Newsom Under Fire for ‘Secretly’ Making $1B Mask Deal With Chinese Company

May 4, 2020 Updated: May 5, 2020

California Governor Gavin Newsom’s $1 billion deal with a Chinese company to produce protective N95 masks during the height of the COVID-19 pandemic has been viewed with bipartisan skepticism.

State Assemblyman Kevin Kiley (R-Rocklin) told The Epoch Times on May 2 that the lucrative contract was handed to the Chinese company, Build Your Dreams (BYD) Auto Co. Ltd., without bidding and shrouded in secrecy; both Democrats and Republicans are asking Newsom for answers.

The Los Angeles Times reported that the first shipment of 3 million surgical masks arrived April 25 and were received into the state warehouse on the next day.

“I don’t know what to expect because the governor’s office refuses to give us any information. What we do know is that he did something very unusual, which was to wire $500 million up front. That’s not the way it usually works for a state contract,” Kiley said.

“So not only did he hide these negotiations from the Legislature, he actually then on his own, unilaterally, took the very unusual step of sending them $500 million before we had received a single mask in return,” he said.

BYD’s Ethics Questioned

Kiley called BYD “disreputable.” It made headlines in 2018 when the electric buses it sold to Los Angeles failed and many officials deemed them low-quality.

BYD President Stella Li responded at the time in an interview with Clean Technica: “As with any groundbreaking technology, issues do arise in manufacturing and performance and BYD aggressively responds and manages these issues.”

Rep. John Garamendi (D-Sacramento), who helped draft legislation last year banning the purchase of BYD electric buses, spoke to Vice about the PPE purchase: “What is our government doing? They may very well flood the market with substandard devices and people will be relying on them as though they are of satisfactory quality, and that is bizarre.”

Newsom said at his daily press conference on April 13 that all PPE delivered by BYD will be required to meet federal standards. The FDA announced an emergency authorization in April to allow the company to import its masks.

Epoch Times Photo
Robotic arms paint a car at the BYD Automobile Company Limited Xi’an plant, in Shaanxi Province, China, on Dec. 25, 2019. (China Daily via Reuters)

Kiley remains concerned. “This company has a lot of problems. There are the ties to the Chinese Communist government. There are ties to forced labor practices.”

Vice reported on April 11 that BYD has used the forced labor of Uyghurs, a religious minority group, at alleged state-run re-education camps in China. BYD has denied the claims and, on April 27, it filed a defamation lawsuit against Vice Media.

In an April 27 media release, BYD stated: “BYD is one of the world’s largest producers and suppliers of electric vehicles including electric cars, buses, trucks and forklifts as well as protective masks, and many other important and useful products. The company will supply the State of California with $1 billion worth of masks to protect its nurses, doctors, caregivers, first responders and others during and after the COVID-19 global pandemic.”

Billionaire Warren Buffett’s Berkshire Hathaway owns 25 percent of BYD.

Ke Li, the president of BYD’s California subsidiary, is listed as a Newsom campaign donor, according to a recent CalMatters article.

“He donated $40,000 when Newsom was running for governor, so that adds a whole other level of questionability here, because the governor is awarding this massive no-bid contract secretly to a company with ties to one of his major political campaign supporters,” Kiley said.

Newsom Scrutinized for How He Announced Deal

Newsom announced the deal on MSNBC’s Rachel Maddow Show on April 7, to the dismay of some state legislators.

“That’s how we all learned about this deal—not from him telling the Legislature about it,” Kiley said. “And when he went on Rachel Maddow, he actually made it seem like this was a California company.”

Newsom initially introduced the deal as occurring “through a consortia of non-profits and a manufacturer here in the State of California.”

When Maddow asked Newsom to confirm if the masks were going to be manufactured in California, Newsom told her: “No, they will be manufactured overseas, but they were sourced through a California manufacturer and a consortium of non-profits.”

As the conversation continued, he said the manufacturer is “in Asia.”

“He tried to slip it in saying that he secured the masks through a manufacturer in California when actually it was just a subsidiary that provided the reference to the company in China,” Kiley said. “So, it just shows the lack of candor with which the governor has approached this whole situation.”

“If he [Newsom] was really concerned about just doing what was in the best interest of our state or healthcare workers, he would have had a process that was more traditional. But instead, he seemed to keep it all very guarded so that he could try to make a big announcement on the Rachel Maddow Show, and get himself in the national news,” Kiley said.

Two days later, Sen. Holly Mitchell (D-Los Angeles), who chairs the Joint Legislative Budget Committee wrote a letter to Newsom’s Director of Finance Keely Martin Bosler requesting details of the deal. Bosler had sent a letter to Mitchell and other budget committee members on April 7 outlining the deal, but without the specifics of the contract.

Mitchell conveyed her support of the deal but requested transparency from the Newsom Administration.

“I understand the Administration feels the need to act quickly due to the worldwide demand for masks and other PPE,” Mitchell wrote in her April 9 letter.

“However, I request that the Administration provide the [committee] the full details of the contract including the performance standards required of the vendor and the manufacturer, the price per mask, the quality standards the masks are required to meet (such as those established by the National Institute for Occupational Safety and Health), the production and delivery timelines, and the efficacy of the technology utilized to clean the masks that will be reused.”

“In light of the massive spending commitments,” Mitchell asked the administration to establish within days a webpage listing the state’s inventory of personal protective equipment (PPE) and other medical equipment, and showing where these items have been distributed.

Assemblyman Phil Ting (D-San Francisco), vice chair of the committee has also raised questions about the deal, Kiley said.

“[They] have both raised some very big questions about the deal and are not at all happy with it. [They] complained that they were not told about it; they learned about it on national TV,” Kiley said. “And so there’s been a lot of skepticism.”

The governor’s office did not reply as of press deadline to The Epoch Times inquiry regarding details of the contract.

Cost Per Mask

Newsom has said the $1 billion deal is for 200 million masks per month—150 million N95 masks and 50 million surgical masks—in a contract that runs until the end of June. But he has not revealed the precise cost per mask.

The prices of the N95 masks and the surgical masks would presumably differ, but if we ignore that price difference and divide $1 billion across some total 500 million masks (a very rough estimate for the approximate timelines given), each would cost about $2.

In Los Angeles, Mayor Eric Garcetti announced April 28 that U.S.-based company Honeywell Corporation will provide the city with 24 million N95 masks for $0.79 each. He noted in his press briefing that such masks can sell for up to $13 each with the current demand.

N95 masks
Boxes of N95 protective masks for use by medical field personnel are seen at a New York State emergency operations incident command center during the CCP virus outbreak in New Rochelle, N.Y., on March 17, 2020. (Mike Segar/Reuters)

Kiley said, “That’s one of the many questions Phil Ting and Holly Mitchell … raised in their letter to Newsom: What are we paying? And again, we don’t know because we haven’t seen the contract.”

Newsom emphasized in the Maddow interview that he used California’s “purchasing power” to get a good price. He said he hopes to have enough to meet California’s needs and even export some to other Western states.

Why Chinese-Made?

Marc Ang, president of the Chinese American Citizens Alliance (CACA), Orange County lodge, blasted Newsom over the deal.

Ang said preference should have been given to an American company at a time when trade relations with China are strained and foreign supply lines are unreliable.

“Going with a preferred dealer without bidding it and without going through the [state] Assembly and the state Senate to approve this is really bad optics. Why would you push a specific vendor? Why would he push something that’s not made in America? I have a real issue with that,” Ang told The Epoch Times. “It reeks of profiteering. These are bad optics in times when we’re looking for leadership.”

Newsom’s choice to act alone without informing state legislators is “almost dictatorial,” he said. He blamed politicians from former presidents Bill Clinton to Barack Obama for making deals with China that he said “have sold out our interests.”

His lodge has been strongly critical of the Chinese Communist Party’s (CCP’s) role in the pandemic. A statement released by senior member, Betty Tom Chu, on March 31 encourages Americans to acknowledge “the truth about the PRC [People’s Republic of China’s] unacceptable actions against its own people (including the arrest of doctors and scientists who were warning about the dangers of the Wuhan virus).”

Ang said of the mask deal, “I certainly believe that it should be America first.”

Even if companies, such as 3M, can’t keep up with the demand for N95 masks, other American companies could step in and start producing them, Ang said.

“If a car manufacturer can easily start making masks, can any of our idle businesses here in California start making masks? Why not them?” Ang pondered. “I would rather see that account go to an American company, actually a Californian company. Why does the deal have to go through China?”

Kiley said, “There certainly seems to be a lot of options, and none of those were available for us to consider because the governor did this secretly and unilaterally.”

Senate Budget Hearing

At a Senate Budget and Fiscal Review Special Budget Subcommittee on COVID-19 Response meeting on April 16, Mitchell said the state is “essentially working on a new budget” for the May Revision, which is slated for May 14.

Sen. John Moorlach (R-Costa Mesa) asked about the BYD deal at the hearing: “With more than 90 percent of pharmaceuticals being manufactured now in China, I’m just curious, why would we want to also buy facemasks from China? Why can’t we find a producer and encourage them in the state of California to make the masks?”

“We have been working on that as well,” said Tina Curry, chief deputy director for the Governor’s Office of Emergency Services. She said local solutions were not available soon enough.

“We needed to find a more rapid solution,” she said at the budget hearing.

Curry said there is such high demand for the masks, that the state wanted to make sure it had a “dedicated supply line.”

Sen. Jim Nielsen (R-Tehama) expressed doubts the masks would be delivered at all.

“I must emphasize that’s a big deal, and many of us are going to be very insistent at seeing the terms of that contract. I must confess, I have not much confidence in it being delivered as suggested for a whole lot of reasons,” Nielsen said at the hearing.

Ensuring timely delivery of the masks is “really, really important,” he said.

“At the least we cannot be throwing out a false hope to people. But there’s a lot of money involved in this, too. So, please do understand there is not an expectation, but a demand, that that contract become available.”