Little Scrutiny Two Years After Gov. Newsom’s Odious $1B China BYD Mask Deal

Two years after Gov. Gavin Newsom’s shady no-bid $1 billion N-95 mask deal with newly formed BYD Mask company, there are still many questions surrounding the deals.

Gov. Gavin Newsom approved spending $1 Billion of taxpayers funds on masks from Chinese company BYD, an electric bus maker which started manufacturing N95 masks as the COVID pandemic hit, when the original mask purchase to Blue Flame fell apart after a bank notified the governor that Blue Flame was only a few days old.

Even more egregious, California lawmakers were not allowed to see details of the $1 Billion contracts signed by Gov. Newsom with BYD. Legislators sent him a letter demanding details of the agreement, saying there has been too little transparency in spending those massive taxpayer dollars… to no avail.

Now, according to the Los Angeles Times, “California Controller Betty Yee, a two-term Democrat with no formal role in the contracting process, worked behind the scenes to help a pair of political operatives land a deal that turned out to be one of the state’s most flawed.”

Is Yee the scape goat in this putrid deal, or is this standard operating procedure for large contracts in California? Or, did Yee screw up the Blue Flame deal so badly, the BYD deal with China looked that much better?

The Globe reported May 7, 2020, “It was only recently revealed that the state of California wired nearly $500 million dollars for masks to a company that had been in business for three days.”

California Globe heard from a source that minutes after the money was wired to Blue Flame Medical LLC, the Controller received a call from the bank warning that the bank account the money went to had only been opened the day before: Blue Flame Medical LLC, registered in Delaware-based company created by two Republican operatives who jumped into the medical supply business on March 23, Mike Gula from Washington, D.C., and John Thomas of Southern California.

The Globe’s public records request revealed that the documents and communications between state agencies involved in the transaction exposed concerns that the company providing the masks had not yet been vetted. The Department of General Services was mentioned as being responsible for the vetting:

The payment to Blue Flame and cancellation of the deal six hours later were revealed in copies of checks, wire transfer receipts and emails California Globe obtained through the April 23rd public records request.

A learned source told me:

“In order to send the up-front money State Officials willingly and knowingly circumvented state regulations, at least 5 times. The funds were recovered, but our Gov has implied by obfuscation that no violations occurred, in both deals.”

“The Governor cut a deal with BYD for masks at $3.30 each, and three weeks later the mayor of L.A cut a deal for fewer masks at .80 cents each. And I believe his are certified.”

The LA Times reports Wednesday:

“Over the course of a pivotal week in March 2020, Yee provided Blue Flame’s co-founder with private advice on how to negotiate an advance payment and discouraged him from disclosing how much the company would pocket from the deal, according to text messages documented in a lawsuit involving the contract.

‘I will see to it that the wire happens first thing this morning,’ Yee wrote to John Thomas, a longtime Republican strategist who founded Blue Flame with GOP fundraiser Mike Gula, in a text message on March 26, 2020.

Hours later, the state wired Blue Flame a down payment of $457 million. The company’s internal records, disclosed as part of a lawsuit, show that it stood to turn a profit of $134 million by charging the state 20% to 30% markups.”

Despite the shady dealings, it took lawsuits over the COVID-19 mask deals to expose the dumpster fire the Governor, connected cronies and the Controller created.

A lawsuit Blue Flame filed against its bank, Chain Bridge, accused the bank of triggering the fraud concerns, LA Times reported. “Chain Bridge then sued JPMorgan Chase, the state’s bank. In February, JPMorgan, one of the world’s largest banks, sued the state to recover its costs in untangling the deal.”

The Globe reported in April 2021 that California Gov. Gavin Newsom had a problem with no-bid contracts to favored donors, yet is barely criticized for it in the media. Only under Newsom’s proclamation of a state of emergency due to COVID-19 were/are no-bid contracts allowed.

Here are several examples of Gov. Newsom’s contracts the Globe reported:

• He awarded a no-bid contract worth over $221 million this year alone for UnitedHealth subsidiary OptumServe to help with vaccine delivery.
• Another no-bid agreement was extended by $61 million.
• awarded a $176 million no-bid contract for a UnitedHealth subsidiary to deliver vaccines.
• The governor awarded Blue Shield a $15 million contract as the state’s third-party administrator for vaccine distribution.
• Last year (2020), the Newsom administration awarded a no-bid $1 billion deal with Chinese company BYD for hundreds of millions of N95 and surgical masks.

By the end of May 2020, the Globe uncovered a trail of well-connected players in the odd $1.4 billion mask deal which appeared to lead right up to the cabinet level inside the governor’s office:

• The prominent lobbyist who represents BYD is Mark Weideman of The Weideman Group. The governor’s campaign received $40,000 from BYD’s automotive division. Weideman also represents Bloom Energy, a fuel cell manufacturer in San Jose, which recently retooled its facility to rehabilitate ventilators for COVID-19 patients. Weideman also represents NextGen America, owned by Tom Steyer, Newsom’s economic recovery committee chairman whose failed presidential campaign petered out in late February.
• Mark Weideman’s wife is Jennifer Wada, an attorney who now has a government relations business – Wada Government Relations Group. It is not common knowledge even among Sacramento insiders that Wada and Weideman are married. Wada previously was a partner in Wada, Williams Law Group. Her former law partner is Anthony Williams, who is now Gov. Newsom’s Legislative Affairs Secretary, although news reports from 2018 also called Williams Newsom’s “chief lobbyist.”
• Anthony Williams was a senior adviser for former Democratic state Senate leaders John Burton and Darrell Steinberg, and lobbied for the Judicial Counsel of California and the State Bar.

A source said the governor was able to pivot so quickly from the bad Blue Flame Medical deal to BYD because of the connections between Weideman, Wada and Williams.

The LA Times reports that Controller Yee went out of her way to advocate for Blue Flame Medical, and then promised to step up her efforts to convince Newsom’s office to make the deal.

The text messages in the lawsuit show Yee directed Thomas to request the Newsom administration to pay Blue Flame in advance — telling him to do so “without invoking my name.”

It’s evident that connections were used in both the Blue Flame and BYD mask deals, and proper procedures were thrown out under the guise of the State of Emergency.

Adding insult to injury, “One day after the Blue Flame deal fell apart, California signed an $800-million contract with Bear Mountain, a company led by former Alabama Atty. Gen. Troy King. That contract was canceled less than six weeks later, after state officials said the company failed to deliver most of the masks,” the Times reported.

California government is in shambles, largely because of political operatives making political decisions, rather than allowing long-time agency officials to do their jobs and play by time-tested policy decisions.

Even thought Gov. Newsom hasn’t been held accountable, Yee may be vulnerable, but will she take the fall – or will she take others down with her?

Read all of California Globe’s reporting on Gov. Newsom’s BYD mask deals:

April 13, 2020: Why Did Gov. Gavin Newsom Make Hurried $1 Billion Deal With China’s BYD for Masks?

May 7, 2020: Public Records Request Reveals CA Sent Half-Billion$ to Newly Formed Mask Manufacturer

May 25, 2020: Exclusive: Gov. Newsom’s BYD Mask Deal Profitable for Insider Dealmakers

August 14, 2020: Are the Rats Jumping Gov. Newsom’s Ship Over BYD Chinese Mask Deal?

April 5, 2021: California Gov. Gavin Newsom Has a Problem With No-Bid Contracts