Federal Prosecutors to Probe Covid-19 Medical Supply Firm

A shopper wears a mask as she walks through a grocery store in Dallas, Texas, last week. (AP Photo/LM Otero)

WASHINGTON (CN) — The Justice Department is opening a criminal investigation into a Delaware-based medical company created in March to sell personal protective equipment and other supplies during the Covid-19 pandemic.

Blue Flame Medical, which describes itself as a company that provides health care supplies to give “governments, first responders and citizens the tools they need to fight Covid-19,” has failed to deliver products to two state governments in the past month.

California Congresswoman Katie Porter wrote in an April 8 letter to the Health and Human Services Office of the Inspector General that the origins of the company were suspicious, as owners Mike Gula and John Thomas “have little to no experience in supply chain dynamics or the medical field.”

Gula most recently worked in Washington as a Republican fundraising and lobbying consultant and Thomas did political consulting in California. The pair formed the company in late March.

“No information is readily available as to the price at which these masks are being sold or to whom,” Porter wrote. “Additionally, their website fails to provide any information regarding who they are procuring these masks from and if their supplies have received approval by the National Institute for Occupational Safety and Health, the Food and Drug Administration or the Occupational and Safety Health Administration.”

In early April, the company received a $6.3 million down payment from Maryland for more than 1.5 million N95 masks and 110 ventilators, along with a request for additional equipment.

But an April 30 letter to Gula from the Maryland Department of General Services says Blue Flame “failed to honor its delivery commitment.”

“Unfortunately, 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,” the letter states.

Last weekend, Maryland canceled the entire contract, which totaled nearly $12.5 million, and called for an investigation.

State officials got their wish Wednesday when the Justice Department opened a criminal investigation into Blue Flame. Prosecutors will reportedly focus on the Maryland contract as well as one with California that was also cancelled. The Washington Post was the first to report the investigation.

A spokesperson for Maryland Attorney General Brain Frosh confirmed in an email Wednesday that his office had received an investigation referral from the Department of General Services but declined to comment further on the matter.

At a press conference Wednesday, Maryland Governor Larry Hogan said the state had recently acquired 4.5 million KN95 masks, 600,000 N95 masks, 150,000 medical gowns and much more protective equipment.

But he said that with such high demand, there had been some instances of possible fraud, confirming he directed the Department of General Services to cancel the Blue Flame order for failure to perform and potential misrepresentation.

“It is unconscionable that anyone would try to exploit this pandemic for profit or for personal gain, which is why I’m so pleased we were able to act so swiftly to uncover Blue Flame’s potential wrongdoings and to alert the authorities,” the Republican governor said.  

In late March, California sent $456.9 million to Blue Flame for 100 million face masks –

almost half of the $1.1 billion allocated by state lawmakers for the pandemic response. The payment was cancelled just six hours later for reasons that were unclear, according to a CalMatters report.

Ethan Bearman, a Los Angeles-based attorney representing Blue Flame, did not return a request for comment Wednesday. Neither did the Justice Department.

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