Thread by @davidmcswane

I've received a ton of strange messages from mask brokers — on twitter, in email, through encrypted apps…

An unregulated mask market has spread like wildfire, attracting middlemen, grifters, billionaires etc. Our government fanned the flames.

Let’s go inside this world…

2/ At 10 p.m. one night, I got a call from a guy named Tim Zelonka. He heard through the grapevine I’d asked questions about a California mask supplier.

I was on the right track, he said…

3/ Only a few hours earlier I talked to the owner of VPL Medical LLC, which had just been awarded ~ $20 million by the federal government … the very same week the company was formed.

That made me quite curious. 🤔
projects.propublica.org/coronavirus-co…

4/ Tim had heard that my call to the company’s owner, Bobby Bedi, had startled some people ... I asked why he cared.

Tim said he was about to buy masks from VPL. “I went and got myself $8,000 in cash. I was on my way with the money in a briefcase.” Then the deal was cancelled.

5/ The guy who canceled the order, a “consultant” working for VPL, had been sued by the Federal Trade Commission the past for alleged fraud.

Then he brought up the billions.

6/ He said he was working with a venture capitalist in Florida who claimed to have connections with 3M, which makes the scarce N95 mask, and was interested in sinking a billion - with a “B” - or so into the mask trade.

7/ He played a recording of a video conference he had with this alleged investor:

“We’ve got several billion dollars sitting in escrow to procure product right now, and we need it yesterday,” said the man on the phone.

8/ Zelonka seemed uneasy but intrigued, as if grappling with a moral dilemma: Can one make a profit off a global crisis without becoming a vulture, and where is the line?

“Then I would be what you’re investigating,” he joked. “A profiteer.”

9/ I have spoken to as many brokers and importers I could find ... Here’s how the market has been getting out of hand ...

10/ “It’s like stumbling into the drug business,” one broker told me.

“You start out as a guy on the corner holding a little bit of product, and the next thing you know, you’re making calls and connecting people.”

11/ He and others described to me a “daisy chain” of middlemen who were getting rich off this pandemic, flipping masks from one private buyer to the next.

12/ The transactions resemble a real estate deal: A broker knows a seller of masks; another broker knows a buyer of masks. The two brokers set up the deal and each takes a commission, a percentage off the final unit price.

13/ And there’s a lot of room for profit. One model of N95 respirator, made by 3M, lists for about $1.27, yet FEMA agreed to pay one inexperienced contractor $7 per mask for them.

14/ Deals are usually negotiated through What’sApp, that broker said, often only with first names divulged. After they set up the business relationship, the brokers collect commissions on any subsequent deal, like royalties.

Example:

15/ Mysterious brokers sent me these “proof of life videos,” which purport to show stockpiles of life-saving PPE ready to ship once the cash was wired ...It’s like a cheesy hollywood movie, yet this is actually how deals are made.

Here’s one:

16/ “On a 300 million 3M mask deal, that deal might be 1 or 2 cents a mask. It’s a big deal,” or a $3 to $6 million commission just for brokering the deal.

“That’s the kind of money that’s changing hands. There’s some billionaires with a B getting involved,” one broker told me.

17/ So back to Tim and the company he had originally called me about.

Tim’s plan was to show up and inspect their product with a reporter in tow. But he’d told everybody he was bringing me. When we arrived.. Nobody answered. Womp womp.

Here we are

18/ As we neared publication, Tim abruptly changed. He said he wasn’t working in PPE anymore. He was focusing just on his primary job - selling high-end juicers to your local yuppie grocery store.

19/ I reminded him of our multiple talks about his alleged billion-dollar-investment to get masks. Suddenly, he said he couldn’t comment on that. He said the phone was cutting out. The line dropped.

Never heard back.

20/ Also FWIW, that original company he’d been trying to buy masks from? VPL Medical?

The owner was the subject of a dozen lawsuits, including allegations of fraud, lease manipulation and breach of contract

21/ VPL’s owner dismissed the court cases and allegations as an inevitable part of business. And he DID deliver his product to the VA on time.

What he couldn’t tell me was how his brand-new company managed to get such a big deal with the feds with no competitive bidding.

22/ There’s a lot more detail in the story, but just know: The Trump administration issued bounties to hundreds of untested contractors to find masks and respirators, and left states and hospitals to fend for themselves. propublica.org/article/the-se…

23/ If you know more about PPE brokers and investors, shoot me a note: [e-mail]

24/ and if you want to get our next big stories, sign up for propublica’s Big Story newsletter: go.propublica.org/bigstory-social

PS - we here at ProPublica have seen a lot of this - companies popping up overnight, untested, some whose owners have questionable backgrounds. Agencies say they’re vetting these companies but we’ve found a ton of problems
propublica.org/article/a-clos…