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Tennessee's no-bid COVID spending spree hits half a billion dollars

Posted: 3:02 PM, May 26, 2021
Updated: 2021-05-26 19:32:54-04
Tennessee COVID spending.jpeg

NASHVILLE, Tenn. (WTVF) — The state of Tennessee has spent nearly a half of billion dollars of your money on its COVID-19 response with virtually no rules, an exclusive NewsChannel 5 investigation discovered.

Our investigation also uncovered more evidence that political connections sometimes played a role in how Tennessee Gov. Bill Lee's administration spent that money.

"Half a billion dollars is a lot of taxpayer money going to no-bid contracts," said House Democratic Caucus chairman Rep. Vincent Dixie of Nashville.

"That is a very big concern especially from someone like Bill Lee that has a business background that should know better. He would not do this with his own business."

More than 14 months after Lee declared a state of emergency in response to the COVID-19 crisis, the staggering cost of Tennessee's no-bid spending spree is now becoming clear.

New data shows that the Tennessee Emergency Management Agency spent $184.4 million for PPE and other supplies, while the Tennessee Department of Health spent $306.4 million on its COVID response.

Combined, that's more than $490 million.

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

The governor has argued the COVID-19 emergency meant there was no time for a normal purchasing process.

"When the pandemic began we had a global crisis with a global supply chain challenge, states were competing for supplies," Lee said back in September.

Blue Flame Medical LLC

Among the companies the Lee administration did business with was Blue Flame Medical LLC, a new company that was billing itself as "the largest global network of COVID-19 medical suppliers" before it had even signed a single contract.

The company, started by a pair of Republican political consultants, was the focus of a 60 Minutes investigation back in December.

"I can't think of a time that we used any political connections to get a contract," company founder John Thomas told 60 Minutes correspondent Leslie Stahl.

Stahl responded, "It seems that your network of political actually did kick in for you, wrote letters, made phone calls on your behalf. That's what I call connections. What do you call it?"

"I call it happy customer references," Thomas insisted.

NewsChannel 5 Investigates discovered that John Thomas' partner, Mike Gula, had done fundraising for Tennessee Republican Sen. Marsha Blackburn.

But when we asked TEMA who put them in contact with Blue Flame, the agency refused to say. In response to a public records request, TEMA also claimed to have no documents showing how the relationship developed.

The House Democratic Caucus leader was skeptical.

"I was born at night, but not last night," Vincent Dixie said, "and that one, it speaks of cronyism.”

Our investigation discovered that Blue Flame was first incorporated on March 23rd, 2020.

Less than two weeks later, the Lee administration paid the company a million dollars up-front without actually placing an order.

One email shows it was "just to hold pricing and start the order."

That money was paid using a state purchase card through a website commonly used for political fundraising.

NewsChannel 5 Investigates noted, "That's a heck of a risk to take with a million dollars."

"That is a lot of money," Dixie agreed.

"That's what really bothers me through this whole thing is that there's no accountability, where is this money going and why was this particular company picked. We have no answers."

Four days later, TEMA put in an order for N95 masks and gowns for a total cost of $1.6 million.

In the end, Blue Flame was not able to deliver the product.

Luckily, the state was able to get the money back a few weeks later.

Other political connections

Back in December, lawmakers held a special hearing after our investigation revealed how Lee's health commissioner, Dr. Lisa Piercey, had steered a no-bid testing contract to another start-up called Nomi Health.

That contract was worth $26.5 million.

Piercey defended the deal.

"The way this came about was another state that had had success reached out to our governor's office who passed it along to us," Piercey told the legislature's Fiscal Review Committee.

But that wasn't the truth.

The truth, our investigation discovered, was that Republican political consultant Tony Simon of Atlanta had contacted the governor's chief of staff Blake Harris, who put him in contact with Piercey.

When Nomi's tests didn't work, the state still agreed to pay the company $6 million.

"These guys seemed like they had no idea of testing, PPE or anything else, but the state bought a bill of goods," state Rep. Bill Beck, D-Nashville, told Piercey.

Governor's state of emergency limits oversight

State comptroller Jason Mumpower oversees the teams of state auditors charged with keeping an eye out for waste, fraud and abuse in state and local governments.

"At every step of the way, emergency contract or not, we did what we were required to do we checked against the law," Mumpower told NewsChannel 5 Investigates.

But under state law, as long as the governor says we are in a state of emergency, his team can give contracts to anyone they choose.

"What we have been able to do, we have done," Mumpower insisted.

NewsChannel 5 Investigates noted, "But there are limits to your authority, is what you are saying."

"There were limits to our authority during those times, yes," he acknowledged.

In Utah, Gov. Gary Herbert announced in early May 2020 that the state would return to traditional bidding processes now that the situation was not so dire.

Tennessee's governor, however, has declined to follow his Republican colleague's lead -- even as he all but declared victory in April in the war against COVID.

"COVID-19 is now a managed public health issue, and our state's no longer a statewide public health crisis,” Lee said.

His most recent executive order still has Tennessee in what he calls a "limited" state of emergency - which means the rules about how your money is spent still don't apply.

NewsChannel 5 Investigates asked Vincent Dixie, "Is it time for him to end the state of emergency when it comes to no-bid spending?”

"Yes, he definitely needs to end it," the Nashville Democrat answered.

"There is no need for it -- especially if in his eyes he believes that the pandemic is over, then it's time to end that."

The governor's office did not respond to NewsChannel 5's request for comment.

Other unanswered questions

NewsChannel 5's investigations have uncovered questions about how a North Carolina-based sock manufacturer, Renfro Corp., got an $8.3 million, no-bid contract from the Lee administration for face masks made out of sock material.

The Lee administration has refused to say how they first came in contact with Renfro.

A small Franklin security company, Pale Horse Global Risk Solutions, has been paid $5.4 million to supply PPE and other medical supplies. The company was linked to Republican activist Robert Swope, although Swope and TEMA officials have been non-committal about his role.

Republican state Rep. Jerry Sexton of Bean Station also got a $165,000 contract for his company, Sexton Furniture Manufacturing, to make hospital gowns.

NewsChannel 5 reviewed emails showing that Sexton delivered the product, but there has been no record of payment.

The Lee administration has refused to answer questions about what happened with that deal.

TEMA Director Patrick Sheehan declined our request that he go on camera and answer our questions for this story.

Instead, TEMA provided the following statement from Sheehan:

“During the first months of the COVID-19 pandemic, the world’s supply chains for personal protective equipment, cleaning, sanitization, and medical equipment ground to a halt while demand for these materials reached unprecedented levels.

"In the winter and spring of 2020, each U.S. state and territory was fighting to obtain the same PPE from the same suppliers in a very tight and highly-competitive global marketplace. Many U.S. states and territories were left empty handed and were not able to obtain these critical supplies.

"By centralizing our PPE procurement efforts in a logistics team at TEMA, we were able to acquire the materials Tennessee needed, with priority, to keep our first responders and medical personnel supplied with appropriate PPE during the most dire days of the pandemic.

"We supplied PPE to thousands of Tennessee’s front-line health care workers, firefighters, emergency medical workers, police officers, teachers, and students when they were not able to supply their own.

"We are in a much better place today in our PPE procurement mission than when we began our effort more than a year ago. Between then and now, we have protected the health and well-being of those on the front lines of Tennessee’s COVID-19 response and the lives of many across our state.”

Special Section: COVID Investigations