Pandemic, Inc.: Chasing the Capitalists and the Thieves Who Got Rich While We Got Sick by J. David McSwane
This is a book about the response of the US government and the nation’s economy to the COVID outbreak. The complete title of the book gives away the author’s perspective. He argues that both the federal government and the private sector got a lot wrong in responding to the pandemic. J. David McSwane is a left-of-center journalist, but the book makes a lot of cogent points. Regardless of where one is politically – especially MAGA or Woke – it’s pretty clear that there were a lot of missteps made as we tried to figure out how to respond to a huge health challenge.
The book opens on April 26, 2020. By then we knew that COVID-19 was a serious problem. The author was on a private jet that was chartered by Robert Stewart, Jr., an entrepreneur who had just received a $35-million contract to provide six million N95 masks to the US Department of Veterans Affairs. Stewart was anxious to prove that he was the right man for the job so he invited ProPublica reporter David McSwane to travel with him as he fulfilled the order.
President Trump had decided that capitalism would be the engine to provide whatever was needed to beat the virus. Federal agencies and state governors were essentially competing with each other to find supplies including ventilators, surgical gowns, and masks. Nobody had really developed a good system to get needed material, like personal protective equipment (PPE), to where it needed to be. It was pretty easy to get a big federal contract to supply something, especially if you knew the right people. Stewart was a veteran who ran a Black-owned business which made him likely to get federal business. In late March, he hired a lawyer, set up a corporation, and found a friend to give him seed money. Although he had absolutely no experience in any aspect of delivering medical materials, he was in business. Stewart said that he had made a deal with a mask supplier in Los Angeles who was shipping the goods to Chicago, where Stewart would soon be landing.
Stewart was selling the masks to the government for $6 each compared to the $1 list price. That’s price gouging but buyers were willing to overpay to get them. The major problem with the deal was that there were no masks available. Six weeks into the pandemic, there weren’t six million masks anywhere in the country.
Early in the pandemic contracts for medical needs were handed out quickly, with almost no vetting of the winning bidder. People close to the administration tended to be awarded contracts. Awarding agencies just had to have faith that the entrepreneur could actually deliver the goods. In many cases that was not the reality. Many bidders thought that they had made deals with reputable companies that could produce the masks or the ventilators or test kits. Others were engaging in fraud, knowing that they had no product but they were pretty sure that the government was too screwed up to track them down for non-delivery. They were often right. While some fraudsters were punished, many weren’t.
Another major program that was designed to help companies get through the pandemic was the paycheck protection program (PPP) which provided direct payments to employers to keep workers on the payroll. This money tended to go to large established corporations who had accounts in big banks that could quickly navigate through the program’s bureaucratic requirements and get PPP money for their clients. The federal government sacrificed oversight and due diligence in order to get the funding out as quickly as possible. The program did save many jobs but a lot of the money went to shady people who misrepresented the size of their business in order to get more money which was often used to buy luxury cars and fancy houses. The owner of a small pizza shop with 4 employees in northern Massachusetts used his PPP windfall (based on lying and saying that he had 50 employees on the funding application) to buy a nice car and a farm in New Hampshire. He got caught and is in prison.
While McSwane is very critical of how Donald Trump handled the pandemic, he does give him credit for developing vaccines in record time. That was one area where our capitalistic system had the right incentives for a rapid roll-out of life-saving shots.
The book documents how elected officials of both parties agreed to dramatically reduce our strategic stockpile of PPE masks, gowns, and ventilators. In 2011, Republicans won concessions from Democrats to cut the federal budget. Many accounts are sacrosanct, but there was bipartisan agreement that we didn’t need to increase the supply of the PPE on hand. No one anticipated COVID. The rest is history. Similarly, the budget for the Centers for Disease Control (CDC) was routinely cut every budget cycle. Again, no one saw a deadly virus in their future.
In January of 2020, Mike Bowen was getting very nervous about what he was hearing from his contacts in China. This new virus was getting out of control. Bowen’s Texas company, Prestige Ameritech, made N95 masks. Since the year 2000, he had consistently preached to each presidential administration about the need to stock up for the inevitable pandemic but no one bought his contention or his masks. Mike’s point was that most of the masks were made in China which could be a problem when we really needed them. It would be better to have an American company available.
In 2019, Bowen convinced Rick Bright, an immunologist from a small federal research agency, that we needed a source of domestically-produced masks. Once the pandemic hit in early 2020, they got a letter to the Trump administration but never got a response. Bowen kept pushing and eventually contacted Peter Navarro, President Trump’s economic advisor, who was beginning to see that we were about to have a big problem with a mask shortage as the virus spread. Navarro got Dr. Bright a meeting with CDC managers who ignored the doctor and assured the administration that there were plenty of masks available in the strategic stockpile. That was wrong.
To his credit, Peter Navarro pushed back. He went to the president with his concerns. The president was not worried about COVID. As he said on February 23, 2020, “We have it very much under control.” Around the same time, the CDC advised that there was no need for the public to wear masks.
At a late February hearing, Senator Mitt Romney (R-Utah) asked a CDC witness how many masks we had available. He was told that there were 12 million N95’s in stock. Romney mused that was only one percent of the masks we would need to combat the virus. He was not happy.
On March 10, 2020, Massachusetts Governor Charlie Baker declared a public emergency due to COVID. On March 11, the World Health Organization (WHO) declared that COVID-19 was a global pandemic. On March 13, Donald Trump declared a national emergency. On March 16, the president had a conference call with state governors during which he announced that they were on their own in acquiring PPE. He was going to let the private market call the shots in responding to the most serious medical emergency in the country’s history. His son-in-law, Jared Kushner, was the point person in freeing capitalism to beat COVID. Kushner formed a shadow task force that promptly drew up lists of what was needed. They were good at making lists. Not so good at getting things done.
President Trump used Twitter to get things done. He tweeted Ford and GM to “START MAKING VENTILATORS NOW!!!!!!!!” A Silicon Valley engineer saw the tweet and tweeted back that he could provide 1,450 ventilators for $86 million. He was awarded the contract. The semi-conscious reader will be shocked to learn that Mr. Yaren Oren-Pines, the tweeter, had no experience in manufacturing ventilators and supplied not one under the contract. He did, however, get paid $69 million in advance, not a bad scam.
New York Governor Andrew Cuomo’s tenure did not end well, but for many months he seemed to have a handle on what was going on. His state led the nation in COVID deaths. In response to the federal government’s refusal to coordinate PPP acquisition efforts, Cuomo observed: “It’s like being on eBay with fifty other states bidding on a ventilator. And you see the bid go up, because California bid, Illinois bid, Florida bid, New York bids, California rebids. That’s literally what we’re doing. I mean, how inefficient.”
The book details the stories of rogues who tried to make a buck or actually did make millions of dollars on not supplying PPE. Often used car salesmen had set up fake companies in order to get federal contracts to supply goods they didn't have. The trick was to get some money up front and then split. Often it worked. One used car guy partnered with a disgraced former Macedonian finance minister who had been arrested in his home country for fraud. Alas, their scam did not work but it was entertaining to read about it.
The author says that Peter Navarro was almost a hero here in that he understood the mask shortage problem. Unfortunately, he was a loose cannon whose other eccentric activities marginalized him even in the Trump administration. He also was giving out huge contracts for pandemic things, including one for $765 million to produce hydroxychloroquine, the bleach that President Trump urged people to drink to ward off the virus. That was bogus science and very dangerous for the bleach drinkers, but Navarro pushed it. Many of the contracts he gave to companies were not fulfilled, although a lot of sketchy people made a lot of money from the feds.
The author had met entrepreneur Robert Stewart, Jr. – who was mentioned at the beginning of this piece – when McSwane was doing basic research as COVID first hit our country.
Stewart invited McSwane to be on the plane as the entrepreneur flew to Chicago to get the masks that he hoped would show up in his warehouse. McSwane was intrigued by Stewart, a young veteran of color who had a company called Federal Government Experts. That sounded impressive, but a Google search of the website found no one home. The “company” was clearly a shell, with the descriptive text on the website ripped off directly from an article in the Harvard Business Review. There was no evidence of any past business activity - no client list, no summaries of work done under previous contracts, just a lot of puffy rhetoric.
During the flight, Stewart admitted to the reporter that he didn’t have the six million masks he promised to deliver to the VA for $35 million, but he had faith that he would find a way to get them. Stewart had used the signed federal contract to get seed money from a financier which he used to charter the jet. He was wearing an expensive suit and certainly looked like a successful businessman. He was articulate and sincere, and he read the Bible during his flight. What’s not to like?
To be fair, Stewart had thought that he had secured the masks through a deal with an agent representing a Chinese mask company. It turned out to be bogus, with the “agent” walking off with some money for his efforts. Stewart found another deal that also didn’t work out. A lot of sleazy people were getting paid fees by people like Stewart who were desperate to find masks. The fraudster ”broker” would talk a good game, show some fake documentation, and take a finder’s fee from the mark, in this case Robert Stewart, Jr. Another deal looked good until Stewart learned that the masks to be supplied were knock-offs and not real K95s as demanded in the contract. Stewart’s last gasp was to track down a woman close to Vice President Pence, Juanita Ramos, who could get masks. Unfortunately, they could not find her. No one in Pence’s office had ever heard of her.
No masks were ever delivered. The VA rescinded the contract and referred the case to the Justice Department for possible fraud. McSwane wrote an article about the caper for ProPublica in which he portrayed Stewart as a sincere guy who wanted to help beat the virus and make some money. However, he had no idea what he was doing and consistently trusted the wrong people.
McSwane devotes a chapter to comparing the 2020 Pandemic to the1918 so-called Spanish Flu that killed between 20 and 50 million people worldwide. There were fights - sometimes fatal - over wearing masks and closing schools. Many undertakers got together and jacked funeral prices. Some doctors sharply increased their fees. Snake oil salesmen sold fake remedies which many folks eagerly purchased in the hopes of beating the disease. Sometimes history rhymes.
The author got a tip that he should look into Viral Protection Laboratories, a brand-new company that had landed $21 million worth of mask contracts in about two weeks, shortly after its incorporation. Most were supposed to go to the VA, but some PPE would be delivered to local businesses. The tipster was Tim, a disgruntled juice bar owner. He needed masks for his employees and contracted with VPL to get them. He quickly saw that VPL was an empty shell with no experience in delivering masks. The founder was a shady character who had been convicted of several fraud charges.
McSwane talked his way into VPL’s supposed factory and there wasn’t much there. He was beginning to think that anyone with an email address could get a federal contract for masks. As it turned out, VPL actually delivered some masks to the VA but not nearly as many as was called for in the contract. The first batch of masks were real N95s. Later deliveries were knock-offs that were rejected.
On May 14, 2020, Dr. Rick Bright, the federal immunologist who had tried to get the government to contract with Mike Bowen‘s Texas company to produce millions of masks each week, was testifying before a congressional hearing. He made his case for domestic mask production which was substantiated by Bowen’s testimony. Dr. Bright also testified against the use of hydroxychloroquine to prevent infection. The week before the hearing, the White House had started a slur campaign against the doctor, who was gay – a major offense to some legislators. There also was an orchestrated campaign against Mike Bowen who was accused of not understanding mask production. In fact, Bowen, who had a mask factory, presented realistic scenarios for producing PPE. Because his numbers were not wildly inflated as were the huckster company’s fabrications, he was savaged by the Republicans on the committee. They asserted that getting enough masks would not be a problem. They also pushed back on Dr. Bright’s warning about drinking bleach as an antiviral.
By the time the hearing was over, 85,000 Americans had died of COVID.
As the demand for masks increased, scammers got to work. Early in the pandemic, any type of mask was OK, even the ones that didn’t fit tightly. Soon the medical community realized that only N95s would prevent the virus from spreading. There were tens of millions of inferior masks in the US. Not surprisingly, resourceful rogues got to work repackaging the unacceptable masks so that they looked like they were N95s and passed them off as the real thing. Big warehouses in Texas became mask repackaging centers that offered good pay up to $25 an hour. Easy work if you kept your mouth shut about what you were doing. Soon the Food and Drug Administration and state health agencies figured out the scam and rejected the fake N95s. Lots of crooks were stuck with a lot of useless masks.
Another task that the US failed to do was to increase testing capacity to identify who was infected with COVID. We had rejected the test created by the World Health Organization that most other countries used. The US Department of Health and Human Services had screwed up developing their own test, so for many months Americans didn’t have access to tests. When a supply problem is created, creative people will find a way to make money.
Reporter McSwane was based in Texas which was home to various pandemic scams. Since there was a shortage of test kits, companies were quickly formed to make fake testing kits. One of the largest was in Houston. The Fillakit Company had been created a few weeks before McSwane visited the factory and talked to the owner, Paul Wexler, who was not happy to have an investigative reporter snooping around. In the few weeks since its creation, Fillakit received a $10.5 million contract from the federal government to make test kits. Wexler was a professional fraudster who regularly ran afoul of federal and state agencies. He had just paid a huge fine to the Federal Trade Commission for illegal activities of a debt relief agency he created to scam people looking for help in paying their bills.
Wexler chased McSwane away from his warehouse. The intrepid reporter hid behind trash barrels and took out a monocular he carried. He saw workers using snow shovels to load some types of tubes into bins. The reporter wasn’t trained in medicine but he didn’t think that was sanitary. He also saw that no one was wearing masks and that the warehouse was filthy and had very poor ventilation, again not conducive to producing safe medical tests.
As it turned out, the company was using small generic bottles, not the required test tubes, in the kits which were completely bogus. Despite that, FEMA (Federal Emergency Management Agency) accepted and paid over $10 million for four million of these useless products. FEMA finally figured out what was going on and refused to accept any more.
The book now turns to another major pandemic giveaway, the Paycheck Protection Program (PPP) which was part of the CARES act that passed in spring of 2020 and made 800 billion dollars available to companies to keep their doors open and their workers employed. The poster boy for what could go wrong was Don Cisternino, an itinerant actor who was in an episode of the TV show ER. Don applied for $7.2 million to keep his company with 441 employees open. He got the money but of course there was no company. He used the cash to buy a $3 million house, four luxury cars, and lots of other things including paying restitution on some of his previous scams.
Getting PPP money was easy. You had to fill out the application and provide supporting documentation - bank statements, balance sheets, financials - all of which you could make up on your computer and printer. No one usually checked to see if the numbers were real, so many people who did not qualify got huge payouts. A lot of legitimate companies that didn't need the help – including Ruth Chris Steakhouses and Shake Shack – received big PPP checks. Tom Brady’s TB12 company got $2 million.
There were orchestrated scams where several fake companies applying for and receiving money had the same address. Kabbage, a very sketchy Atlanta-based financial services company, processed nearly 300,000 loans and took a cut of each PPP check. Many of their applications were written for bogus companies. Robert Stewart, the guy who failed to deliver six million masks, applied for PPP money. On his application he said that he had 37 employees. At most, he only had four people on the payroll. He got the money.
The book takes a look at people who relied on lies to advantage themselves in the pandemic. Robert Kennedy, Jr., is first up. He did some good legal work on environmental issues early in his career, but he’s best known for espousing crackpot theories on the dangers of vaccines. He starts his pitch by explaining how a minor throat condition he developed recently was caused by a vaccine he received 25 years earlier. The fact that his audience doesn’t leave the room at that point is eloquent testimony to the power of false facts, especially when regurgitated by a celebrity. The disorder he claimed to have is genetically based. It has nothing to do with vaccines.
The National Vaccine Information Center is an umbrella organization that is devoted to giving vaccine deniers forums to pontificate, spread misinformation, sell stuff, and make money. RFK, Jr. is one of their main men. He tells the audience all about how Bill Gates planted microchips in the COVID vaccine which makes it worse than all of the other awful shots out there.
Anti-vaxxers often buy into a range of extreme conspiracy theories - the Holocaust wasn’t a big deal; 9/11 was an inside job sponsored by the US and/or the Jews. What moon landing?
Kennedy makes $255,000 a year from his anti-vax non-profit and he makes a lot more giving speeches and selling books. He has over two million followers on social media. He is a big deal in the fringe world. There are others who do the same thing and make a lot of money organizing efforts to stop COVID vaccinations. Many make a very good living selling quack cures for various maladies on their websites, including repackaging Vitamin D as a virus stopper.
RFK, Jr. is hinting that he will be a Democratic candidate for president in 2024. Both political parties have a lot of work to do.
Of course, the anti-vaxxers jumped onto the PPP “Free Money!” bandwagon. Kennedy got $145,000 and Joseph Mercola, the guy who pushed the Vitamin D COVID cure, cleared over $300,000.
COVID-19 has been very, very good to them.
McSwane writes about the January 6 attack on the US Capital and how a lot of people who were COVID deniers –conspiracist Alex Jones and several prominent anti-vaxxers – fanned the flames to incite the attack. Jones got higher ratings and the vax deniers got clicks on their websites, a win-win for the nuts, not so much for the rest of us.
The author traces our country’s flawed COVID response to the fact that the federal government decided to keep its hands off the PPE and testing needs and relied on the market to be efficient in getting us what we needed expeditiously. That didn’t work. But one area where McSwane praises capitalism is the rapid development of effective vaccines. He received his first shot in April 2021, and was almost crying at the thoughts that our country developed vaccines in record time. He does note that much of the prep work done by Moderna and Pfizer was paid for with public money over the years, but the companies came through. Two days after Moderna in Cambridge received the virus’s genetic information from China, the company sent the vaccine off to the National Institutes of Health for testing. That is wicked fast.
Of course, Moderna and Pfizer corporate leaders and staff made a fortune on the vaccine, but that was OK with McSwane. Both companies received lots of COVID federal funding. It was money well spent. The Trump administration's Operation Warp Speed was indeed wicked fast and it got the job done.
Near the end of the book, McSwane deals with the novel coronavirus and nursing homes. The chapter is called “The Death Pits.” There’s not much new here. We all know that congregate housing for senior citizens was a petri dish for COVID. The industry was very slow to understand the dangers of the virus to its clients. McSwane notes that for-profit nursing homes were slower to respond to the pandemic, but all of them were asleep at the switch concerning the virus.
Part of the problem was that for many weeks/months, we didn’t have good information about COVID. Is it transferable by touching groceries or mail? No, it wasn’t but a lot of people spent a lot of time disinfecting mail and wiping down Cheerios boxes. Should I wear a mask when I’m in contact with others? No/Yes, depending on when the advice was given.
Part of the problem was that some companies were just inept. The Brighton Nursing Home in Beaver, PA, is owned by a mega health care company, Comprehensive Healthcare Management Services LLC. Most of the staff and residents ended up testing positive for the virus - over 400 people - and 80 died. Even after the company had received good information on how to minimize risk, it didn’t change anything. The company billed tens of millions of dollars to Medicare and insurance providers during the pandemic. The federal government ended up fining the company $62,500 for ignoring health protocols, but the millions of dollars that came in during COVID made the fine easy to pay.
The last chapter references the first chapter in the book. We revisit Robert Stewart, Jr., who is in court waiting to be sentenced in US District Court in Alexandria, VA. You may recall that when the book began, he and the author were on a chartered plane to pick up six million non-existent N95 masks for the VA. Stewart had pleaded guilty to various fraud charges. He wasn’t in trouble for not delivering the masks. His defense argued that he never should have been given that contract and that the federal government was at fault here for being really dumb.
The judge bought that, but Stewart had received a lot of money from various funds that he wasn’t eligible for, including over a million dollars in PPP grants. He also had scammed various veterans’ organizations for money. He served in the military, but not as a Marine combat veteran. He had served stateside in the Air Force Reserve, a noble calling, but he was not a combat veteran as he had maintained. Stewart applied for and received tens of thousands of dollars – to which he was not entitled – from Marine support groups. Charges related to those frauds carried up to a ten-year sentence. The rest of the crimes could get him another ten to twenty years in prison.
The US Attorney wanted to make an example out of Stewart, who had done a lot of bad things. This wasn’t just one poor decision; it was a pattern of fraud and lying. Stewart was a poster child for greed in COVID.
Stewart was very contrite. He admitted that he had gotten greedy and lost track of right and wrong. He cried as he said that his parents had taught him all about making good choices but he had ignored that. He had just become a father which made the idea of being behind bars for twenty years even more awful.
Stewart had a lot of gushy character references. People liked him and saw that he could turn his life around.
The judge told Stewart that he was looking at twenty years but the sentence was for one year and nine months. Robert Stewart, Jr. would be around to help his son grow up.
Bob’s Take
David McSwane works for ProPublica, a New York City-based non-profit that is home to many investigative journalists. The stories in the book were solidly sourced, with a lot of third-party backup. He was very good at getting close to sources and situations that illustrated the problems the USA had in dealing with COVID. He does opine a bit, but it is his book.
McSwane observed that it seemed that anybody with an email address and the ability to make up financial documents could get PPP money. There were some cases where homeless people who did not operate a business got PPP grants. I know of situations where companies that didn’t need the money were advised by their bank to apply just in case the business went sour. The point of the program was to get a lot of money out to a lot of companies very quickly, so there was very little checking to see if applications were bogus. Many were.
Robert Stewart, Jr., is an interesting case. He wanted to help get us through the pandemic and thought that he knew the right people to go to get six million masks. He was delusional and became fraudulent, but he probably wasn’t hardwired to be a bad prson. The judge did the right thing.
