Susan Walsh/AP Photo
Rep. Raja Krishnamoorthi (D-IL) practices social distancing as he enters the Capitol Building.
First Response
I have made no secret of my views on Donna Shalala, chosen as one of the members of the Congressional Oversight Commission. One of the reasons why the choice is so distressing is that oversight, even with relatively weak authorities, can accomplish a lot, when wielded by creative and persistent individuals who understand the problems they’re trying to solve. You don’t even need the Trump administration’s cooperation to get the necessary information and get things done.
One member of Congress has been proving this model since the outset of the coronavirus crisis. Rep. Raja Krishnamoorthi (D-IL) is the chair of the House Oversight subcommittee on Economic and Consumer Policy, and he has been racking up a series of small but impressive wins. He’s done this through identifying, questioning, and raising attention to various outrages from individual companies, and going to the companies themselves for the information rather than Trump’s obstructionists. “It is part of the strategy to try and figure out what the heck is going on in this situation,” Krishnamoorthi told me in an interview. “It’s hard to get answers from (Treasury Secretary Steven) Mnuchin or HHS Secretary (Alex) Azar, but you can go to those companies, and sometimes you get the same information but from a different source.”
A couple weeks ago, Krishnamoorthi teamed up with one of his power-packed subcommittee members, Rep. Katie Porter of California (Ro Khanna, Rashida Tlaib, and Ayanna Pressley also sit on it), to question Wellness Matrix, a company advertising an “in-home” COVID-19 testing kit that didn’t exist, one of many scammers offering fake tests. The Securities and Exchange Commission responded by delisting Wellness Matrix from the stock exchange. Krishnamoorthi’s subcommittee questioned Alex Jones’ sale of miracle toothpaste infused with silver as a coronavirus cure. The Food and Drug Administration stopped the sales.
These were not Democratic agencies, but Donald Trump’s SEC and FDA. “That’s because of public pressure,” Krishnamoorthi said. Raising awareness of these fraud schemes makes it impossible for even an anti-regulatory executive branch to refrain from regulating.
Read all of our Unsanitized reports
Krishnamoorthi’s latest crusade is a real doozy. You know the story of Covidien, the big medical supply company that bought out a rival that had a contract to supply cheap ventilators to the federal government, and then cancelled that contract. The company that replaced Covidien and agreed to make cheap ventilators for the national stockpile was called Respironics, a division of Philips North America Corporation.
In 2014, Philips received a $13.8 million grant from the Biomedical Advanced Research and Development Authority (BARDA), part of the Department of Health and Human Services. BARDA gives grants to develop technologies for emergency response for things like pandemics, and the grant helped create the guts of the Philips ventilator. Last September, the company agreed to a contract for 10,000 of these FDA-approved ventilators, known as the Trilogy Evo, at $3,280 a pop.
As ProPublica has reported, the Trilogy Evo did not then go into production, nor did they accelerate operations as the outbreak began. They instead took the underlying technology and built a ventilator to sell overseas at nearly six times the cost. “Taxpayer money funded this technology,” Krishnamoorthi said. “And rather than producing when taxpayers most need it, they’re profiteering by selling it abroad. It bothers me and a lot of people.”
This seems like a tailor-made situation for the Defense Production Act, to force Philips to honor the original contract for the cheap ventilators first. But while the Trump administration did invoke the DPA on Philips on April 2, it was for a new deal to purchase 43,000 ventilators for $15,000 each, still nearly five times as much as the initial quote. Jared Kushner reportedly negotiated the deal. “I have a special interest in all things Jared Kushner touches in our government,” Krishamoorthi said.
In a document request to the parent company, Krishnamoorthi asks for all contracts, communications, and details of negotiations between Philips and the government going back to 2015, as well as all sales of the new “high quality” version of the Trinity Evo being sold abroad.
This is real oversight, using the tools to simultaneously demand information from companies and raise public pressure to receive that information or change behavior. It’s worked in the past for Krishnamoorthi, as well as working for Rep. Bill Pascrell and Porter in getting Live Nation to reverse their decision on blocking some refunds to customers during the crisis. And it doesn’t require running into the brick wall of the Trump administration with requests. “I think it’s a model that unfortunately we have no choice but to use right now,” said Krishnamoorthi.
So if we want to know about this strange “air bridge” program, where FEMA is acting as logistics operator for private distributors, seeking out the information from the distributors. If we want to know about these jacked-up sales to the government of N95 masks, ask the sellers of the masks. If you want to understand bailout terms granted to companies, ask the companies. It sounds simple but it’s not always done, in many cases because the practitioners of oversight don’t want to know too much about what they’re overseeing.
Krishnamoorthi is a mainline loyal Democrat. If Pelosi had a problem with a fire breather, she could have selected someone for bailout oversight who knows how to do oversight. The lack of conflicts of interest would be a bonus too.
Odds and Sods
I was on Ring of Fire with Sam Seder discussing the “banks steal the checks” scandal. Listen to that here.
I was also on the Electablog podcast, GOTMFV, discussing the COVID-19 crisis. Listen to that here.
Over at the Prospect, Leif Wellington Haase has an excellent proposal for a new version of the Civilian Conservation Corps, creating an army of contact tracers who question coronavirus patients, find their contacts, and get them isolated.
Mairav Zonszein reports on how Israel, mired in the COVID-19 crisis, is also losing its grip on democracy.
You can find all of our coronavirus coverage at prospect.org/coronavirus. And you can find every edition of Unsanitized at our COVID-19 Daily Report page.
Yay Deal
It looks like Nancy Pelosi and Chuck Schumer drove a hard bargain and got a portion of what they wanted on the interim, I-don’t-know-how-to-number-this CARES Act, I want to say 1.5?, while giving up even more leverage for CARES Act 2. The emerging deal includes $300 more for PPP, the small business forgivable loan program; $50 billion for disaster loans for small businesses (in the first round this only gave out $10,000 tops I believe); $75 billion more for hospitals to defray costs; and $25 billion to surge testing.
It’s amazing that funding for testing, which anyone with even passing knowledge understands is essential to reopening the country, ends up as a Democratic sweetener and not a bipartisan priority. But Senate Democrats initially asked for $30 billion, so this is a slight drop from that. Considering that we needed to invoke the Defense Production Act just for the testing swabs, skimping in any way on this is ridiculous.
Of course, this deal orphans a whole bunch of priorities into the next bill, without much impetus for Republicans to play ball now that businesses are taken care of. There’s apparently some Senate deal between Bob Menendez (D-NJ) and Bill Cassidy (R-LA) on state and local government relief but it’ll have to wait. So will hazard pay, postal service funding, vote by mail guarantees, emergency temporary workplace standards, expanding health coverage, eviction protections, rent cancellation, payroll support, and about half a dozen other issues. I don’t really know what gets Republicans interested in any of them.
The Ruth’s Chris Rule
Meanwhile, any single lawmaker can object to final passage and force their colleagues to come in to Washington, frustrating the intended procedure of a voice vote in a pro forma session. That allegedly makes this bill contingent on broadly agreeable terms but also provides opportunity. For example, one lawmaker could require the small business loans, newly refreshed, to actually go to small businesses.
You’ve heard by now that Ruth’s Chris Steakhouse, a chain with dozens of locations nationwide, scooped up $20 million in PPP loans, by using two separate subsidiaries to evade the $10 million loan cap. Since they were listed in a sum on Ruth’s Chris SEC disclosure form, I don’t know how they could possibly be considered “separate legal business entities,” and frankly the Small Business Administration should examine ways to expel them from the program for violating its spirit. But in general, big chains are eligible for these loans, as long as each location has under 500 employees. Small restaurants are consigned to inevitable failure while Potbelly and Shake Shack get aid and thrive. Just as Congress allowed it, they could disallow it when they restart the program.
Shake Shack, which got banks to underwrite $140 million in equity the same week as getting a $10 million PPP loan, actually gave the government back its money on Sunday, after public outcry. If Congress wants its reputation to survive intact, it will entertain an amendment—call it the Ruth’s Chris rule—to restrict PPP loans to publicly traded companies with access to capital markets, or maybe to companies below a certain revenue cap. One lawmaker can make that suggestion, and threaten to ruin the leadership’s swift passage plan. Who will do it?
Today I Learned
- Europe slowly crawls back to life, an indicator for what “reopening the country” looks like. (Wall Street Journal)
- The story of the Smithfield plant in South Dakota is horrifying. (BBC)
- So far, the threat of supply chain resiliency revealed in this crisis is not triggering an exodus of manufacturing away from China. (Reuters)
- Schools turning into food pantries. (Los Angeles Times)
- Disney parks no longer paying workers. (Financial Times)
- Restaurants fight insurance companies to collect on disaster claims. (Wall Street Journal)
- Bars and restaurants use the cash bolted to the walls as mementos to make donations to their workers. (New York Times)
