An obscure Santa Fe company is under criminal investigation for possible forgery and price gouging in the sale of millions of dollars of personal protective equipment and medical supplies to the New Mexico Department of Health, according to a spokesman for the state Attorney General’s office.
Bionet was one of the first companies to win state contracts to provide PPE during the coronavirus pandemic. It was founded in 2010 by Gabriel Bethel, a local entrepreneur who has interests in real estate and medical marijuana. He said it started as a lab-testing company, but has been inactive for years.
Questions emerged early and culminated in late April when the state rejected part of a Bionet shipment after determining that it failed to meet federal standards, according to the DOH. The department’s top purchasing officer said that, in at least one instance, it was unclear what the state thought it was ordering.
“They knew what they were selling us,” said Roy McDonald, chief procurement officer for DOH. “The question becomes, did we know what we were buying?”
Many of the products in question were sold far above pre-pandemic prices. In one example, Bionet sold respirator masks for $4 apiece, at least double the manufacturer price, documents show. In another, the DOH paid $6,000 each for 150 sleep apnea machines, which can be used as ventilators; online, they currently sell for about $2,700 apiece.
Matt Baca, spokesman for the attorney general, confirmed that a criminal investigation is underway.
It comes amid growing concerns that counterfeit masks have infiltrated New Mexico’s PPE supply, a worry for numerous states nationwide. At the national level, the Department of Homeland Security has launched a major operation against COVID-19 fraud, initiating at least 202 criminal investigations.
Bethel said he was unaware of any ongoing investigation and said he hasn’t heard from the state since shortly after one of his deliveries was rejected on April 24.
“There was no fraud that happened whatsoever,” he told Searchlight New Mexico, adding that Bionet had always delivered the precise products that the state ordered. He described what he called an earnest, well-meaning effort to provide much-needed supplies to his home state, one that was riddled with challenges.
The company had never sold PPE before, Bethel told Searchlight. According to DOH spokesperson David Morgan, Bionet was “recommended to the state.” The company’s contracts with New Mexico totaled $6.93 million, according to McDonald.
“Uncertainty, confusion and miscommunication”
Bethel identifies himself on LinkedIn as having “a multifaceted entrepreneurial career … primarily focused on finance, commercial real estate investment/lending/development and medical product and services development.” He is also president of Harvest Foundation, a licensed nonprofit producer of medical cannabis, according to Secretary of State documents and the DOH, which licenses such businesses in New Mexico.
In the early days of the pandemic, Bethel said he got a call from a “colleague in the National Guard who shall remain nameless,” asking him to find a PPE source. (A National Guard spokesperson said the military organization doesn’t purchase PPE for the state.)
Later, Bethel said, he got a call from someone at DOH with a similar request; he said he can’t remember the caller’s name. Bethel said he told the caller he would do what he could, and he reached out to vendors with connections to international PPE suppliers who were willing to make a deal.
Eventually, Bethel said he heard from Diego Arencon, Gov. Michelle Lujan Grisham’s deputy chief of staff, who, he said, moved the process along. Arencon declined an interview.
Within a few weeks, the business relationship soured.
“The relationship with Bionet has been fraught with uncertainty, confusion and miscommunication,” Arencon wrote, in an April 27 email to Bethel obtained by Searchlight.
Where’s the PPE?
The state did not pay Bionet the full $6.93 million, but it did pay $2.6 million for the equipment it received, including KN95 masks, ventilators and gloves. There is “no way” to say where the PPE ended up, Morgan said.
Bionet was not the only company that sold KN95s to the state. Some masks went to first responders. Others went to health clinics. Still more were distributed to the New Mexico Corrections Department
By mid-April, some county emergency managers who had requested N95s from the state began receiving boxes of KN95 masks instead, according to a dozen interviews conducted by Searchlight. One official, Farmington Deputy Fire Chief David Burke, was so concerned that he sent the masks out for testing by a private company. All of them failed.
“I haven’t seen a KN95 that meets our N95 standards,” Burke said.
New Mexico is of course not the only state to navigate a chaotic marketplace for emergency medical supplies. Across the country, the growing pandemic and lack of federal coordination have drastically increased the need for supplies, sometimes leading to rushed purchases, cut corners and deals with little-known vendors. This has resulted in faulty or counterfeit equipment and unfulfilled purchases.
Last month, the Indian Health Service bought a million subpar masks from a business owned by a former White House aide, according to a ProPublica investigation.
The masks were purchased for hospitals across the Navajo Nation.
Vendors include lingerie company
The New Mexico Attorney General’s interest was sparked by an incident on April 24, when two individuals showed up at the state’s warehouse, a repurposed indoor basketball court housed within the National Guard complex south of Santa Fe. The pair was there to check out a recent Bionet delivery — part of a large order the company had contracted to provide the state.
One of the individuals was Bart Lally, who is listed on a Bionet delivery document as the company’s “medical supervisor” and is registered with the state as a physician assistant. The other person was Lally’s assistant, Bethel said.
Kelly Hamilton, then-acting secretary of the New Mexico Department of Homeland Security and Emergency Management, told Searchlight that state employees had “expressed concern that the product seemed different.”
Some of the products came from unapproved vendors, including a lingerie company in Anhui, China, according to an employee who spoke on the condition of anonymity. Many of the masks contained suspicious markings that indicated they could be counterfeit. One warned that “misuse can result in suckness [sic] or death.”
The National Guard officially rejected the delivery, leaving several tons of suspicious PPE sitting on trucks outside the complex for several days. Three days later, Arencon informed Bethel in an email that the masks “cannot be used with confidence.”
The rejection was “disheartening news,” Bethel said. He insisted that his shipments had all of the correct FDA certifications and said they were rejected because of a minor packaging error.
“No good deed goes unpunished,” Bethel said. “[Everyone] is so desperate for these goods, and yet they’re being turned away because of these CDC regulations … Don’t let the perfect be the enemy of the good in a time of crisis.”