Federal authorities have launched an investigation into a politically connected company that the state of Maryland says failed to supply millions of dollars worth of masks and ventilators.
The U.S. Department of Justice contacted Maryland officials making them aware of the investigation, according to sources with knowledge of the probe.
An attorney for Blue Flame Medical defended the firm, arguing the company will fulfill its obligation to supply equipment needed during the pandemic.
“It is beyond comprehension what this is all about," Ethan Bearman, attorney for Blue Flame Medical, said of the investigation. "Blue Flame Medical is devoted to getting masks and ventilators to the people in Maryland who so desperately need them. The company has a contract with the State of Maryland to deliver 1.5 million masks and 110 ventilators by June 30, and Blue Flame Medical fully intends to honor that contract.”
Blue Flame Medical was founded in late March by a pair of political consultants with no experience in the medical field, Mike Gula and John Thomas.
The state signed a $12.5 million deal April 1 with Blue Flame Medical LLC to provide the N95 masks and ventilators. State officials say the order was supposed to have shipped by now and it hasn’t. The equipment was to ship by April 14, according to documents provided by the state. Blue Flame has maintained it has until June 30 to fulfill the order. The state paid half of the money up front, but the goods never arrived, and Maryland canceled the contract, state officials have said.
“It is unconscionable that anyone would try to exploit this pandemic for profit or for personal gain,” Gov. Larry Hogan said during a news conference in Annapolis on Wednesday afternoon.
Hogan said his office asked Maryland Attorney General Brian Frosh to investigate the company for “failure to perform and for potential misrepresentation.”
Blue Flame has hired former Attorney General Doug Gansler as one of its lawyers. He referred questions to Bearman.
“We have received communications from Douglas Gansler, Esq. of Gansler, Cadwalader, Wickersham & Taft LLP, legal counsel for Blue Flame Medical, but as has been the case for several weeks now, there are still no shipping details to corroborate any claims of imminent fulfillment,” said Mike Ricci, a spokesman for Hogan.
Federal investigators are looking into whether Blue Flame took advantage of emergency contracts to buy goods and supplies related to the coronavirus pandemic, sources said. The Hogan administration has awarded more than $341 million in quickly approved contracts during the crisis.
The Washington Post reported Wednesday that the investigation also includes the company’s actions in California, where a different contract with the firm was terminated.
Blue Flame won a deal in Maryland when one of the company’s principals emailed an acquaintance in Hogan’s administration to make a pitch for a business deal, according to the governor’s office. Before that, state procurement officials “had no knowledge of or previous working relationship” with the Blue Flame founders, according to the state.
Blue Flame said it would work with a partner company, Hakim Unique Group, to source personal protective equipment that Maryland was seeking to supply.
State procurement officials verified that Hakim Unique Group was a legitimate firm specializing in medical management that was based in Hangzhou, China.
Hogan’s top legal counsel, Michael Pedone, referred the matter to Frosh, claiming the company misrepresented its ability to deliver the goods. Frosh’s office confirmed receiving the referral but has declined to comment further.
The sudden rise in demand for masks, gowns, gloves, ventilators and testing supplies because of the coronavirus pandemic has left hospitals and states scrambling to find suppliers.
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Maryland has awarded more than 100 emergency contracts in recent weeks, according to Nelson Reichart, deputy secretary of the state Department of General Services, which oversees state purchasing.
Reichart said states are “all clamoring for the same goggles, gowns and gloves.”
Those contracts will undergo review by the state Board of Public Works, composed of the governor, comptroller and treasurer. The first contracts will go before the board at its next meeting in two weeks, Reichart said at the board’s online meeting Wednesday.
Some state lawmakers have called for more oversight of the procurement process in light of the contract dispute with Blue Flame.
Hogan said the state found itself in the position of needing to quickly find medical equipment that it isn’t used to having to buy. It had to turn to “unusual sources” to procure the equipment amid a competitive market.
“We were lucky to catch this one situation. Hopefully there aren’t others,” the governor said.
Baltimore Sun reporter Justin Fenton contributed to this article.