GOP operatives’ business probed over virus contracts
WASHINGTON — A company created just six weeks ago by a pair of Republican operatives received hundreds of millions of dollars in payments from desperate state and local governments for coronavirus supplies but is now facing a federal criminal investigation and a rising chorus of complaints from customers who say their orders never arrived.
The company, Blue Flame Medical, had boasted that it could quickly obtain coveted test kits, N95 masks and other personal protective equipment through a Chinese government-owned company with which it had partnered, according to documents obtained by the New York Times.
Blue Flame was started by a pair of Republican political consultants, Mike Gula and John Thomas, who did not have much experience in the medical supply field. Gula’s fundraising firm has been paid more than $36 million since 2008 by a range of top Republican politicians and political committees, while Thomas has served as a general consultant to a number of campaigns.
Thomas had said in an interview in late March that the pair had developed “very, very large networks” through their work in politics that would enable them to secure supplies from manufacturers, and connect to customers, such as government offices, large medical systems and law enforcement agencies around the world, including in the Middle East.
The company’s pitch — which was accompanied by an endorsement from a well-connected Chinese businessman who is an associate of Thomas — struck a chord with government agencies scrambling to obtain lifesaving supplies as the severity of the pandemic was becoming apparent.
Orders came in from state governments, local police departments and airports in California, Florida and Maryland, according to interviews and documents.
But things have not gone as planned.
Supplies never arrived
The state of California quickly clawed back a $457 million payment for 100 million masks, as first reported by CalMatters. Other state and local agencies that paid Blue Flame say the supplies never arrived or that orders were only partially filled.
The Justice Department is pursuing a criminal investigation into the company, according to people familiar with the investigation, which was first reported by The Washington Post.
Some of the company’s clients are requesting refunds or threatening their own investigations.
Blue Flame’s lawyer, Ethan Bearman, did not respond to questions about the complaints, the demands for refunds or the federal investigation.
“We have spent close to $5,000 on unfilled items and we need to have it all refunded,” wrote Daniel Lynch, a commander with the Melbourne Police Department in Florida, in an email to Blue Flame officials this month after spending weeks waiting for masks, face shields and surgical gowns.
“At this point, if you do not refund the City of Melbourne this money, I will consider it theft/ fraud, and move this to a different direction,” Lynch wrote in the email, obtained under open records laws.
Representatives for the Maryland State Police also said they had not received supplies ordered from the company in late March. And separately, the Maryland Department of General Services moved to cancel a $12.5 million contract for masks and ventilators, and asked state law enforcement officials to investigate, as first reported by The Wall Street Journal.
The willingness to pay huge sums to an unproven company reflects a desperate clamor to obtain vital equipment at a time of relatively limited supply. And Blue Flame’s inability to quickly make good on its promises underscores the logistical challenges and uncertainty surrounding a private production chain largely influenced by an unpredictable Chinese government and shrouded in concerns about profiteering.
New York state paid a Silicon Valley electrical engineer $69.1 million for more than 1,000 ventilators on the recommendation of the Trump administration, which passed along the proposal after it had been highlighted by a supplychain task force assembled by President Donald Trump’s senior adviser and son-in-law Jared Kushner.
But the engineer had not been vetted and did not deliver a single ventilator. New York is now seeking to recover the money.
Agencies scrambling
State and local agencies “were in a very difficult position, trying to vet companies that were nontraditional suppliers or third parties,” while at the same time “scrambling and quite frankly competing with each other to get access to either stockpiles or a reliable supply chain,” said Louis Grever, executive director of the Association of State Criminal Investigative Agencies.
“There was some real fear here about whether or not these thirdparty vendors and suppliers were legitimate, whether or not they truly had access,” said Grever.
He circulated an inventory list from Blue Flame to state law enforcement agencies across the country after the company was recommended to him by a law enforcement consultant named Laura Milford and her husband, James Milford, a former deputy administrator at the U.S. Drug Enforcement Administration.
In an email sent to Grever, Laura Milford wrote that Blue Flame had “teamed with” Miami-based intelligence and security firm V2 Global, which indicated in promotional materials that its coronavirus response team included her husband, as well as other former officials, including Kevin McAleenan, Trump’s former acting homeland security secretary.
(A person close to McAleenan said he is not involved with Blue Flame, and only agreed to provide crisis management consulting to V2 on a case-by-case basis two months ago.)
While Blue Flame had incorporated just two days before Milford had sent the email, she called the company “a prominent aggregator” of “masks, travel kits, COVID-19 test kits and Personal Protective Equipment important to the Coronavirus response.”
After circulating the price sheet, Grever said, he almost immediately received inquiries from local and state law enforcement agencies in Arkansas and Florida interested in doing business with Blue Flame, and referred them to Laura Milford, who served as a liaison to Blue Flame.
“I’m going to be honest with you, I felt like I was misled about what the nature of the company was,” said Grever, a former FBI official. He said it appeared to him that Blue Flame officials overpromised because they “thought they could rely on associates from the past” but in the end failed to deliver.
Feeling misled
In an email, Milford suggested Blue Flame misled her about its capabilities. The company, she said, “purported to being able to provide Personal Protection Equipment (PPE) at a time of high demand and crucial need when suppliers were extremely hard to find, if at all.”
She said she is not in business with Blue Flame and “was merely generating awareness of a potential PPE supplier to agencies who would perform their own due diligence.”
After Maryland state officials complained about the delay in their $12.5 million order for 1.55 million N95 masks and 110 ventilators, Blue Flame blamed Chinese officials for preventing the shipment arranged by Great Health Companion Group, according to a person familiar with the situation.
Bearman, Blue Flame’s lawyer, had issued a statement to The Times earlier in the week saying the company “fully intends to honor” the Maryland contract, and “is devoted to getting masks and ventilators to the people in Maryland who so desperately need them.”