Coronavirus: Contractor that promised FEMA 10 million masks for $55 million fails to deliver

Panthera Worldwide LLC, whose parent company filed for bankruptcy protection last year, promised to deliver PPE by 1 May

A little-known Virginia-based defence company that was awarded a $55m (£44.8m) federal contract to provide 10 million N95 masks for the US government’s coronavirus response failed to deliver and had its contract cancelled on Tuesday, according to the Federal Emergency Management Agency (FEMA).

Panthera Worldwide LLC, whose parent company filed for bankruptcy protection last year, had promised to deliver the much-needed personal protective equipment by 1 May, despite having no history of providing such materials to the government. The owners last month said that the company was aiming to deliver the materials two weeks early. Instead, they sought a 10-day extension to 11 May and ultimately did not furnish the items.

“We are patriots and take pride in our products for the US government, especially during this real medical crisis,” one of the company’s executives, James Punelli, wrote in an email on 15 April. He also promised the masks would be provided before 1 May “for certain, in full and with a very high-quality product”.

Mr Punelli and his business partner, Raymond Jones, did not respond to requests for comment Tuesday on the contract’s cancellation. An attorney who has represented the men in bankruptcy proceedings, Mark Lindsay, also did not respond to a request for comment.

Lea Crager, a FEMA spokeswoman, said on Tuesday the company requested another four-day extension, to 15 May, but the agency denied the request. The agency moved to cancel the contract on Tuesday, a day after the deadline.

“FEMA will continue to coordinate with our federal and state partners, along with private vendors and supply companies, to identify and deliver medical supplies to prioritised areas,” she said in a statement.

The unfulfilled contract leaves the US government without an expected delivery of 10 million of the sought-after masks, which provide enhanced protection against the novel coronavirus by filtering airborne particles and droplets. It was the latest misfire by the Trump administration in its frantic quest for medical supplies, in this case relying on an untested company for critically needed masks.

The point of contact listed for Panthera Worldwide in a federal procurement database is Sepp Benedikt, a retired Navy commander and intelligence officer. Included with his name is an address in Leesburg, Va., that is shared by the parent company. An online profile says Mr Benedikt currently lives in Switzerland and served until February as “director of operations and business development” for Panthera in Europe, the Middle East and Africa. It also includes a resume with the full name of Joseph “Corwin” Medard Benedikt.

Mr Benedikt did not respond to requests for comment.

Biographical information associated with his name provided by the US Navy indicates he enlisted as a student in 1983 and served for three years abroad, in Japan and then Italy, with the Naval Security Group, which conducts intelligence operations. He transferred to the Navy Reserve when he returned to the United States but did additional stints in Europe in the early 2000s, rising to the rank of Commander in 2004. He retired in 2008.

A spokesman for the Air Force, Michael Dickerson, said records indicate Mr Benedikt was employed as a civilian intelligence specialist from 1991 to 1995 with the 67th Intelligence Group in Los Angeles. The Defence Intelligence Agency declined to comment.

In April, Mr Punelli said Panthera Worldwide was a “separate legal entity” from the parent organisation and was procuring the masks through Department of Defence “contracting relationships” the company has. He did not elaborate on the relationships.

The company, which is no longer licensed to do business in Virginia following nonpayment of fees, has not previously manufactured or distributed medical equipment, according to records reviewed by us. Mr Punelli has said the company is registered as an LLC in Delaware and allowed its Virginia registration to lapse “because we’re not doing business in Virginia”.

The parent corporation, Panthera Enterprises, declared bankruptcy last year, estimating in a filing that it could have as many as 99 creditors and liabilities as high as $50m (£40.7m). Mr Punelli and Mr Jones are currently being sued by a subcontractor leasing the company’s primary asset, a 750-acre training facility in West Virginia. Mr Punelli, in an email last month, dismissed the lawsuit as “frivolous”.

Business partners have accused Mr Punelli and Mr Jones of fraud in lawsuits filed in several states. In 2018, Mr Punelli admitted to entering into a contract on behalf of an aerospace company that he had “no authority” to represent, according to his affidavit in a case brought against him and others in US District Court for the Middle District of North Carolina.

The no-bid contract for N95 masks with the embattled company struck procurement experts as unusual. Even under emergency circumstances, federal agencies are required to determine that contractors are responsible and to find the price fair and reasonable, said Daniel Gordon, a former administrator for federal procurement policy in the Obama administration and former acting general counsel in the Government Accountability Office.

While it is not uncommon for deliveries to be late or otherwise inadequate, Mr Gordon said, “it’s extremely rare for contracts to be terminated for default”. Such a move can block the company from receiving any future federal contracts, he said.

Ms Crager, the FEMA spokeswoman, said a contracting officer had performed a responsibility determination for Panthera. And she said the company would not be barred from future contracts and would not face a penalty fee, though she declined to elaborate on those decisions.

The contract reflects the mad dash by the Trump administration to secure critically needed personal protective equipment or PPE. As part of the scramble, federal agencies have awarded bulk contracts to third-party vendors for supplies at prices nearly eight times what they would have spent earlier in the year, when US intelligence agencies warned of a looming pandemic. In January, the government turned down an offer from a domestic manufacturer to produce millions of N95 masks.

The price that FEMA agreed to pay Panthera per mask, about $5.50 (£4.48), is significantly higher than what the government pays companies such as 3M, which charges as little as 63 cents per N95 mask, according to a company price index.

FEMA is not alone among federal agencies in agreeing to pay steep prices for the masks, which are in use in hospitals, clinics, police departments and fire and rescue stations from coast to coast. The Department of Health and Human Services (HHS) last month finalised a $100m (£81.4m) contract for 10 million N95 respirators – meaning each mask would cost $10 (£8). An HHS spokesperson said the order was pending an emergency use authorisation from the Food and Drug Administration, as well as “other applicable certifications”.

The Washington Post