A review of purchasing records by The Frontier obtained through an open records request to the state shows the critical and urgent need for personal protective equipment to protect frontline workers from the pandemic drove up prices for the state and forced leaders to get creative in the hunt to secure it. The equipment has been in short supply, causing some states to compete against one another and even the federal government.
There have been reports of shady deals and fraud across the country.
Following media reports of steps the health department took to secure supplies, some critics have called the health department’s methods risky. Attorney General Mike Hunter announced an investigative audit of the health department’s spending on April 28. However, the governor and other officials have said there are strong reporting requirements in place and have praised the agency’s efforts.
Officials have acknowledged getting protective equipment has been a challenge.
On May 8, Gino DeMarco, who has been making purchasing decisions for the health department, sent an email to an agency employee outlining a substantial price increase for gowns from a supplier, bringing the total order to $1.4 million, according to records show.
While DeMarco acknowledged the spike was major, he said it was “the lesser of two evils” but “nothing unusual” amid the coronavirus crisis. If the state didn’t accept the increase, he wrote, they would lose the supplies. It wouldn’t be the first time, he said.
“It accomplishes our primary goal of providing PPE to save lives,” DeMarco said.
He added: “We desperately needed those gowns to continue with the PPE strategy at LTC (long-term care) facilities and resupply first responders. The time has come, however, to pay the piper.
“If I don’t agree to pay the new price, he will refuse to deliver the remaining gowns and sell them to someone willing to pay a higher price (which at this point is nearly anyone).”
Purchasing records, which were obtained through an open records request by The Frontier, show state officials approved around $80 million in orders to purchase equipment from almost 40 suppliers, but many of those were canceled after suppliers failed to hand over the material by the required delivery date.
When excluding orders that were called off, about $46 million in supplies had been ordered by the state as of Wednesday, said Health Department spokeswoman Shelley Zumwalt. Around $20 million worth of supplies have thus far been received by the state, she said.
Records show the state identified several companies that only started selling personal protective equipment in the midst of the pandemic, including one Florida-based executive airport and aircraft leasing company with alleged links to international drug-trafficking operations.
See a full list of companies and individuals the state sent purchase orders to here.
World Jet, Inc. is a Ft. Lauderdale, Fla., executive airport and aircraft leasing company owned by former professional race car drivers William and Reginald “Don” Whittington.
On April 18, the state agreed to pay World Jet $4.7 million for 1 million face masks, though that order was later cancelled after the company could not deliver the masks. But on April 25, the state agreed to pay World Jet a total of close to $784,000 for 50,000 isolation coveralls. The state later cancelled a subsequent order from World Jet Inc. placed on April 27 totaling $14.1 million for 3 million surgical respirators, 50,000 surgical caps and 250,000 surgical gowns.
“The World Jet PO auto-canceled at 5 pm yesterday,” Demarco wrote in a May 1 email to Health Department CFO Rebecca Rhodes regarding the April 27 order, “we can leave it canceled.”
World Jet, Inc., was established in 1977 by Reginald Donald “Don” Whittington and his brother William “Bill” Whittington. The Whittington brothers raced both airplanes and cars, and in 1979, won France’s 24 Hours of Le Mans race.
However, in 1986, the Whittington brothers pleaded guilty to filing false tax returns in connection with a multi-ton marijuana smuggling operation between 1977 and 1981, allegedly to help fund their racing careers. Bill Whittington accepted a plea deal in connection with filing false tax returns in 1979, 1980 and 1981 and was sentenced to 15 years in prison (though he would be released in 1990) in addition to agreeing to forfeit assets of $7 million. Don Whittington accepted a plea deal to one count of filing a false tax return in 1979 and one count of conspiring to defraud the IRS and was sentenced to 18 months in prison. The feds also seized $1.3 million in assets from Don Whittington.
Since then, U.S. Drug Enforcement Administration and media investigations have linked World Jet and the Whittingtons to a plane that crashed in Mexico in 2007 carrying nearly four tons of cocaine that was part of a clandestine Immigration and Customs Enforcement operation, as well as transportation of alleged terrorists on behalf of the CIA to Guantanamo Bay, Cuba.
In November 2013, the U.S. Drug Enforcement Administration, U.S. Department of Homeland Security and the FBI raided World Jet’s offices in Ft. Lauderdale after a year-long investigation. According to a DEA affidavit, the company had been leasing or selling aircraft to drug traffickers in South America, Mexico and South Africa at inflated prices and kept the aircraft in Don Whittington’s or a third party’s name to keep the U.S. tail number on the aircraft.
According to the DEA, once a drug trafficking organization was done using the aircraft to transport a load of drugs, it would be repossessed by or returned to World Jet, the DEA alleged. If the aircraft was seized by law enforcement for drug trafficking, it would be returned to World Jet, since the company held a financial lien on the plane, according to the DEA.
Read the full 2013 affidavit by the DEA for a search warrant involving the Whittington brothers and World Jet, Inc. here:
According to the DEA, money from the operation was deposited in a Liechtenstein-based bank account controlled by Bill Whittington, and being laundered through a resort spa and ranch in Colorado operated by Bill Whittington’s daughters. Between 2003 and 2012, Whittington’s Liechtenstein bank account went from $1 million to $10.6 million.
Don Whittington was never charged in the case, but in 2018, Bill Whittington pleaded guilty to tax fraud in connection with the Liechtenstein bank account and the Colorado properties and was sentenced to 18 months in prison and ordered to pay the IRS $1.8 million.
Reached by The Frontier on Friday, Don Whittington declined to comment.
Zumwalt said DeMarco and the state were both aware of the past allegations against World Jet prior to contracting with the company, and that an Oklahoma-based broker set the state up with World Jet, Inc. for PPE supplies.
“The State was aware of of investigations into the company and took precautions to protect State interests,” Zumwalt said in a statement Friday.
Prices for equipment rose
Oklahoma ordered 400,000 KN95 masks in late March from a three-day old company called Standard Healthcare Supply, LLC. Records show the state initially intended to buy 250,000 of the masks, but ended up purchasing 400,000 at a price of $3.18 per mask.
The price for the masks rose throughout the days as Oklahoma sought to finalize the purchase, as other states fought for the PPE, causing prices to rise.
“The price has gone up to $3.18 each, which is still a good price for us,” PPE Czar Gino DeMarco wrote. “We’re going to increase the order quantity, too.”
The state purchased the masks from Dikran Tourian, who created Standard Healthcare Supply, LLC, in late March as he sought out PPE he could sell to the state.
On LinkedIn, Tourian identifies himself as the CEO of Signature Investments, LLC. He has a long history of working for energy companies in the state.
On March 27, two days before DeMarco informed Rhodes the price of the masks had risen, Tourian sent DeMarco an email saying he was “scrambling.”
“I’ll figure things out,” the vendor wrote. Use my company (information below) and I’ll make it work. The vendor said at that point that the masks would cost $2.68 each.
“I need to know exactly what I need to do to get paid quickly,” the vendor wrote.
Emails between Tourian and the state make it clear the situation was fluid, and rapidly changing.
The same day he informed DeMarco they were “scrambling,” Tourian said in an email that there were only 10,000 masks, which would cost the vendor only $2.18 per mask.
“Please do not share the spreadsheet with anyone else,” Tourian wrote, “as I’m happy to help the state/hospitals out, but I may sell these masks to businesses for profit down the road.”
On March 28, Tourian wrote to Rhodes, Donna Dodson (the OSDH Chief Procurement Officer) and DeMarco to say he did not yet have a federal Tax ID number.
“I don’t need Work Comp as we have no employees and only selling to the state so don’t need sales tax permit,” Tourian wrote. Tourian, in a later email, asked Rhodes for “guidance” on whether liability insurance was necessary.
The state made two purchases with Standard Healthcare Supply, LLC, — the March 31 KN95 mask purchase, as well as a purchase of 200,000 surgical masks at $0.96 per mask. DeMarco told Rhodes that Tourian was “one of the small businesses we’ve agreed to (pay through an automated clearing house) since they are funding all of this with their own money.”
On Tuesday, Stitt announced the formation of an advisory group of state legislators to help distribute the roughly $1.2 billion in CARES funds provided by the federal government. Stitt’s administration is establishing a tracking and reporting system for the funds.
Stitt this week signed a bill that will require the Oklahoma Office of Management and Enterprise Services to publish daily reports on all expenditures made from the CARES fund.
As of Thursday, the health department had spent $8.2 million in federal CARES Act funding. Oklahoma received about $1.5 billion as part of the Coronavirus Relief Fund.