Segway inventor sold state-owned PPE to VA for $ 83 million
On April 12, 2020, a FedEx cargo plane stopped at Manchester-Boston Regional Airport loaded with essential personal protective equipment.
“The state of New Hampshire received a great Easter gift this morning,” Governor Chris Sununu said as members of the New Hampshire National Guard unloaded the plane.
The coronavirus was spreading in New Hampshire. Global competition for PPE supplies was intensifying.
Dean Kamen, perhaps the state’s most famous inventor and businessman, led the shipment of PPE, containing more than 91,000 pounds of gloves, gowns, face shields and masks.
PPE’s arrival on Easter Sunday would be the first of a dozen deals between Kamen and the government. Fifteen months later, the politically connected Bedford resident sold $ 26 million of PPE to the state and at least an additional $ 56 million to the US Federal Department of Veterans Affairs. It did this through a unique arrangement that no other private provider has access to, an arrangement that has not been reported before.
Even though Kamen sells PPE to the VA in Washington DC, that’s not what he charges, at least not directly.
By public databases, invoices, and interviews, the NHPR found that the state and federal governments have created a single reimbursement structure available only to Kamen. He is able to sell goods to the VA, without registering as a federal seller, while speeding up his reimbursement. These transactions have also not been submitted to the State Executive Council, which typically approves contracts worth more than $ 10,000, due to the state of emergency in New Hampshire.
Last April, during the press conference on the tarmac, Sununu and Senator Jeanne Shaheen congratulated Kamen for arranging the delivery. Dressed in his signature bomber jacket, Kamen stepped onto the podium and described how the expedition went.
“Anyone who knows me knows that I rarely have a plan,” Kamen said. “I never have a plan. I react to opportunities.
Kamen stated that his company DEKA (which created the Segway in the early 2000s, along with a number of other high-tech products) imports part of its supplies from China. Kamen says he worked the phones with his field contacts to locate the PPE. He also worked with other connections, asking Fred Smith, the CEO of FedEx, to provide a plane. Kamen even faced the money.
“I told my finance guys, keep transferring money to a faraway place, and they did,” Kamen said.
The federal and state governments, along with Kamen, say the arrangement was put in place to ensure prompt delivery of materials during a global health pandemic that has left supply chains in tatters. However, the reimbursement system appears to have remained in place long after other PPE vendors also stepped in to supply goods to the state.
“[Kamen] wants to support veteran health care and the Department of Veterans Affairs, ”Deb Kramer, acting deputy assistant secretary of health for support to the Veterans Health Administration at the Department of Veterans Affairs, told NHPR.
According to Kramer, Kamen and New Hampshire met a critical need early in the pandemic, providing the VA with materials that protected veterans and their healthcare workers across the country, ultimately saving lives.
Under the financial arrangement, when Kamen sells goods to the VA, such as a $ 17.5 million transaction for surgical gowns in November 2020, his company, Manchester-based DEKA, submits an invoice to the state. from New Hampshire. The state then requests payment from the VA, which in turn reimburses the state, which then pays Kamen.
In short, the State of New Hampshire acts as an “intermediary” in these transactions.
In an interview, Kramer with the VA declined to comment on why the financial arrangement was implemented.
“I think you should ask that of New Hampshire because they are the ones who have a relationship with Mr. Kamen,” she said.
But Jake Leon, a spokesperson for the state Department of Health and Human Services, said the arrangement was put in place at the request of the VA.
Leon declined to make anyone from the state health department available for an interview for this story. He added that the state believes this is the first and only time New Hampshire has acted as a financial intermediary for a private entrepreneur.
When NHPR asked Kamen about this financial arrangement, he said it comes down to a matter of speed – he would be reimbursed faster if he didn’t have to register as a federal supplier and submit invoices directly. at the VA.
“You can sort of bypass all of these regulatory elements if your state gets it, because there is a much simpler and more direct way for the federal government and the state government to exchange contracts and money. “Kamen told NHPR. “So I called our governor and said, ‘Hey, governor! “”
“Calling the governor” is not a metaphor for Kamen. He has long been friends with Sununu. In 2019, the pair flew to Dubai together for a conference. A Sununu spokesperson said the governor “was happy to help protect our veterans across America by building on the state’s existing relationship with DEKA.”
Kamen is also close to Shaheen. The two recently worked together to secure a commemorative coin through Congress, with part of the sale financially benefiting FIRST, a robotics nonprofit founded by Kamen for young people. In 2018, ARMI, another nonprofit run by Kamen and funded by the federal government, paid Stefany Shaheen, the senator’s daughter, $ 120,000 for consulting work, according to tax returns.
Regardless of his contacts, Kamen stressed that he was financially responsible if a freight plane turned out to be faulty or of poor quality, the same risks any other PPE supplier takes, he said.
But if he took a risk, did he also take a profit?
“I think of everything related to the state, I made a commitment to say, just cover our costs, and I think the cost of my staff in the field,” Kamen said in response to the question. he had taken advantage of the arrangement. “For the VA, I think there was an award, there was a structure, and we met… again, I’m not an accountant. We did not go into this to make money.
Kamen did not say whether or how much he profited from these transactions. A spokesperson also later declined to answer the same question.
Prices for PPE moved rapidly during the pandemic, due to a lack of supply, intense demand and unpredictable transportation costs. Invoices obtained through a right to know application show that Kamen’s products were more expensive than some suppliers but inferior to others.
In September 2020, for example, DEKA billed the VA $ 6.25 per unit for what is called a “level 2” surgical gown. That same month, the VA awarded a Contract for eight million gowns to another vendor, Akiva Technologies, at a unit price of $ 1.17 per gown. But another vendor, Grand Traverse Economic Development, was charging even higher prices in New Hampshire at the time: $ 8.75 per dress.
The VA and the state say they believe what Kamen charged was fair, and due to the state of emergency, normal rules that required companies to submit competitive bids were on hold.
Drew Cline, president of the Josiah Bartlett Center, a free market think tank, a criticized a special tax break that Kamen’s ARMI project successfully lobbied in New Hampshire. But when NHPR asked Cline about the deal, he saw no problem. He said “this really doesn’t sound like a romantic insider deal for the benefit of a friend of a politician.”
“It looks like some people on both sides are trying to come up with a solution that would get the product needed quickly in an emergency and come up with a smart workaround,” Cline said.
Asked why he thought this workaround had been in place for so long, Cline suggested that it was probably “a case of inertia setting in, and it just keeps rolling.”
But not everyone sees this financial indictment as an innovative workaround.
“What is the VA doing to use the state of New Hampshire as a buying agent?” Charles Tiefer, a professor at the University of Baltimore Law School, asked when told of the arrangement.
Tiefer is the author of a textbook on government contracts and has looked at shady contracts during the Second Iraq War. He said he had never heard of the federal government contracting goods this way.
“April 2020 has been a very special and horrible time,” Tiefer said. Perhaps the financial arrangement at that point made sense, he added. But he wonders why it would be in place for so long, noting that normal billing and procurement systems exist to protect the taxpayer.
“There is special treatment here which is given either for no good reason or for a bad reason,” he said.
It is not even clear if these transactions are still ongoing. A spokesperson for the governor said “the state hasn’t helped the VA buy PPE in months” and the last transaction on the state’s books was recorded in March. But in June, the VA said it was still buying nitrile gloves from Kamen. Kamen himself said in July that he still sells PPE. A DEKA spokesperson did not respond to a request for clarification.
For his part, Kamen doesn’t view the financial maneuver as special treatment – or at least not something special that he asked for.
“Well, I never asked for one,” he said. “We are not in the PPE business. I had no reason to ask them for special treatment. If anything, they would ask us, “Hey, can you get another load? “”
And so, charge by charge and $ 83 million later, Kamen served as a key supplier of PPE to both the state and the VA. It’s an arrangement that all parties to the deal say worked well for them.
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