Millions of dollars, questionable PPE, and a forgery: Did New Mexico get duped?

Larry Barker

A Larry Barker Investigation

SANTA FE, N.M. (KRQE) – The COVID-19 pandemic officially became a crisis in New Mexico on March 11, 2020. Once Governor Michelle Lujan Grisham declared a public health emergency the first order of business was to invoke a clause in state law allowing for emergency no-bid procurements in order to execute a nationwide search for critically needed medical supplies.

“Protecting our health care workers is of paramount importance to the New Mexico Department of Health,” says Chris Emory, a Health Department Bureau Chief. “There were vendors and brokers coming out of the woodwork offering (protective equipment) to the state,” Emory says.

“The entire nation found itself in this feeding frenzy for PPE,” New Mexico National Guard Adjutant General Kenneth Nava said. 

“This is a matter of life and death,” the Governor’s Deputy Chief of Staff Diego Arencón says. “We didn’t have months, weeks, days. We literally had hours to make decisions collectively to bring PPE home, to keep each other safe,” Arencón said.

From the Governor’s office, Diego Arencón coordinated the state’s search for Personal Protective Equipment or PPE. In late March Arencón got a call from a Santa Fe business called Bionet NM offering to supply New Mexico with critical medical equipment. Bionet’s representative boasted the firm could deliver as much as 10,000,000 face masks a week. Arencón told KRQE News 13 that before the phone call in March he had never heard of Bionet NM and all he knew about the company is what they told him.

Bionet is described on its website as a holding company. The business has no listed phone number, no storefront, no showroom or warehouse. Secretary of State records show Bionet’s address at a Saddleback Ranch estate near Lamy, NM. Bionet’s CEO is an entrepreneur named Gabriel Bethel who is a real estate developer. According to state incorporation documents, Bethel also manages a medical marijuana dispensary as well as a Santa Fe wellness clinic.

Urgently in need of protective equipment, the Governor’s staff authorized the purchase of millions of dollars of medical supplies from Bionet NM. KRQE News 13 asked Diego Arencón how an obscure firm like Bionet ended up with nearly $8,000,000 in-state purchase orders? “It’s a great question,’ Arencón said.

It was a multi-million dollar business relationship that soured from the get-go. Over the course of just 30 days, a mysterious forgery would surface, there were truckloads of questionable face masks, and state and federal investigations were launched. The Governor’s staff now admits they were duped.

In late March the governor’s office placed its first order with Bionet: 120,000 protective face masks for front-line healthcare workers.

(Getty Images)

Not all face masks are the same. A simple 3-ply surgical mask is fine for the general public. The face mask ordered from Bionet is a specialized medical product called an N95 which is commonly used in hospitals. N95 face masks are tested and approved by the U.S. government for Covid-19 protection. However, once the pandemic hit, N95s became scarce. States like New Mexico scrambled for a substitute like the KN95 which is a face mask made in China. Some KN95s are approved by the FDA for use against the Coronavirus and some are not. And some vendors peddle Chinese made masks that are counterfeit.

“We identified a problem with counterfeit masks in New Mexico somewhere around the April time-frame,” says the Health Department’s Chris Emory. “It was incredibly difficult. It’s really unrealistic for the state to be able to validate those products,” Emory said.

“It’s absolutely necessary that our health care workers, our first responders, the folks that require this personal protective equipment … that will protect them from this Covid-19,” National Guard Adjutant General Kenneth Nava says.

In its order with Bionet, the state specified it needed the hospital quality N95 masks. Even though Bionet billed New Mexico for 120,000 N95’s, what they delivered was a truckload of face masks made in China. Some 8,000 of those masks arrived damaged.

View tips on how to avoid counterfeit masks »

“The initial order from Bionet was supposed to be the N95 masks. And they, in fact, were not,” says the Governor’s Deputy Chief of Staff Diego Arencón. “We couldn’t read the packaging. We had to get it translated. It was a civilian mask, to my recollection, for like pollution and dust. We obviously did not distribute that to any first responding agencies,” Arencón says.

Instead of distributing the Bionet masks to doctors and nurses, they were repurposed for general use. Bionet was paid $448,000.

Email between New Mexico Governor’s Office and vendor Bionet NM »

Over the next few weeks, Bionet promised to supply New Mexico with truckloads of masks, face shields, gowns, and gloves but failed to deliver most of those products.

In April a bizarre document surfaced that would shock state officials and launch investigations. It’s a letter written on New Mexico National Guard stationary authorizing a Texas firm to obtain PPE from “factories in China” through a New Mexico vendor. The vendor number referenced in the letter is assigned to Bionet. The letter surfaced after it was used to solicit sales of protective equipment in another state.

A close look at the letter reveals several anomalies. For example, on the letterhead, General Nava’s official title ‘Adjutant’ General is spelled ‘Acijutant’.

“It’s a forgery,” says General Nava. “If you look at the letter closely, you’ll see that it was a scanned copy of my letterhead. The National Guard had no role whatsoever in procuring PPE.”

The letter was purportedly written by National Guard Lt. Col. David Durham. Durham, who is a Farmington Physician, tells KRQE News 13 he did not write the letter. “The first time I saw that letter was when the investigator showed it to me. Forgery is probably the accurate word choice here,” Dr. Durham says.

The forged document was addressed to Nexus Medical Products in Fredericksburg, Texas. Nexus representative Dave Schiller told KRQE News 13 the letter was provided to Nexus by a medical equipment broker named “Jason.” Schiller says he thought the letter was authentic.

Read Forged Letter »

An attorney for Bionet CEO Gabe Bethel claims the letter is “legitimate.” He says it was used without Bionet’s knowledge by someone else in an apparent attempt to defraud other states. The attorney would not say who created the letter. State and federal investigations are underway.

And there’s more. In April the state ordered from Bionet 1,000,000 FDA approved Chinese made face masks. The $4,000,000 shipment was delivered to the National Guard warehouse in Santa Fe on April 24th, 2020. 

“When this shipment arrived, the (Bionet Representative) could not validate that it met FDA standards. The paperwork was not correct,” says the National Guard’s Adjutant General Kenneth Nava.

“We found there were discrepancies between the paperwork, or lack thereof, of a shipping manifest that corresponded with the FDA certifications and the actual product itself,” The Governor’s Deputy Chief of Staff Diego Arencón said. “There was grave concern. And when that was brought to my attention from the warehouse staff, I immediately called the authorities.”

“Folks from the Attorney General’s office and some other investigators came out to take a look at this. And ultimately, the state determined that (the face masks) did not meet our requirements. It was not what we believed we were purchasing and the order was rejected,” General Nava says.

The state refused to pay Bionet’s $4,000,000 invoice and the trucks were ordered off state property. The FBI and the New Mexico Attorney General’s office are investigating. 

See Invoice »

Over the course of one month, Bionet was paid $2,598,150 for delivering to New Mexico 150 oxygen ventilators, nitrile gloves, 3-ply surgical masks and KN95 (Chinese) face masks. New Mexico no longer does business with Bionet. “I’d say that we were taken advantage of in a time of critical need and they need to be held accountable,” Diego Arencón says.

During last year’s Legislative Session Lawmakers unanimously passed, and the Governor signed, SB88 which provided, in part, accountability over the disbursement of funds involving emergency no-bid state contracts. The Bionet transactions would prove to be the Governor’s first test of the new statute.

According to the 2019 state law, when making an emergency (no-bid) procurement, the State is required to “…use due diligence in determining the basis for the procurement and in selecting a contractor.” Diego Arencón admits Bionet’s background was not checked before handing the firm millions of dollars in purchase orders. He says Bionet was selected primarily because it was based in Santa Fe. “We relied on their honor (in midst of) a pandemic global crisis,” Arencón says.

The new law also stipulates, in the event of an emergency no-bid procurement, the State must, “… outline its determination of the basis for the procurement and its selection of the contractor in writing and include the writing in the procurement file.” State officials acknowledge there is no written documentation reflecting Bionet’s selection as a vendor. Governor Michelle Lujan Grisham declined to be interviewed for this report.

In a brief phone conversation, Bionet CEO Gabe Bethel said he would get back to us. He didn’t. His attorney says Bethel would have “no comment.” The Bionet website has been removed from the Internet.

Bionet Press Release Regarding Investigation

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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