018 was settled "to our satisfaction" on confidential "We had a very reliable, high-quality source of these surgical masks through our DoD contracting relationships and we will provide these masks before May 1 for certain," he said. Ht said the company won't discuss sourcing détails, but will make a partial shipment to FEMA nex week. FEMA said it has the supplier's word that the masks are genuine. "No advance payments have been made" to Panthera, a FEMA spokeswoman said. "Payment will not be made until FEMA No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 11 of 12 U.S. Pays High Prices for Masks From Unproven Vendors in Coronavirus Fight - WSJ receives, inspects and accepts the shipment of masks." 4«e ^OLO The mask shortage has spawned a marketplace of new entrants sensing potential profits. PHOTO; JUSTIN LANE/SHUTTERSTOCK As for due diligence, the spokeswoman said FEMA followed standard fédéral rules for acceptable contractors, and found no issues with Panthera. Among those rules: Contractors are supposed to have "a satisfactory record of integrity and business ethics" and "adéquate financial resources to perform the contract," according to fédéral contracting régulations. Panthera's parent company operated a security-training facility in West Virginia that had some small fédéral contracts, according to government contracting databases, but ran into financial trouble and filed for bankruptcy last year. Panthera Worldwide, the entity that won the big FEMA contract, is listed in fédéral databases as having one prior fédérai contract, for which it was paid $50,000. Panthera has told FEMA the masks are in the process of being shipped from the Netherlands, the spokeswoman said. Panthera's contract was reported earlier in the Washington Post. A $14.7 million VA contract for two million N95 masks was canceled earlier this month, after the first-time fédéral contracter said its Chinese supplier backed out. Claire Coder, chief executive of the contracter, a menstrual-products firm called Aunt Flow Corp. in Columbus, Ohio, said her supplier informed customers in late March that exports were "We called the VA and let them know immediately," Ms. Coder said. "That was our rise-and-fall in the N95 mask business." She said the VA modified the contract to buy 250,000 lower-tech surgical masks from her company for 96 cents each, delivered Wednesday. Similar surgica! masks typically sold for less than 20 cents each before the pandémie, but prices for those also have surged. The largest N95 mask contract given out by the VA, for an initial $35.4 million, was signed at thf end of March with a two-year-old company that opérâtes out of a small office in a Washington suburb. Fédéral Government Experts LLC agreed to provide the VA six million masks for $5.90 apiece bj April 25, with potential for another five million masks at the same price at a later date, for a total of $64.9 million, according to fédéral contracting data. "l'm getting ready to step on a Boeing 737 to bring the masks to the VA," said CEO Robert Stewart Jr., reached by phone on Thursday, where he said he was at the Port of Los Angeles about to go through customs. "l'm looking at a few million masks right now." According to Mr. Stewart's résumé, he was a Pentagon contracting officiai for manyyears, until leaving for the private sector in 2018. Fédéral contracting data shows Mr. Stewart's company also has a deal to provide FEMA with $3.5 million of N95 masks. The company isn't listed in government databases as having any prior fédéral contracts before the Covid-19 pandémie. —Ben KesUng contributed to this article. No. 2:19-bk-00787 Doc 159-1 Filed 06/05/20 Entered 06/05/20 15:20:39 Page 12 of 12
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