Covid Aid Scams and Dodgy Deals Could Have Been Avoided

(Bloomberg Opinion) -- Almost every scam is a little bit funny, even when linked to the deadly serious coronavirus. Consider BuzzFeed's latest installment in the genre:

The site reported on Thursday that Yaron Oren-Pines, an electrical engineer in Silicon Valley, managed to make millions of dollars selling ventilators he apparently never had and never could supply. Three days -- three days! – after he tweeted to President Donald Trump, “We can supply ICU Ventilators, invasive and noninvasive. Have someone call me URGENT,” New York State paid him $69.1 million for 1,450 ventilators. BuzzFeed noted that amounted to $47,656 for each ventilator – or at least three times the normal price of high-end ventilators.

New York officials told BuzzFeed that Oren-Pines seemed credible because he came recommended by a crack team of experts: the White House's coronavirus task force. The team is led by Vice President Mike Pence and includes Treasury Secretary Steven Mnuchin, Surgeon General Jerome Adams, Health and Human Services Secretary Alex Azar, National Economic Council Director Larry Kudlow and others. (After BuzzFeed published its report, Pence's office said the task force wasn't involved in the ventilator contract; New York said it canceled the contract and got most of its money back.)

Oren-Pines doesn't appear to have a background in medical supplies or government contracting, but he was loaded with good old-fashioned ambition. “He's always a go-getter,” a friend told BuzzFeed. “Anytime there's opportunity, he's always been out there trying to help and make a buck.”

This one has all of the makings of “funny”: outrageous behavior, stupidity, gullibility, ribald incompetence and many unanswered what-the-hells.

That's not to say that L'Affaire Oren-Pines also isn't obscene and disturbing. It's got it all. And it's proof that a vacuum in federal coordination and leadership and a dearth of supplies have forced governors across the country to procure medical equipment in a Wild West environment. Confronted with a global pandemic and routine second-guessing from the left and right, they've had to scramble for solutions and have sometimes rushed into ill-considered contracts.

It's also a reminder that the public response to the coronavirus is gilded — $2.6 trillion in spending from the federal government alone — and yet it already has far too many Keystone Kops moments, and far too little sophisticated oversight, than anyone should be comfortable with. The Treasury Department and Small Business Administration's multiple fiascos surrounding the $669 billion Paycheck Protection Program offered some of the first examples of this. Federal and state contracting whodunits, such as the one featuring Oren-Pines, are an example of another fresh stream of problems that is likely to run much deeper given what we've already seen.

Representative Katie Porter, a California Democrat, flagged this in a recent op-ed published in the Washington Post. Contracts procured under the Defense Production Act aren't, like most federal contracts, public documents. This winds up “leaving Americans in the dark about one of the administration's key tools in its Covid-19 response,” Porter wrote. She recommends that future relief legislation tries to cure this by ensuring that all DPA orders are made public. Transparency is a crucial and important first step in all of this, but effective federal and state oversight deployed before contracts even go out the door is, perhaps, even more important. Porter also cited a few instructive examples of contracting possibly gone haywire:

A no-bid, $96 million deal for respirators issued to a Canadian chemical and rubber company, AirBoss of America Corp. ProPublica, which first reported the contract, said that the White House took the unusual step of ordering the Federal Emergency Management Agency to give the contract to AirBoss. ProPublica also found that as of early April, more than 25% of the Covid-19 response contracts were awarded with no competitive bidding.
A $55 million deal for N95 masks awarded to Panthera Worldwide LLC, a tactical training company based in Virginia that also has no history of producing medical supplies. The Washington Post, which reported on that deal, said that Panthera's parent company is bankrupt and hasn't had any employees since May 2018.
A much more modest $75,000 contract for masks awarded to MyPillow Inc. The company's chief executive officer, Michael Lindell, is a generous donor to the Republican Party and Trump famously invited him to speak at a press briefing in the Rose Garden last month. MyPillow doesn't make masks and had to look for a subcontractor to fulfill the contract, according to Politico.

In addition to Porter's examples, here's another recent episode that was fortunately derailed:

Christopher Parris, a 39-year-old Atlanta resident, was arrested by federal authorities on April 10 and charged with fraud for trying “to secure orders from the Department of Veterans Affairs for 125 million face masks and other personal protective equipment (PPE) that would have totaled over $750 million,” according to the Justice Department, which has also uncovered possible fraud by businesses that received PPP loans.

Even if you don't find any of this funny, disgusting or outrageous, you should, at the very least, find it worrisome. The trillions of dollars that have flooded from state and federal coffers into the business community isn't your governor's or your senator's or your president's money. Its yours. And there doesn't appear to be enough people tracking it very carefully.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.