Select Subcommittee Releases New Findings from Investigation into Fraudulent Federal Contracts for N95 Masks
Jun 17, 2021
New Evidence on $38.7 Million Fraudulent Scheme Underscores Vulnerability Created by Trump Administration’s Poor Pandemic Response
Washington, D.C. (June 17, 2021) — Today, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, released a staff memo identifying findings and releasing new documents obtained in the Select Subcommittee’s ongoing investigations into problematic contracts to acquire critical supplies in response to the pandemic.
Today’s memo sheds new light on how Robert Stewart, Jr., Chief Executive Officer and owner of Federal Government Experts, LLC (FGE), lied to the Department of Veterans Affairs (VA) and the Federal Emergency Management Agency (FEMA) in order to obtain multimillion-dollar contracts for N95 masks during the coronavirus pandemic and how federal officials failed to detect his lies, despite clear red flags. Yesterday, Mr. Stewart was sentenced to 21 months in prison and three years of supervised release by a federal judge following his February 2021 conviction for false statements, wire fraud, and theft of government funds.
Chairman Clyburn issued the following statement in connection with the release of today’s memo:
“The findings released today highlight yet another example of the fraud, waste, and abuse that pervaded the Trump Administration’s disastrous pandemic response. With no national plan in place, federal agencies like VA and FEMA were forced to scramble to find life-saving supplies during the early months of the pandemic—leaving them vulnerable for fraud and exploitation. This failure of leadership allowed those seeking to get rich and exploit the pandemic shortages to win multimillion-dollar federal contracts at inflated prices that they had no realistic plan to fulfill. Without these masks at VA hospitals, the lives of our veterans and frontline responders were needlessly endangered. The Select Subcommittee will continue its investigations into these critical failures in order to ensure that our nation’s medical supply chain is better prepared for the next public health crisis.”
Today’s memo includes the following findings.
Mr. Stewart Made More than 30 False Statements to Contracting Officials to Fraudulently Obtain $38.7 Million in Federal Contracts and Cover up His Failure to Perform
Documents obtained by the Select Subcommittee reveal new details regarding Mr. Stewart’s fraudulent scheme, including his negotiations with VA and FEMA and numerous false statements to contracting officials. For instance, Mr. Stewart falsely represented that he had millions of N95 masks “on hand and ready” for shipment, that “masks had been delivered to LAX” and other locations, and that “masks had been intercepted by a member of Vice President Pence’s Covid19 task force”—causing one VA official to recount that contracting with Mr. Stewart became “a shell game of ‘where are the masks?’”
Mr. Stewart Secured Contracts to Supply VA and FEMA Millions of N95 Masks at Inflated Prices
New evidence reveals that after VA officials told Mr. Stewart on April 5, 2020 that they would pay him only $4.00 per N95 mask, Mr. Stewart was able to drive the price up by claiming FEMA officials had notified him that same day of “their intent to purchase” two million N95 masks. VA ultimately agreed to purchase six million masks from Mr. Stewart at a price of $5.90 per mask, noting that “given the short amount of time and emergency nature of the procurement [the contracting officer] was only able to do a minimal amount of price analysis.” Ten days later, on April 15, FEMA awarded Mr. Stewart a contract for 500,000 masks at the price of $7.02 per mask.
VA and FEMA Failed to Perform Sufficient Due Diligence Prior to Awarding Contracts
Documents obtained by the Select Subcommittee show that VA officials raised repeated concerns over whether Mr. Stewart’s company “can actually come through with product,” but still awarded him multimillion-dollar contracts. An internal VA communication later acknowledged that there were “areas we could have addressed differently” during the contracting process.
New evidence also reveals that VA awarded Mr. Stewart a second contract worth $249,900 to supply N95 masks two weeks after the agency terminated his first contract and referred the matter to VA’s Office of Inspector General, and after concerns about Mr. Stewart’s performance and VA’s subsequent cancellation of Mr. Stewart’s first contract had been publicly reported. Although Mr. Stewart was not paid under either contract, VA officials admitted that working with Mr. Stewart was “a waste of time for the government” and cost the agency labor hours.
Officials Admitted that the Federal Government’s Lack of Preparedness Forced Them to Take Risks
Newly released documents show that federal officials admitted that they were forced to compete on the open market for limited supplies of N95 masks during the early months of the pandemic—resulting in the agencies having to pay “a premium for the supply” and rushing to award multimillion-dollar contracts “as quickly as possible,” including to an unvetted supplier, despite their concerns. These factors substantially increased the risk of fraud, waste, and abuse of taxpayer resources. One contracting officer who was involved in more than a dozen investigations related to potentially fraudulent contracts awarded during the pandemic told federal authorities: “The level of foolishness during COVID-19 had become pure ridiculousness.”
FGE is one of seven federal contractors that the Select Subcommittee has been investigating since July 14, 2020. Today’s memo follows findings related to other contractors previously released on March 30, 2021, including that the Trump Administration failed to heed warnings and refused to mobilize a coordinated response to procure supplies that were needed to protect Americans.
Click here to read today’s staff memo.
Click below to read the new documents released today:
Documents regarding VA’s $35.4 million contract awarded on April 10, 2020.
Documents regarding FEMA’s $3.5 million contract awarded on April 15, 2020.
Documents regarding VA’s $249,900 contract awarded on May 15, 2020.