How hucksters and would-be profiteers invaded California’s online COVID-19 marketplace
In early April, Gov. Gavin Newsom launched a website where people and companies could help
In early April, Gov. Gavin Newsom launched a website where people and companies could help California gear up for the coronavirus pandemic.
The portal was designed as a marketplace for middlemen, manufacturers and business giants to pitch deals and donations with the state, which was scrambling to obtain medical supplies to fight COVID-19.
For some, the site was a chance to clear out their closets.
Someone in Los Angeles found seven masks while cleaning out an apartment and asked to donate them. A Santa Rosa resident offered an ice machine, an orthopedic boot and two N95 masks that were leftover from the 2017 wildfires.
“Sorry,” the person said, “that’s all I had left.”
Along with these small gestures, the portal soon became cluttered with hundreds of questionable offers and a dizzying array of sales pitches, a Sacramento Bee review of more than 6,000 submissions found. Hucksters looked to cash-in on the chaos, conspiracy theorists shared outlandish plans to quell the virus’s spread, and residents vented their frustrations about people not wearing masks.
Multiple groups floated pseudoscience as a substitute for vaccines. Someone suggested water mixed with oil from oregano could ensure pneumonia “will never form in the lungs.”
One person wanted crop dusters to rain antiseptics on streets and populated areas to slow the spread of the virus.
The chaotic marketplace offers a window into the Newsom administration’s frantic efforts to make sure California has enough equipment to handle a surge of COVID-19 cases in the state’s hospitals.
State officials leading that effort were forced to wade through the thousands of offers, rejecting most of them, but also accepting some questionable offers posted on the website that later fell through, including a $456 million deal to buy masks that is now under federal scrutiny.
On the website, dozens of people said they could produce millions of masks and face shields, thousands of ventilators and body bags. Companies advertised new mask-cleaning technology. Hotels lined up to be part of Project Roomkey, Newsom’s project to subsidize them into becoming shelters for the homeless and COVID-19 patients.
Nick Vyas, executive director of the Marshall Center for Global Supply Chain Management at USC, at first laughed at some of the would-be sellers a Sacramento Bee reporter described to him.
He then called the state’s system appallingly “backward” and said it allowed “price gouging, illegitimate product, false promises and extreme confusion that added to the crisis at hand and really spun out of control.”
“In 2020 in one of the most powerful countries and one of the most powerful states, our approach is really going back to the 18th century,” he said. “I think this is absolutely not how we should be managing a future pandemic or a catastrophic event of this magnitude with this level of intelligence.”
He said he hopes the state figured out a better system of acquiring gear in case another surge in COVID-19 overwhelms what supplies officials have been able to gather.
“There’s a distinct possibility of a second wave,” he said. “If we find ourselves in the same spot, shame on us. Because we did not learn our lessons.”
Officials for months have said the rush to get gear was like the “Wild, Wild West.” States were mostly on their own to stockpile their own medical equipment. Many were forced to compete with each other in a market where global demand far outstretched supplies.
The flurry of entries on the supplies website shows in granular detail just how frenetic things became.
Scores of entries indicated people had a line on gear and pressured the state to move quickly.
“My friend’s factories…”
“I know someone…”
“My father has a factory in China …”
At the height of the crisis, there were around 40 state officials from various agencies screening each entry and flagging ones worth a second look. Some of those screening and vetting procedures resulted in collapsed deals or canceled wire transfers. Other portal entries led to some of the most touted, high-dollar contracts of the pandemic, records show.
For example, though it was known for making electric cars and buses, an entry from BYD almost immediately after the portal launched said the LA-based company had recently modified its Chinese factories to make masks.
It could deliver hundreds of millions of masks, the writer said. Three days after announcing the website, Newsom revealed the state had struck a $1 billion deal with the company — a deal that subsequently became highly fraught and mired in delays.
California procurement workers locked in several other major, highly scrutinized deals after representatives reached out through the state website.
Bear Mountain Development Co. LLC contacted the state and said it had “up to 300 million masks that are currently located in California. Unit Cost = $5.75 (each) Available for immediate delivery.”
The state awarded the company a nearly $800 million contract but walked away after the company failed to deliver most of the supplies.
Likewise, Blue Flame landed a $456 million deal for 100 million masks after going through the portal, but that deal ultimately collapsed, too. The company is now under investigation by the U.S. Department of Justice, according to the Washington Post. Blue Flame has subsequently sued its bank in Virginia, saying it ruined the company’s reputation by improperly telling California officials the transaction might be “fraudulent.”
The state’s procurement process during the pandemic has been heavily criticized in the weeks since it entered hundreds of no-bid contracts signed without public input. The state has awarded approximately 410 no-bid contracts worth at least $50,000 apiece since March 1, according to a Bee analysis.
The contracts total about $3 billion, although the actual spending has yet to be calculated since many of the deals require payment after delivery of the product
Now, submissions to the portal are screened and subject to the state’s “enhanced vetting process,” said Mark Ghilarducci, director of the state’s Office of Emergency Services, during an oversight hearing last month. Ghilarducci said the process now includes consultation from health and supply chain experts as well as local, state and federal law enforcement and the FBI.
“We saw amongst vendors fraud, promises not kept, overstated capabilities, and an overwhelming number of individuals and companies working hard to take advantage of the situation,” Ghilarducci said, referring to the thousands of entries on the portal.
“It was really a miracle in many ways that there weren’t more challenges.”
‘Changing by the hour’
The website was the first, and in some cases the only, way for people to make an offer on gear.
Some of them could be dismissed easily as vague and suspicious.
A purported China-based company made grand promises and said it could explain more on the phone: “Almost everything u need to fight the pandemic…But I need a power of attony (sic) from u to quote, new policy. Not enough letters here, call me, i will explain.”
“Please Contact me ASAP for things,” someone who said they were from Texas wrote, “supply chain is literally changing by the hour.”
It’s unclear if the state called either entity. Neither returned The Bee’s requests for comment.
Another company, Get Rich Inc. in Walnut, California, proclaimed in a highly misspelled portal entry to have a line of millions of N95 masks. State officials were directed to go to a new website (with a copyright of 2023 at the bottom of the home page). “We still have all kinde of mask, with diffent price, they all have the FDA approved…”
Suspicious as the name may sound, the company appears to be legitimate, with incorporation papers on file with the state from 2017. Its owner did not return a call or email seeking comment.
All told, “very few” of the 6,000-plus portal entries in April prompted a call-back from the 40 people screening them, said Brian Ferguson, spokesman for the California Department of Emergency Services.
But, he said, the experience taught the state valuable lessons that improved its vetting process and will secure supply chains.
“The challenges the state faced is something we’re going to take with us in subsequent disasters,” Ferguson said. “We want to make sure there’s adequate supplies ready and that you have a plan for where you’re going to get the next thing we’re not thinking about right now.”
The process of weeding out the shady operators ensures that hospitals and county officials will have a pre-vetted list of state-approved, reliable sellers from which to buy equipment in the future, Ferguson said.
Aside from an overwhelming number of submissions and a crushing number of offers to supply masks, the portal devolved into a catch-all for volunteer services and people trying to cash in.
When Newsom announced an effort to house health care workers and people experiencing homelessness, some hotels across the state clamored to be part of the effort. A dozen La Quinta Inns across California volunteered with the same exact response. Other hotel chains did too, as did a property manager who claimed to have “over 100 vacant furnished apartments available.”
When Newsom announced an effort to deliver meals, bakeries, cafes and local restaurants across the state offered to help.
There was no shortage of out-of-the-box thinking.
One California engineering group volunteered to take its decades of work “designing high capacity rides and attractions for Disneyland” to create “a high speed, high capacity system to sample, test and eventually vaccinate” people.
“Unfortunately they never responded,” Peter McGrath, the company’s CEO said in an email to The Bee.
People suggested that machines for sleep apnea could be used as ventilators (in fact, those helped spread the virus in a nursing home in Washington). Someone associated with a high school robotics team whose season was canceled because of the pandemic suggested kids could convert robots to ventilators.
There were also unsolicited goods.
An Elk Grove company said it could supply 70,000 rolls of toilet paper each month.
An Orange County bar-game distributor pitched pool tables, air hockey, foosball, shuffleboard, game tables, arcade games. “People need us more than ever to enjoy their time at home with the kids.”
And in some cases, the portal became a place to vent frustrations.
Dynasty Group USA, a medical supply company in La Mirada, wrote that it was increasingly frustrated with the process.
“This is my 5th submission, not 1 phone call. This is a joke… we have supplies that can save lives. We are a vital source with 50 people sourcing daily in china. we have access to millions of units. we are not asking for upfront money.”
REACH Air Medical Communications Center in Sacramento asked for supplies. “I am only looking for 60 N95’s, 20 containers of hand wipes and 20 bottles of hand sanitizer gel. We are out of all and just trying to keep our Comms specs as healthy as possible.”
Martel Eye Institute LLC in Rancho Cordova: “We are a surgery Center and need PPE supplies. Need to start surgery again but need N95 masks and FEMA has taken most of the supplies. What do we do?”
Tensions weren’t always about supply chain logistics and the procurement process. As often happens with widely published email addresses and online portals, people complained about their neighbors.
Somebody under the name “Concerned Citizens of Warner Springs” demanded the state remove hikers on the Pacific Crest Trail.
Meanwhile in Lassen County, residents were upset at people not wearing masks or practicing physical distancing. But the anger didn’t stop there.
“I called your office and your staff was rude and NOT knowledgeable which I found up setting (sic), I was transferred when I requested to speak with someone more informed.”
It was unclear whether anybody returned the call.