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EXCLUSIVE: Tennessee wastes millions on no-bid COVID contract with politically connected company

Posted: 6:11 AM, Dec 14, 2020
Updated: 2020-12-14 20:00:36-05
Gov Bill Lee visits TN Public Health Lab.jpg

NASHVILLE, Tenn. (WTVF) — Tennessee Gov. Bill Lee's team wasted millions of dollars on COVID-19 testing promised by a politically connected company - and taxpayers got nothing for their money, an exclusive NewsChannel 5 investigation has discovered.

Over the objections of career state employees, Tennessee Health Commission Lisa Piercey steered a $26.5 million, no-bid contract to a Utah company with no health care experience -- after a Republican political consultant pitched a contract to the governor's office.

In the end, just as the career state employees had warned, the deal collapsed -- and the Lee administration paid the company almost $6 million to get out of the contract.

"This is frankly worse than our worst fears," said state Sen. Jeff Yarbro, a Nashville Democrat who had expressed concerns in the early days of the coronavirus crisis about potentially unaccountable spending as state government responded.

Do you have information on any questionable contracts? Email: investigate@newschannel5.com

In fact, the beginning of the pandemic produced a huge business opportunity – even for companies with absolutely no healthcare experience.

Nomi Health emerged from a politically connected Utah high-tech coalition known as Silicon Slopes. In a March 25th podcast (see excerpt below), Nomi CEO Mark Newman laughed about his unexpected venture into COVID-19 testing.

“Seems like we need tests, we can line up tests - like anyone game for some fun?” Newman quipped, adding that "an email 14 days ago has turned to a more than full-time job. So, that’s terrific.”

The Nomi Health CEO was a business-school graduate who had previously created a company that allowed corporations to conduct job interviews through an online portal.

"I've been trying to learn as fast as everyone else and break this into kind of systems," Newman said.

"So if a clinician is listening to this and says 'that guy doesn't know what he's talking about,' just call me up and help educate me. We're trying to move as fast as we can."

Less than six weeks later, Tennessee would award that $26.5 million, no-bid contract to Newman's company.

"Entering into a $25 million, no-bid contract with a company with a lack of expertise -- over the objections of the professional staff of the agency -- is one of the most shocking things I’ve seen in my time in state government," Yarbro said.

In early April, Utah’s Republican Gov. Gary Herbert was first to give a no-bid contract to the new company.

Republican governors in Iowa and Nebraska quickly followed Utah's lead.

Emails show that, two weeks later, Republican political consultant Tony Simon from Atlanta was pitching a Nomi contract to Gov. Lee’s chief of staff Blake Harris, who put him directly in touch with Health Commissioner Lisa Piercey.

Simon's bio shows he had previously worked with the Republican Governors Association and served as co-chairman of Donald Trump's inaugural committee.

Documents, obtained under the Tennessee Public Records Act, reveal that Nomi made a presentation to Piercey dated April 27th.

The next day, Piercey's chief medical officer, Dr. Tim Jones, delivered some "good news" in an email to the head of the Tennessee Public Health Laboratory and other officials.

"The Commissioner is arranging for a contract (probably already signed) with a company called Nomi to help facilitate mass testing for COVID," Jones wrote.

For that money, Jones noted, "the one thing they do not provide is any manpower... We will have to figure out ways to come up with staffing... As soon as we can we obviously need to get you folks involved in the lab side of things."

The contract was signed on May 1st.

Sen. Yarbro's reaction?

"The problems here were so obvious from the beginning that it’s clear we just didn’t follow a good process for contracting."

Besides Newman’s own words, there were already warning signs from a story in the Salt Lake Tribune published the day before Piercey signed the contract, warning of a “potential public health disaster” in Utah.

Reporter Erin Alberty broke that story.

"If you just went back through the podcasts and stuff that was coming out of this group of companies," Alberty said, "the language was kind of dismissive of medical expertise -- sort of bragging about the fact that we threw this together in three weeks, we figured this out."

Salt Lake Tribune story (1).jpeg

Alberty's story quoted an email from one of the Utah governor’s own experts that “a pandemic is not the time for amateurs to learn.”

He worried that Nomi was finding far fewer COVID-19 cases than other testing operations.

"The difference was pretty stark," Alberty said. "There were about half the rate of positive results that all the other Utah testers were getting."

NewsChannel 5 Investigates noted, "Which raised the prospect that you were getting lots of false negatives?"

"Potentially. That was the concern."

A newspaper in Iowa, where that's state's Republican governor had also inked a deal with Nomi Health, had similarly published a column questioning Newman's qualifications.

"The difference between a startup and a pandemic is that in a startup if something fails people only lose their jobs," the columnist wrote.

"In a pandemic, people die."

Inside Piercey’s department, Dr. Richard Steece, the head of the state’s lab, reacted strongly to the unexpected news of the no-bid contract.

“Please tell me we can get out of this contract? Or better yet it has not been signed?” Steece wrote.

Jones, the chief medical officer, responded: "Signed, sealed and delivered. The Commissioner would like to start implementation within a couple of weeks.”

Yarbro sees that as a damning piece of evidence.

"If the leader of our health response isn’t talking to her own lab when signing a testing company, it makes you question whether anything is going right," he added.

A few days later, another article warned that Nomi's Iowa project "isn't living up to its promise."

"This one worries me a bit more than the Utah one did," Jones said in an email to Piercey. "We're going to need to keep on our toes here for a while."

The next day, on May 6th, Piercey’s laboratory team went on the record with their “significant concerns” about the Nomi Health contract.

Deputy lab director Kara Levinson noted in an email that Nomi's testing platform appeared to be fourfold less sensitive than CDC-approved tests.

"Using a less sensitive test has the potential to give false-negative results, which has significantly [sic] implications for individual patients that may be sick and for public health staff that perform contact tracing," Levinson wrote.

Adding a less sensitive test to the state's arsenal "is not logical," she added.

"The optics of knowingly using a less sensitive/inferior test, especially when the Governor has stated that we are targeting vulnerable populations for testing (nursing homes, prison, minority populations, and etc.), has the potential to create strong political backlash."

Levinson's email also noted that the "Nomi laboratory equipment is not novel or groundbreaking technology."

"There simply is no advantage to the state to pursue this current arrangement."

Her concerns continued for another four paragraphs.

In subsequent emails, lab director Richard Steece suggested that Nomi Health's process could only produce half as many tests as promised.

Another laboratory official, Paula Gibbs, was more blunt.

"Speaking honestly and openly here ... this project is actually SLOWING us down instead of helping increase throughput," Gibbs wrote. "The effort being put into this is taking away from the TRUE high throughput platforms and taking away resources that could be used to increase our capacity in other more efficient ways."

Again, Yarbro was stunned by what we discovered.

"I think what was most surprising was to see how quickly and how aggressively the career professionals responded to try to stop this contract from happening.”

Still, Piercey continued to push her team to work with Nomi.

Her chief medical officer, Dr. Tim Jones, noted in a May 8th email to a couple of health department officials, "This is of course a very sensitive issue with the Commissioner, given the uncertainties of our future path."

In addition, Mark Newman and other Nomi officials had claimed they could deliver the personal protective equipment needed for the testing process.

But instead of medical gloves, they delivered “breeder gloves” used by veterinarians on farm animals. They also got hydrogen peroxide wipes that were “for veterinary use” and “not appropriate for disinfecting from coronavirus.”

And their KN95 masks were not FDA approved.

In fact, later tests would prove that the masks performed well under the expected standards.

Jones downplayed the quality concerns.

“In the bigger scheme of things, this is one I’m not sure I’d throw myself (or the project) over the sword for," Jones wrote.

Yarbro questioned, "Why were so many people inside the Lee administration willing to fall over the sword for this company?"

Then, in early June, Nomi Health faced even more bad press in news stories published in The Guardian and Utah's Deseret News.

"The ice is getting thinner," Jones emailed Piercey.

On June 10, a formal validation report issued by the state’s health laboratory drew a line in the sand, concluding that they had “no confidence” in the reliability of the Nomi test .

"The validation study of the Nomi COVID-19 test system did not meet the regulatory criteria necessary to approve it for use in the TN public health laboratory," the report concluded.

"As such, the laboratory director cannot sign off on the validation nor implement it for clinical testing."

Piercey emailed to express her "enormous thanks ... for their vetting of this product and process," promising to follow up with next steps.

Five days later, on June 15th, the state finally issued a "notice of termination of contract," claiming Nomi Health had caused "life, health or safety to be jeopardized."

But in the end, Piercey approved a payment of $5.9 million to settle with the company.

"It’s appalling frankly," Yarbro said, "that this administration has spent $6 million that could have gone to help Tennesseans to pay off a company that was never going to be able to do the work that they intended in the first place."

NewsChannel 5 requested an interview with Commissioner Piercey a week ago, but the Department of Health never responded to that request.

Late Monday, Piercey's team issued the following statement:

"During the early weeks of the COVID-19 pandemic, the state faced unprecedented international competition for scarce testing capacity and resources such as PPE. Tennessee undertook extensive efforts to overcome global shortages and explored both traditional and innovative options to rapidly expand testing capacity for Tennesseans, including executing an agreement with Nomi Health to expand testing capacity within the state. After onboarding issues, the platform was not ultimately used to process COVID-19 labs, though the state was contractually obligated to pay for certain goods and services delivered, including test kits and certain setup costs, and the parties ended the contract by Mutual Termination Agreement."

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