S1: Have you tried to get a hold of a protective mask recently, like just for yourself? Yeah, you know, I need to. David McSwain is a reporter for ProPublica. He’s been holed up at home like a lot of us lately. When he goes out, he wears this knockoff and 95 that he found a few weeks back.
S2: And I know it’s a knockoff because it has the year loops and it’s not a strap around the back of my head. So even if the material is in ninety five grade, it doesn’t offer you the same protection.
S1: Lately David’s been thinking about how he could get his hands on the real thing. But he knows the market for masks right now. It’s crazy.
S2: I picked up one of those masks at a grocery store and it was like six bucks, which is about six times what it was four months ago. Probably more, because these are from China. They’re probably worth 40 cents. But, you know, it’s like if if it has some level of protection, I’m willing to pay right now.
S3: I talk to my managers about maybe paying out the nose for a couple of masks.
S4: I know how David feels. I tried to get masks recently. They weren’t even. And ninety five’s just basic cloth masks. I place my order. I sat back and waited. A couple weeks later, I got a letter from the company had ordered from. They said their masks were stuck in China. Customs had delayed any exports of PPE.
S1: I wanted to talk to David about all this because over the last few weeks, he hasn’t just been hunting for masks for himself. He’s been tracking protective equipment as it pops up and then disappears around the country, watching his masks slip through the hands of hospital systems, state agencies, even the federal government, because all these places are having the same problem.
S2: Yeah, I mean, you’ve got extreme desperation, extreme demand and unprecedented scarcity. So people see an opportunity to make money and hospitals and agencies and private citizens are willing to pay for it.
S4: On today’s show, how David McSwain went on a bizarre journey with someone who saw how desperate the country is for masks and decided to capitalize on that. It’s a trip that reveals a shadowy marketplace, one that’s creating extremely high prices and a lot of deals that just fall through this story.
S5: It’s part mystery, part farce and part tragedy. I’m Mary Harris. You’re listening to what next? Stick with us.
S1: David’s journey into the shady mask market, it begins back in April. He wanted to know how the federal government was getting access to protective equipment when it was in such woefully short supply. He was especially interested in who was securing no bid contracts for this stuff and how quickly those contracts were being fulfilled.
S2: We just saw all of a sudden that the government was just going to spend and spend and spend. So, you know, we knew there would be stories there. So I coordinated with one of our really good Duna analysts, and I can do a little bit of data. And I said, why don’t we just pull it in and just start splitting it up? Take a look. So this is like a massive spreadsheet. Oh, it’s worth. It’s worse than it’s. It’s a relational database that you’ve got to kind of put together and you can pull a spreadsheet out of it after you run some analysis. And what I’ve started to do is, you know, let’s just pull down every contract that didn’t have competitive bidding. That’s usually a telltale sign of the government’s desperate for something. We knew the emergency powers were in effect and they weren’t bidding these things like they normally do to make sure that they’re hiring reputable companies at a fair price. So we just pulled those down, left them by agency. And you started to see some interesting things.
S1: David, were you particularly interested in the V.A. when you were looking at this database of federal contracts?
S2: No, I wasn’t, actually. I tried to approach when I’m doing any sort of data analysis, I try to approach it with without a bias, just sort of see where the numbers take me and look for outliers. And the V.A. jumped out in terms of the volume of contracts they’ve awarded. How many of them were no bid contracts and how many of them were awarded to contractors with no previous experience? I had never covered the V.A. before. You know, I haven’t really touched on that issue, but it was clear to me that they were scrambling. You know, you’re not going to hear the V.A. say this, but this looks like panic buying. And it stood to reason. I mean, the V.A. health system has something like more than 100 hundred health care facilities. Hundred and seventy medical centers, et cetera, and just tens of thousands of nurses and doctors who are really treating. I mean, they’re treating some of the most vulnerable people out there, people who are, you know, among the most susceptible to this virus. So they needed masks and and it just looked like they were really. Taking advantage of being able to get around the competitive bidding to just try to cast a wide net and bring in what they could. That’s what the data suggested.
S1: You ended up focusing on this one company, in particular, federal government experts, LLC. Why did they stand out?
S6: Well, two things. And this is just sort of from experience, the name. Federal government experts to me just sounded kind of funny, like it was just a little on the nose. Yeah. This was just clearly a company that was going after federal contracts. Right? Just the name of it. And it was an LLC which told me, you know, that this this is a smaller player, most likely. Sometimes we’ll see ELLISS or really just somebody working out of their basement. And so in some of these people deliver. I mean, that’s not necessarily a bad thing.
S2: But I was curious because here’s this company by that name, they got a thirty four and a half million dollar no bid contract. Is that big? That’s big for a no bid. Yes. In the context of the federal government, it’s chump change. Right. But it’s a big amount for a small company. I mean, this was just astronomical compared to the revenue this company was taking in, according to what we can tell through available credit records.
S1: What were they supposed to deliver for that money?
S6: So it’s thirty four and a half billion dollars for six million and ninety five mask’s, which comes out to about five. Seventy five a mask. This was Hodges mid April. Now you’re seeing that price kind of everywhere, somewhere around there, but they seem pretty high.
S1: What should the government’s been paying for masks like that?
S2: You know, it’s hard to tell anymore because it’s. You know, experts I’ve talked to say, you know, there just aren’t any. Ninety five mass slept, but for mass that were out there based on the manufacturer’s recommendation, these should have been around two dollars apiece, which is still high. I mean, six months before they were, you know, I think less than a dollar apiece. So this this seemed like, you know, a pretty expensive buy with an untested company. You know, we looked into it and it was their first ever federal contract that was reported.
S1: Yeah. Did federal government experts have any experience acquiring medical equipment?
S2: No. I mean, that was obvious from the Web site. You know, I was just kind of poking around and, you know, they’re advertising like I.T. consultancy, which is which is like a it’s a vagary that you just, like inevitably comes up when you’re writing about government contracting. You know, it’s like he at a dinner party and someone says, I’m a consultant and you’re like, I don’t know what that means.
S1: Yeah. My favorite part of your article was you said the company’s Web site advertised a block chain A.I. solution to government procurement, whatever that means.
S2: It was unclear what that means.
S1: So you see this company that looks pretty green with a big no bid contract for masks and no experience in the medical supply chain. So what do you do then?
S2: I was looking for other companies. I was thinking I was gonna do a story just sort of on these untested companies being hired and, you know, sort of get my ducks in a row and then we’re going to call everybody. Well, that’s when The Wall Street Journal wrote a story that was pretty similar to what I was thinking I would do, just sort of the first pass. And in that day, you know, anyone who is crunching the data would see what I saw. They saw the federal government experts had a big deal with the V.A. and this was a new company. And they quoted the CEO, Rob Stewart, as saying, I’m a decent, you know, a reputable company and I’m looking at the mess right now. Got him. And I thought my first thought was like, you know, damn it. I got scooped on this. Like, maybe we maybe we pivot and then I just sort of get a little bit more. I was like, how did this guy get six months? Like, you had no experience in this space. So maybe that’s just something I should find out. You know, I was just curious.
S1: So maybe that’s the story. Like, how do you how do you do this, Hatrick?
S2: Yeah. I mean, I didn’t know. I thought, let’s find out, you know, because when you pitch a story, your editors want you to deliver on it. I was like, well, let me just call the guy.
S7: So I called him up and said, hey, you know, I just wanted to know how you got this deal or your new company and and how you’re doing this.
S2: You told the Journal that, you know, you’ve got the mass. And that’s when he tells me, well, you know, I don’t I don’t have them yet. They’re there in L.A. and I said, well, the Dart, the Journal quoted, you were saying you were in L.A. looking at the masks and that you were about to hop on a plane and what not. And he said, no, no, no. They got it all wrong. I’ve been in quarantine since December there in L.A., but tomorrow I’m going to fly to Chicago to supervise them being delivered to the V.A. at their distribution center outside Chicago.
S1: So that’s a pretty big inconsistency to have one piece of journalism saying this guy’s looking at the masks, he’s about to deliver them. And then you call him up and he’s like, well, actually, I wasn’t looking at the masks and I don’t have them, but I’m gonna get them right.
S2: And he said the journal got it wrong. And I could have you know, it could’ve been a misunderstanding. Sometimes we’ll say, you know, I’m looking at this thing, but you don’t mean that literally. You know, maybe he’s looking at an invoice, you know? So I you know, I was giving him the benefit of the doubt. But something something didn’t seem right. There were just some questions. And so I just said, well, that’s interesting. When do you fly out? He said, well, I fly out tomorrow morning. I’m going on a private jet. And I said, Oh, really? Can I come with you? Sure.
S1: Okay. Why would you say that? Like, why would I say. Yeah. No one wants to fly right now. And there are some inconsistencies in his story. Why did you want to get on the plane?
S2: Well, I’m on board. You know, I’m locked up in my apartment here. No, I mean, joking aside, the CEO of a company with a major contract to deliver a lifesaving supplies to a really hard hit agency where people are dying, says, come with me on my private jet. Better go.
S1: Before you got on the plane, I wonder if Rob Stewart, the CEO of this company, if he was able to answer your question of how this guy with no experience in this industry was able to potentially get his hands on six million masks.
S2: I mean, that’s what made me curious. He was being a little cryptic. I don’t think he was lying to me. I think he was really trying to tell me that this is insane, that there’s just craziness out there right now. And he said, well, you know, that’s that’s the real story, Dave. These buccaneers and pirates, you know, these folks who are. Coming in and they’re cutting deals, and I know a guy who knows a guy brokers and middlemen, and I said, Oh, really? That’s interesting. Isn’t he one of the buccaneers and pirates? Well, from his vantage, no. I mean, he he is a public facing company who got a contract that’s listed in a public database. You know, his desire to deliver seemed genuine. I mean, there’s no doubt there was profit motivation. This is really good for his company. It’s a lot of money. But for him to connect to the product because he didn’t have a connection of the supply chain, a supply chain, which, by the way, is like factored in the total mess. He had to deal with people sort of in the shadows.
S1: So you decide to meet up with Stuart on his plane. What happens that morning when you get on that morning?
S2: You know, we meet at the executive wing at those international. And, you know, he comes in in a nice suit. You know, it seems energized and confident. This is the first time you’re meeting him in person. Yeah, yeah. We hadn’t met in person. And, you know, we get on the plane and he starts to tell me that he has nothing to hide. He’s he’s a good, reputable companies trying to do his best for the country. And he, you know, he thought, bring me along to prove that he’s you know, he is who he says he is.
S1: Yeah. There’s clearly a lot of pride wrapped up in what he was doing. You know, he’s chartered this private jet to go get these masks. He’s brought you along and then he says, OK, let’s make a stop and pick up my parents.
S2: Yeah, that. So that part was difficult. My difficult because I understood what he was doing. You know, any any good son wants to share or daughter, I imagine, wants to share their success with their parents. So there was a piece of me that wanted wanted him to succeed, you know, but I’m just there to watch. And, you know, we stop in Columbus, Georgia. That’s where his parents are. That’s where the tourist folks are. But you know as well as well, actually, as we took off from D.C., we were chatting and it became clear to me that he didn’t actually have the mass. The deal had fallen through in L.A., that if, in fact, there was a deal. He said, Does Mascotte bought out from under him? And I was like, Well, Rob, what? Why are we flying on a private jet that you paid twenty two thousand dollars for? To go to Chicago and you don’t have any masks or anywhere to ship them there, any, he tells me, you know, it’s kind of a faith thing. And in a way, I just felt like we were just kind of too far down the road in his mind, you know, stay the course. And part of that involved bringing his parents along. You know, he didn’t tell me this, but part of me wondered if he just had already told his family that he was coming down in the jet. And, you know, I wanted to follow through.
S1: So let me just see if I understand the timeline. Right. So you get on the plane with the CEO of this company, Rob Stewart, and he explains when you get on, like, OK, we were supposed to be getting these masks. Actually, there are no masks, but I’m gonna go pick up my family anyway and hope it works out.
S2: Yes, that’s exactly what he said. But with a little more bravado, it wasn’t. I hope it’s going to work out. It was. This is going to work.
S1: So the family gets on the plane and sort of some friends and people who are working with him. And everyone heads to Chicago. You describe how Rob Stewart and his family. They go to this hotel and basically Stewart is just on the phone with all kinds of people calling in favors, trying to make this deal happen. What kinds of people is he talking to?
S2: Yeah, it was, you know, as a fly on the wall. I couldn’t I couldn’t hear the other side of the phone, but I could hear his head. And occasionally he would stop and tell me what had just happened. But no, he was on the phone with the V.A. contract managers talking about getting an extension or saying, you know, I’m working on it. It’s coming in. And then he you know, he’d be on the phone with the guy who said, hey, I can help you get the masks. And they’d be talking about logistics. And he and another colleague we’re talking about, well, do you know a guy who has a freight company, you know, and then the conversation would turn to, well, OK, what if we get a cargo jet that just runs a few trips and then we get the other half of the six million masks on eight trucks? And, you know, he’d be telling somebody on the phone, no, I want to deliver all the mass at once. You know, it’s too risky to split up the shipment because, you know, we’ve got to pay for insurance twice. And, you know, the mass might be damaged and then the V.A. is not going to pay, you know, just a lot of that. It was all very hurried, increasingly stressful. You know, I sort of watched this slowly. The realization came to each person that, you know, we don’t have any masks, we don’t have a way to ship them. And then the conversation turned to, well, you know, if only one of these buccaneers and pirates, you know, if the supply chain weren’t some muddled and all the while, you know, I’m witnessing this, but his his folks are coming in and now it’s kind of a family affair that isn’t working. And finally, Rob says to his mom. You know, Mom, I’m sorry you came out here for nothing, which was a sad moment, you know. And that told me that, you know, I don’t know if it was delusion or pride or or authentic belief, but, you know, he really thought he was going to pull it off.
S1: Yeah. It’s funny, your article about this whole debacle. It kind of reads like a caper, like it has a little bit of a madcap quality and there are funny details. But listening to you retell it now, it feels much sadder.
S2: Yeah. I mean, the moral of the story was, in my mind, the V.A. wanted masks and it was just throwing contracts out. And it was bizarre to take this flight knowing that you didn’t have any masks. But it was also a tragedy in a way, because this is somebody trying to launch his business and appeared to think that this was his big break.
S1: What happened with Rob Stewart’s contract with the V.A.? Did he ever get any masks?
S2: No, he didn’t get any masks. And, you know, I came back to D.C. and described a little bit of what I had seen to the V.A. to ask them for comment. You know what? That ended. You do have this company. Are you extending his contract as he requested, et cetera? And then, you know, they told me, I think the next day or maybe the day after. Actually, we’ve just terminated this contract and we’ve referred it to the inspector general to take a look at it, which implies that there’s some suspicion of impropriety. Rob says that, you know, he’s going to cooperate fully. Does anything to worry about, he says. So it’s unclear what they’re looking into there. But they hadn’t told Rob that the contract had been terminated. And I had to call him and ask him about it. So he actually found out about it from me. From his point of view, he it’s sort of been played by the system. This black market that sort of emerged out of the government’s desperation for a really scarce product.
S1: Yeah. I’m curious who you see as the bad faith actor here. Like, who’s messing up? Is it the V.A. that put all these made all these no bid contracts available? Is it Rob Stewart who thought he could do something when he didn’t have enough experience? Is it those fixers and buccaneers that Stewart was complaining about?
S2: So anytime I come into a story, particularly the contract story, I sort of remind myself of Hanlon’s razor, you know, never attribute to malice that which can be explained by incompetence or I think the actual phrase is stupidity. But I prefer incompetence. I think what we had here is an agency that was desperate for something so lax. The rules as well as most of the federal government did. And they threw contracts at several companies, not just his that I don’t think in a time of competitive bidding would have gotten those deals. The V.A. says while we are, you know, we’re doing all this vetting. But the truth is they just didn’t do the normal amount of due diligence because these were handed out within days. I mean, the contract solicitation day and the same date are the same often in these cases. So they’re handing them out. And maybe there’s good reason, you know, you could argue that these contracts, which look more like bounties than contracts. It’s more like go out and get stuff and then we’ll pay you. That might be a good way to get these things in this environment. But the V.A. is encouraging some of this market. And was this even necessary? Why couldn’t the V.A. buy from the source?
S1: Yeah. I mean, I was having that thought, too. Like, why do you need these third party folks? Isn’t this why we have the Defense Production Act?
S2: Well, the answer is the V.A. is being cagey in their responses to me. But the answer appears to be that FEMA’s really leading the charge here on gathering up P.P. and they’re deciding where things go and then in charge of the national stockpile. But the V.A. is a special agency because they’ve run the largest hospital system in the country. They needed this stuff now. So in a way, it would make sense to, you know, sort of have guerrilla fighters out there for you trying to find these things so they couldn’t wait. Right. And from the V.A. point of view, you know, the thing that they’ve told me repeatedly when I’ve asked about not just this contract, but others that have fallen through. Well, we didn’t pay anybody. The V.A. has not once paid for items that weren’t delivered.
S3: But for me, the real conflict here, the real concern was this is about time, which we don’t have. Nurses and doctors need these things in these hospitals. People are dying. And while we’re waiting on these supplies, you have these brokers and middlemen and untested companies jockeying for these supplies and driving up the price. And, you know, shipments are being lost and then FEMA takes stuff. And all of this stuff is happening with this lifesaving product before it can actually get to people whose lives depend on it.
S4: David McSwain. Thank you for joining me. Thanks for having me. Jay, David McSwain is a reporter for ProPublica. And that’s the show. What next? Is produced by Daniel Hewitt, Mary Wilson and Jason de Leon. Every day this show is a lot better because of the hard work of Alicia McMurry and Alison Benedikt. Thanks for listening. I’m Mary Harris. I’ll talk to you tomorrow.