The state of Maryland on Saturday terminated a $12.5 million contract for personal protective equipment with a firm started this spring by two well-connected Republican operatives.
State officials said the company, Blue Flame Medical, failed to deliver masks and ventilators as promised and that the matter has been referred to Maryland Attorney General Brian Frosh, a Democrat, for review.
Blue Flame received a nearly $6.3 million down payment from Maryland in early April - after promising to provide within weeks desperately needed personal protective equipment for front-line medical personnel dealing with the novel coronavirus.
Ethan Bearman, the Los Angeles attorney for Blue Flame Medical, said Saturday he was unaware the state was unhappy with the firm.
"This comes as a surprise," Bearman said when told that the attorney general had confirmed receiving a referral about the company from the state General Services Department. "This does not comport with what I know of Blue Flame Medical."
However, a letter sent to the firm Thursday by Danny Mays, Maryland's director of procurement, revealed deep frustration.
"Despite numerous requests for information and order status, Blue Flame Medical has yet to deliver any items under this order, or provide any pertinent data as to a pending shipment," Mays wrote. "As Blue Flame Medical LLC has failed to honor its delivery commitment under the terms and conditions, [the Department of General Services] is now formally requiring Blue Flame Medical to cure this deficiency."
Bearman acknowledged that delays had occurred in filling the order but said such problems have become commonplace this spring during the chaotic rush to locate masks and other protective equipment.
The Wall Street Journal first reported the contract's cancellation Saturday.
Blue Flame was started in late March by Michael Gula, a Republican fundraising and lobbying consultant in Washington, and John Thomas, a California political consultant.
Before moving in to the medical supply business, Gula was known in GOP circles for his political fundraising prowess. His firm has raised campaign funds for Sens. Patrick Toomey of Pennsylvania, Steve Daines of Montana, Ron Johnson of Wisconsin and dozens of other influential Republicans. He startled some longtime clients in March when he announced he was quitting the fundraising world during an election year to start the medical supply business with Thomas.
Thomas recently worked as a strategist and fund-raiser for Republican Don Sedgwick, who sought to run against Rep. Katie Porter, D-Calif., but lost in the March primary.
The two Republican consultants incorporated their firm in Delaware on March 23 and a week later received the contract from Maryland.
Gula used a connection to a staffer in the administration of Gov. Larry Hogan, a Republican, to initially make a pitch for the sale, according to a Maryland official who spoke on the condition of anonymity to discuss a sensitive legal matter. After Gula started using that staffer's name on a reference sheet to seek contracts with other states, the official said, the staffer referred the matter to the chief legal counsel for Hogan, Mike Pedone.
Pedone then referred the matter on April 9 to Frosh's office, the official said.
Gula and Thomas did not respond to requests for comment.
The April 1 purchase order, which was obtained by The Washington Post, identifies June 30 as the delivery deadline. But the Maryland official said that is only because June 30 is the end of the current fiscal year. The agreed upon shipping date for the masks and ventilators was April 14, this person said. Bearman did not respond to a request for comment on this complaint.
The order shows that Blue Flame agreed to provide 1.5 million N95 masks and 110 ventilators, and that the state wired the company nearly $6.3 million as a deposit.
Michael Ricci, a spokesman for Hogan, said in an interview Friday that none of the masks and ventilators had arrived.
"We placed this order on April 1, and we haven't gotten anything," Ricci said. "We received no shipping confirmation. Obviously, that's a concern. That's not been the case with any of our other vendors."
The price Blue Flame was charging at the time for N95 masks - $4.52 each - was much higher than the list price provided by manufacturers.
Frosh confirmed Saturday the matter had been referred to his office.
Frosh would not comment on the contract, the investigation or what precipitated the referral.
Asked about the delays in fulfilling the contract, Bearman said: "I know Blue Flame Medical wanted to deliver the shipment [masks and ventilators] in April. I know, too, of actions by the Chinese government. Their supplier in China wrote a letter to Blue Flame Medical informing them that the Chinese government interfered with the supplier's ability to ship."
Bearman said his client "has done everything in its power to fulfill, and has alternate suppliers to fulfill the order as written. And they so informed the state of Maryland."
The Hogan administration has been aggressively working to shore up the state's supplies of equipment needed to fight the pandemic, including the purchase of 500,000 coronavirus tests from South Korea last month.
Local officials in Maryland were frustrated that those tests were not made available for their use, in part because of a lack of swabs, reagents and other testing supplies.
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