Department of Health Bought Overpriced Medical Equipment from Contact Referred by National Guard

A supplier that the National Guard rejected for selling at a premium landed million-dollar sales to the Department of Health. Meanwhile, the National Guard paid $220,000 to a company that operates out of a house in the nearby town of Carolina, for tests that arrived two months late.

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The Department of Health was not the only government agency that purchased COVID-19 screening tests, masks, and other supplies for the pandemic. The Puerto Rico National Guard also made its purchases, and at least one of its transactions reflects what has been a pattern within the government during the emergency: failure to comply with the agreed terms; intermediaries with no experience in medical products; and companies that disappear without a trace.

Between April and June 30, the National Guard disbursed $4.3 million for emergency-related procurements.

The information about the National Guard’s suppliers was shared with the Department of Health, José Reyes, Adjutant General of the National Guard, told the Center for Investigative Journalism (CPI, in Spanish).

Reyes said that at a meeting in the house of state La Fortaleza, Mabel Cabeza — the Department of Health’s former chief of staff and liaison between the medical Task Force designated for the pandemic and the executive branch — asked who was providing procurement quotes to the National Guard for emergency-related equipment. The CPI asked the Department of Health for the list of suppliers it had received from the National Guard but got no response.

“The COVID emergency was discussed in several meetings at La Fortaleza, and at that time, Mabel Cabeza asked me who the National Guard was reaching out to for quotes. And I said we were looking for a range of possible vendors inside and outside of Puerto Rico. And that was when she asked me to share [the names of] some of the companies that were submitting proposals to the National Guard Purchasing Division,” Reyes told the CPI.

The Department of Health made purchases from suppliers, on the same dates, at higher prices compared to similar products for COVID-19 purchased by the National Guard, according to the interview with Reyes, as well as the procurement orders from the Department of Health and the National Guard.

National Guard changes story on the list of companies tapped for quotes

Luis Alcaraz Fuentes, dean of the InterAmerican University of Puerto Rico’s School of Aeronautics, was one of the contacts who went from submitting a failed quote to the National Guard Purchasing Division to landing multi-million dollar sales with the Department of Health.

The dean, who has no prior experience selling medical products, told the National Guard Purchasing Division between March 16 and 20 that he was a representative of the Metro Rehab company, Reyes said. Alcaraz was trying to sell medical equipment related to the virus, mainly N95 masks, but his offer was rejected because it was not competitive, the military officer said.

Despite this, Reyes shared Alcaraz’s contact with the Department of Health, and he submitted a quote under the name of Maitland 175, an Orlando company through which he managed to land eight purchase orders (two of them to cover the shipping cost) totaling $12.8 million in supplies to fight the pandemic.

Reyes told the CPI that he did not request a quote from Alcaraz Fuentes, but that the latter “approached the National Guard” to submit the quote. A week after the interview with Reyes, Angelique Adjutant, public affairs officer for the National Guard, gave a different version. She said the National Guard contacted several companies by phone to request quotes.

The CPI asked how the National Guard prepared the list of companies from which it requested quotes over the phone or from where it got the list from. Adjuntant responded that they came from the list of contractors registered with the General Services Administration (GSA).

However, the CPI confirmed that Maitland 175 is not on the GSA contractor list.

Alcaraz Fuentes managed to get the Department of Health to contact him through a phone call he had with Reyes. After the call, the military officer asked the Department of Health to call Alcaraz Fuentes, according to the report by the House of Representatives’ Department of Health Commission that investigated government contracts during the emergency period by COVID-19.

Reyes told the CPI that he did not and does not know Alcaraz Fuentes, and that he did not meet him during the procurement process with the National Guard Purchasing Division.

Department of Health paid between 120% and 420% more, when comparing prices of the same items

Until May, Maitland was the supplier with the most sales to the Department of Health during the pandemic, according to the purchase orders reviewed. The supplies it sold arrived and were delivered, the Department of Health confirmed. But similar to what happened with the failed transaction to buy $38 million in tests from construction company APEX, some of Maitland’s sales were overcharged.

The first order that the Department of Health placed with Maitland was on March 20: 200,000 Zhejiang Orient Gene Biotech brand serological tests at $26 each, for a total of $5.5 million. A day later, on March 21, the government of Peru obtained 700,000 of the Orient Gene-brand tests for less than $5, according to the purchase order obtained by the CPI.

The price difference is more than $20 for each test, despite being of the same brand.

“We got companies that gave us the N95 [mask] for $3.15 or $3.50,” between   March and April, said Reyes. Meanwhile, the Department of Health bought 500,000 KN95 masks (equivalent to Chinese-made N95) from Maitland for $8 each, for a total of $4 million on March 20.

Maitland not only sold masks and serological tests that detect antibodies to the virus to the Department of Health. It also sold goggles, pistol-type thermometers, and face shields, among other products.

National Guard also had problems with suppliers

Nine days after the Department of Health’s procurement, the Puerto Rico National Guard purchased some 20,000 Cellex brand rapid antibody tests from Iceland Holdings/Probat LLC for $11 each; $15 cheaper than the ones the Department of Health purchased from Maitland. At the time of the purchase, this brand was authorized by the U.S Food and Drug Administration (FDA) for emergency use.

The National Guard prepaid 50% of this order, $110,000, on April 4, and expected to receive the tests on the 30th of the same month.

However, Reyes canceled the order on May 11 because Iceland Holdings failed to meet the delivery date and gave them seven days to refund the $110,000 that was paid in advance to the company, according to National Guard documents released to the CPI.

A month later, on June 4, Reyes voided the cancellation of the order, arguing that the company had “experienced a delay in orders from China.”

The tests arrived two months late, on June 9. Despite that, the National Guard proceeded to pay the entire order, without requesting a discount or establishing any penalty on the company for the delay.

Iceland Holdings was registered as a limited liability corporation on March 2, 2018. The nature of its business is “real estate management and tourism operation,” according to the Puerto Rico State Department registry. The company’s address is a house on Venus Street in the near San Juan town of Carolina.

The CPI contacted Difra Bjork Landmark, President and CEO of Iceland Holdings/Probat, to find out how her company had contact with the National Guard. She was also asked if she had previous experience selling tests or medical products, among other questions sent to two emails addresses. Bjork Landmark returned a call, but her only comment was that she sold the Cellex brand tests to the National Guard because “she had the license to carry out the sale.”

The tests that the National Guard bought from this company were to be distributed exclusively among military personnel who carry out tasks related to the pandemic emergency in maritime ports and at the Luis Muñoz Marín international airport.

Maitland is not registered to do business in Puerto Rico

Michelle de la Cruz, a press spokesperson for the Department of Health, did not answer why that agency contracted a company that is not registered with the State Department to do business in Puerto Rico. Secretary of State Elmer Román did not respond either to questions about what the consequence of engaging a company that is not registered with that agency would be.

For a foreign corporation to be able to do business on the island, including those based in the continental United States, it must register with the Puerto Rico State Department, according to the agency’s regulations and the General Corporations Act. However, Maitland does not appear on the Registry of Corporations as a company authorized to do business on the island.

There are some exceptions to this requirement, such as “an isolated action” that is completed within a 30-day period and that is not part of a series of similar transactions. Maitland got eight different purchase orders in a 30-day period, and delivering some of those products took more than a month.

According to the Corporations Act, the only consequence of doing business on the island without being registered with the State Department is that the foreign company will not be able to sue in Puerto Rico’s courts, a corporate lawyer consulted by the CPI explained. The transaction, however, is not invalidated or voided. If the company pays the applicable fee ($150 for corporations) and registers with the State Department, it can correct the breach to be in compliance even after doing business.

The lawyer, who asked to remain anonymous, explained that the delivery terms determine where the title to the goods is transferred: at the port of shipment or at the destination point. In the case of Maitland, the purchase order establishes that the title of ownership of its products would be transferred to the destination, in this case, Puerto Rico, so it is considered that the business was carried out on the island. Despite this, the government paid taxes in Florida as if the transaction had taken place there, and not here.

In addition, the Department of Health paid more than $360,000 in Florida state taxes for the Maitland purchases that it could have avoided by filling out a fee waiver form, the Treasury Department’s Deputy Accounting Secretary, Alfonso Rossy Raíces, said in a public hearing, according to the final report of the House commission that investigated the acquisition of tests by the Department of Health.

On the other hand, the law that centralizes government acquisitions in the General Services Administration (ASG, in Spanish) requires that this agency   authorize the waivers that are granted to purchases during the emergency period, including that the company does not have to be registered in the Sole Registry of Bidders (RUL, in Spanish).

Most of the purchases from Maitland were on March 20, and it was not until March 24 that ASG issued a memorandum exempting purchases related to the COVID-19 emergency from this requirement.

However, the ASG insisted to the CPI that in this case, an executive order from Gov. Wanda Vázquez signed on March 16 delegated direct supervision of COVID-19 emergency purchases to the Office of Management and Budget (OGP, in Spanish).

That same day, the OGP issued a memorandum establishing “the procedures to be followed for emergency purchases related to COVID-19 that affects Puerto Rico,” and which apply to the Department of Health. The agency had to file Form 113, accompanied by a justification of the need for the requested goods and the purchase order or emergency contract, as the case may be.

The OGP memorandum does not establish the requirements that companies like Maitland must meet to sell to the government during the emergency.

The CPI asked the OGP if it assessed and authorized the Department of Health’s purchases made from Maitland, as well as the requirements that foreign companies must meet to do business with the government during the emergency, but there was no response.

Metro Rehab, the company that Alcaraz Fuentes represented to submit quotes to the National Guard, isn’t registered with the Puerto Rico State Department either. Alcaraz appears as the director of Metro Rehab of Orlando, a Florida-registered corporation that was active from 2011 to 2013. In 2014, the Florida State Department dissolved the corporation, rendering it incapable of doing business over not submitting the required annual reports to keep the corporation active, the CPI found.

The company that Alcaraz represented before the Department of Health, Maitland 175, was registered in Orlando, Florida, in 2000. It does not have a website and the mailing address that appears on the Department of Health purchase order, 7546 Park Springs Circle, corresponds to a house in a residential area of Orlando. The primary address listed on incorporation documents, 6633 Lake Cane DR, Orlando, also corresponds to a residence.

No trace of Maitland and Alcaraz Fuentes

Despite the fact that he oversaw Maitland 175’s sales to the Government, Alcaraz Fuentes said he does not hold any position in that company, but is “a friend of the company’s owner, Ms. María Hsueh and I have sometimes assisted her in some business transactions.”

Maitland 175 “is dedicated to delivering products from China to the United States” and it is “the first time” that the company “had any relationship with the Puerto Rico Department of Health,” the House Health Commission’s report states.

Alcaraz Fuentes also testified in writing to the House Health Commission that on March 16, “he sent a text message to the Director of the Ports Authority, Atty. Joel Pizá, in which he offered his expertise in logistics and air routes, in addition to his contacts in Asia to assist the government of Puerto Rico with the acquisition of any equipment that was necessary to combat the pandemic.” Alcaraz added that he knows Pizá because he was an adjunct professor at the InterAmerican University of Puerto Rico’s School of Aeronautics.

The CPI attempted to contact Alcaraz through several telephone numbers, both personal and of his office as dean of the InterAmerican University of Puerto Rico’s School of Aeronautics, as well as via several emails, but there was no response.

Maitland’s addresses also appear as headquarters for at least 17 other corporations. Maitland 175 President Maria T. Hsueh and Vice President Ming Chi Hsueh are registered as president or resident agent of those 17 corporations. None of the companies associated with Maria and Ming Hsueh have a connection with the health industry. They include investment firms such as Bofine Investment, Innovation International Investment, and Barrix Investment, all of which have no online presence or are inactive.

Hsueh’s signature appears on Maitland’s invoices submitted to the Department of Health.

The CPI tried to contact María Hsueh at the phone number that appears on the invoices, but an automatic voice message indicates that the mailbox is full. In addition, it attempted to contact her through Aviation Training Management (ATM), a Florida-registered Tennessee aviation school with the same address as Maitland 175 and where Maria and Ming Hsueh appear as managers.

A message left for ATM Executive Director Dave Garvey asking for Maria Hsueh was not answered. Attempts were also made to contact her through the number for Delaney Park Holdings, another of the companies that have the same address as Maitland in which Hsueh appears as vice president, but the number is out of service.

Governor’s aid demanded that the Maitland contract be signed
Purchases from this company, which were prepaid, were approved by Concepción Quiñones de Longo, former acting secretary of the Department of Health, emails attached to the purchase orders show.

“I gave all the information I had to the House of Representatives. After the referral, my lawyer recommended that I do not speak further [about the Department of Health contracts during the onset of the pandemic],” Quiñones de Longo replied when the CPI contacted her to ask about the approval criteria for the purchases from Maitland.

Quiñones de Longo told the House Health Commission that Marisol Blasco, special aid to the Governor, called her to demand that she sign the Maitland contract. Blasco denied having given her such a directive. The current Governor’s Aid supported Blasco´s version, contradicting three testimonies of officials who declared that they had heard her give these instructions to Quiñones de Longo, the Commission’s report states, referring to: Deputy Secretary of Environmental Health, Mayra Toro; former assistant to Quiñones de Longo, Roberto Rosso; and former director of the Department of Health’s legal advisers, Raúl Banda.

Like the other three brands of serological tests that the Department of Health obtained, the Orient Gene brand sold by Maitland to the government of Puerto Rico did not have the FDA’s approval at the time of purchase. Health Secretary Lorenzo González told the CPI in early April that 200,000 tests were delivered to the government after receiving the “go-ahead” from the FDA, but this is not true, according to a document the agency released May 20th. The official did not specify then that these were the Maitland tests, but the only purchase order for that amount was made out to this company.

The Commission, chaired by New Progressive Party Rep. Juan Oscar Morales, did not summon Alcaraz Fuentes or Maitland representatives to public hearings, as it did with other people who were subjected to questioning, but instead sent them questions by email.

Since a state of emergency was declared by COVID in March, the purchase of tests and medical equipment to deal with the emergency has been plagued by irregularities involving the Department of Health, the Bureau for Emergency and Disaster Management, the Medical Task Force, officials from La Fortaleza, and the private sector.

Federal authorities are investigating the Department of Health for irregularities in the contracting of companies related to the emergency by COVID-19 since March. In early June, the Fiscal Control Board sued the government to deliver documents on the purchase of tests for this virus, declared a pandemic by the World Health Organization on March 11 and that as of June had caused more 400,000 official deaths worldwide and 153 in Puerto Rico. The island´s population is 3.2 million.

Government contracting to deal with the Department of Health emergency has followed a scheme based on using a company or individual as the business front, contacts related to the ruling New Progressive Party and with privileged access to government officials, partners abroad, and a series of intermediaries who profit financially from the sale.

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